TEXT 3:

Under the pressure of the economy sinking into economic crisis, the Party and Government of VN decided to initiate an economic renovation policy in 1986. Over the last 15 years of economic reforms, VN has obtained/gained some important/ significant advances and achievements which were widely recognized both inside and outside the country.

Overall, VN has transformed/ shifted from a state-subsidized,bureaucratic and centrally-planned economy to a market-oriented one; from an economy with massive development of state-owned and collective economic sectors to a liberal, multilateral one; from an economy prioritizing heavy industries to an economy emphasizing three strategic economic programs: goods and foodstuff, consumer goods and goods for export.

The economic growth over the last 15 years can be divided into the following periods.

From 1986 to 1991

This was a transitional period of the most meaning significance/ importance in the transformation from the centrally planned mechanism to a market one in the context of severe social-economic crisis since the early 1980s.

In this period, VN had to face/ encounter with many difficulties and challenges. Although the VN’s foreign investment environment was quite/ relatively liberal, some provisions in the Law on Foreign Investment were still inadequate to meet demands of foreign investors. The infrastructure was backward and not suitable for VN to integrate into regional and world economy. The management apparatus of VN was still burdened and cumbersome with spreading bureaucracy, one of the major obstacles to investors. Although the domestic currency was stable, it was still inconvertible. The banking system was backward and ineffective.

In this period, the Government implemented a series of market-oriented macro reforms/ renovation measures such as liberalizing prices of most consumer goods, removing subsidies through government budget to consumer goods prices, floating the exchange rate closer to its market value and adopting a financial autonomy in state-owned enterprises.

The most important turning-point in this period was the promulgation of the Law on Foreign Investment (LFI) in 1987. Since then, this law has been amended twice to create more favorable opportunities for foreign investors. Together with the LFI, the regulations on customs, immigration and import - export have been renovated to facilitate the expansion of economic relations with foreign countries.

The period of 1992-1997

It was in this period that VN’s economy reached the highest growth pace and was quite stable. The annual average rate of GDP rose to 8.9% while the inflation rate in this period decreased considerably in comparison to that in the previous one. The achievements were probably comparable with those of East Asian Newly industrialized countries (NICs) in the period of 1970-1980, with China and some recent Asian dynamic economies.  

The VN’s economic achievements in this period best reflected the actual effectiveness of the Government’s market-oriented renovation policies. Economic reforms concentrated on dealing with serious mechanism problems.

- Liberalize land use rights in rural areas and shift from collective production method to family-scale ones.

- Reform the renovation of state-owned enterprises, enhance their productivity and reduce budget for the state-owned sector.

- Open the economy, develop foreign trade and expand foreign direct investment based on integrating with regional and world economy.

The period of 1998 – present

VN’s economic growth in this period tends to decrease. The economic growth reached the highest rate of 9.45% in 1995 and declined to 5.8% (in 1998) and 5.3% (in 1999).

This above situation was caused due to various/many reasons/factors, mainly the influences of the Asian financial crisis and the VN’s inadequate/inappropriate policy mechanism.

The Asian financial crisis, originating from Thailand’s financial market in July-1997 had an adverse influence on VN economy through the decrease in exports and foreign direct investment. Besides, another important cause was that the innovation policies in the previous periods proved ineffective due to a number of internal and external changes.

In terms of trade reforms, although VN committed to participate in AFTA, there was no specific schedule to reduce the annual tax rates to achieve the final commitment in 2006. Meanwhile, non-tariff barriers, instead of being removed, have been reinforced as short-term, ad-hoc solutions to domestic production.

The reform of state enterprises and equitisation process are implemented very slowly.

To overcome the above inadequate mechanism and policies, The Gov should implement tougher reform solutions. Recent policies tend to focus on stimulusing demands such as adopting a loose monetary policy, lowering ceiling lending interest rate to increase purchasing power. These solutions aim at mobilizing financial resources from the budget and banking system to invest in infrastructure. However, these are short-term solutions.

For the sustainable development of VN’s economy in the future, it’s necessary to have long-term and stronger measures to reform policy mechanism. Particularly,

- Improve the efficiency of the economy by promoting state-owned enterprises to operate more effectively and creating favourable conditions for development of non-state economic sector.

- Remove trade protective barriers gradually to encourage healthy domestic competiton, actively and positively prepare to integrate in regional and world economy.

- Consolidate the financial system to mobilize and utilize domestic resourceseffectively. Build a modern efficiency banking system operating effectively.

- Improve management, and creatively & flexibly implement economic policies to creat more liberal marco-economic environment and healthier competition mechanism.

Overall, during the past renovation, VN economy has reached high growth rate and changed the outlook of the economy in comparision to the recession stage of the centralized, planned mechanism. Thanks to economic growth, people’s living standard was improved significantly compared with that in the past. Those great achievements reflected the right policy in the resolution of Communist Party of VN.

However, to steadly hold and prove these achievements, it’s necessary to keep further promotion enonomic reforms and implement socio-economic policies flexibly.