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Vietnam embarked on Doi Moi policy in 1986 with three main pillars: (i) to shift from a centrally planned economy to a market-oriented one; (ii) to develop a multi-sector economy in which the private sector plays an increasingly important role; and (iii) to actively and effectively integrate into regional and global economy in accordance with Vietnam’s situation.

Since the 6th CPV’s Congress in 1986, the Doi Moi has recorded significant accomplishments and Vietnam’s economy maintains consecutive high growth rate. WTO membership enables Vietnam’s economy to integrate further into the global economy and to utilize external resources to boost industrialization and modernization. Vietnam aims to basically become a modern industrialized economy by 2020.

The 1987 Foreign Investment Law was the first legal document that helped form the legal framework for the Vietnamese market economy. In 1991, the Private Enterprise Law and Corporate Law were introduced. The amended 1992 Constitution affirmed the existence and development of a multi-sector economy under a market mechanism, including the foreign-invested sector. This was followed by the promulgation of a number of laws essential for the formation of the market economy, including Land Law, Tax Law, Bankruptcy Law, Environment Law, and Labour Code, etc. Hundreds of ordinances and Government decrees were enacted to guide the implementation of these laws for national socio-economic development.

Along with the law-making process, market economy institutions have also been established. It is Government policy to eliminate the central planning mechanism, emphasize monetary - market relations, focus on economic management measures and establish an array of financial institutions, banks and basic markets for money, labour, goods and land, etc. The administrative reform was promoted so as to improve economic competitiveness and to help create a more favourable business environment and mobilize all resources for economic growth. The political will of the Vietnamese Government was also reflected in the strategy for administrative reform in 2001-2010, which emphasized the simplification of administrative procedures, amendment of laws and improvement of economic management. These changes have helped establish a dynamic mechanism to meet the development requirements of the country in the new context.

Overall, tremendous economic reforms taking place more than two decades of Doi Moi have yielded encouraging results. Vietnam has created an ever more competitive and dynamic economic environment. The multi-sector economy has been encouraged to develop, thus mobilizing effectively all social resources for economic growth. External economic relations have been expanded, attracting greater foreign direct investment and broadening export market. Labour export, tourism industry and remittances from overseas Vietnamese have been strongly promoted to generate increasing foreign earnings for Vietnam.

Over 25 years of Doi Moi, Vietnam’s GDP has continuously increased from 3.9% between 1986 and 1990 to 8.2% in the following 5 years of 1991-1995. Between 1996-2000, Vietnam’s GDP growth reached 7.5%, lower than that of the previous 5 years amidst the Asian financial crisis. Since 2003, Vietnam maintained a high and stable growth rate: 7.3% in 2003, 7.7% in 2004, 8.4% in 2005, 8.2% in 2006, 8.5% in 2007, 6.2% in 2008, 5.32% in 2009 despite the global economic and financial crisis and targeted to reach more than 6.5% in 2010.

Upon the amendment of the Enterprise Law in 2000, private businesses have enjoyed strong encouragement for development. This Law institutionalized the freedom of all individuals to doing business in areas not prohibited by law. It also removed administrative obstacles that hampered enterprises such as complex licensing procedures or fees, etc.

2005 Enterprise Law, which is applicable to both domestic and foreign-invested enterprises and came into effect on July 1st 2006, provides more encouragement through equal rights and obligations of enterprises regardless of ownership forms.

With a view to raising the productivity of the state-owned sector, priority has been given to concrete policies and measures to adjust and reorganize SOEs, particularly in finance management of SOEs, management of state investment in SOEs, or the equitization of SOEs. Until 2009, almost 4.000 SOEs have been equitized.

Vietnam has succeeded in translating economic achievements into social progress. Benefits of Doi Moi process, for instance, are delivered to the majority of the population on a relatively equal basis. Economic growth is combined with the improvement of life quality and development of healthcare and education. The Human Development Index of Vietnam increased from 120/174 to 109/177 in 2007. The average life expectancy was raised from around 50 in the 1960s to 73 in 2008. The poor household ratio dropped from 70% in early 1980s to 14.75% in 2007 (or 2.7 million poor households) and estimated 13% in late 2008.

Foreign Trade and International Economic Integration

As Vietnam is actively integrating into global economy, Vietnam’s economic ties with other countries and international organizations have been expanded. Vietnam is now a key member in ASEAN and active member in APEC, ASEM and other international economic organizations. Vietnam is also realizing its commitments in ASEAN Free Trade Area. Economic cooperation with major economies like the US, EU, Japan, Russia, China and India has been broadened. Vietnam signed a bilateral trade agreement with the US. Vietnam is also negotiating a Comprehensive Partnership and Cooperation Agreement with EU and Economic Partnership Agreement with Japan. In January 2007, Vietnam joined WTO, marking its full integration into global economy.

Since Doi Moi, Vietnam’s foreign trade has increased 20% annually. From around US$ 0.5 million before Doi Moi, total export reached US$ 48.4 billion in 2007, US$ 62.7 billion in 2008 and US$ 56.6 billion in 2009. Import in 2008 was US$ 80.4 billion and that in 2009 was US$ 68.8 billion. The structure of export has also seen a positive change. During the 1991-1995 period, major exports were crude oil, fisheries products, rice, textiles, coffee, forestry products, rubber, peanuts and cashew nuts. In 2008, Vietnam mainly exported crude oil, garment and textile, footwear, seafood, wooden products, electronics and rice. This structure reflects the rise in processed and manufactured products and decline in unprocessed products, including agricultural, fisheries, forestry products and animals. Despite this shift, unprocessed export products still make up a large proportion. Therefore, greater efforts are needed to rapidly raise the proportion of industrial exports.

Foreign Direct Investment

In December 1987, the Foreign Direct Investment Law of Vietnam was introduced to help form the basic legal framework for foreign investment activities in Vietnam. The Law was amended and supplemented several times, notably in 1996 and 2002, which created a more open and attractive environment to draw foreign investors into crucial industries such as export-oriented processing and manufacturing, and key economic zones of the country.

2005 Investment Law and 2005 Enterprise Law, which came into effect on July 1st 2006, have been a significant progress in creating an attractive environment. In addition, other reforms have been made such as tackling business obstacles, lowering Personal Income Tax, adopting one-stop-service policy, reducing telecommunication tariffs to a competitive price in the region, improving infrastructure, expanding investment areas, including those previously closed to foreign investors, such as telecommunication, insurance, supermarket, banking, etc.

The rise of FDI is also attributed to political, economic and security stability, high economic growth rate, continuation of market-oriented economy reform, improved living standards and consequently higher domestic demand, greater international integration, and growing reputation and increasingly recognizable trademarks of Vietnamese products in international market.

Over the past years, Vietnam has drawn increasing inflows of FDI. From a negligible figure of 1986, FDI into Vietnam reached US$ 64 billion in 2008 and US$ 21.5 billion in 2009 amidst the global economic lowdown. FDI not only generates profits for foreign investors but also represents a significant capital source which comes along with technology transfer and advanced business skills. FDI helps better tap national potential, creates tens of thousands of jobs and raises professional skills for Vietnamese workers, making contribution to socio-economic development in Vietnam.