Edited by Suiwah Leung, Ben Bingham and Matt Davies
Ben Bingham and Suiwah Leung1 INTRODUCTION In the two decades since Vietnam launched its Doi Moi market reforms2 the results have been widely hailed for sustaining economic growth, reducing poverty and increasing the standard of living. The transformation from a poor agrarian economy to an increasingly globally integrated market economy generated considerable optimism about the country’s economic outlook. For example, the latest Socio-Economic Development Program (SEDP)3 outlined Vietnam’s ambition to become a middle-income country by the end of this decade and a modern industrial economy by 2020. This optimism was not confined to government circles; it reflected the consensus view, especially following Vietnam’s accession to the WTO in January 2007. In the wake of domestic turbulence and the severe downturn in the global economy in 2008 some of this optimism has waned. This chapter considers the challenges facing Vietnam in light of these recent developments. It reviews the two principal waves of economic reform over the past two decades and discusses the factors that made investors so optimistic about Vietnam’s long-term outlook. It then discusses the deterioration in economic conditions over the past 12 months before addressing the broader reform challenges that Vietnam faces if it is to succeed in developing a modern market economy. 2 TWO DECADES OF REFORM Doi moi, or economic renovation, began in 1986 but the effective opening of the country to international trade and investment did not start until 1989. Throughout the 1990s GDP grew at an average annual rate of 7–8 percent...
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