The Search for a Framework
Edited by Masahiro Kawai and Mario B. Lamberte
Tri Thanh Vo and Chi Quang Pham INTRODUCTION 16.1 Viet Nam officially launched its Doimoi (Renovation) in 1986, but only started a radical and comprehensive reform package aimed at stabilizing and opening the economy in 1989. During 1996–99, market-oriented reforms were somewhat stalled. Since 2000, a new wave of economic reforms has been stirred up with emphasis on structural reforms (stateowned enterprise (SOE) and financial reforms, and development of the private sector) and further trade and investment liberalization. The years 2000–07 witnessed a boom in the private sector and deeper international economic integration. Experiences from various countries and the current position of Viet Nam are drawing attention to how Viet Nam can sustain economic growth and sound financial development while mitigating financial risks. This chapter seeks to address the issue, taking into consideration the whole period 1995–2007; that is, from before the Asian crisis, but with a focus on the more recent financial and policy developments. The chapter is structured as follows. Section 16.2 briefly describes the changes in Viet Nam’s economic fundamentals and financial sector development. Section 16.3 analyzes in greater detail the capital flows and their impacts on real economic activities as well as on macroeconomic stability. Section 16.4 then reviews recent macroeconomic policy responses to the surge in capital inflows and assesses the strengths and weaknesses of those policies. Section 16.5 makes some policy recommendations for sustaining high economic growth and sound financial development in the country while mitigating possible financial and inflation risks....
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