The rapid modernization of Ho Chi Minh City is attributed to the success of Đổi Mới.
|Vietnamese alphabet||Đổi Mới|
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Đổi Mới (Vietnamese: [ɗo᷉i mə̌ːi]; English: "Renovation") is the name given to the economic reforms initiated in Vietnam in 1986 with the goal of creating a "socialist-oriented market economy". The term đổi mới itself is a general term with wide use in the Vietnamese language. However, the Đổi Mới Policy (Chính sách Đổi Mới) refers specifically to these reforms that sought to transition Vietnam from a command economy to a socialist-oriented market economy.
The Đổi Mới economic reforms were initiated by the Communist Party of Vietnam in 1986 during the party's 6th National Congress. These reforms introduced a greater role for market forces for the coordination of economic activity between enterprises and government agencies and allowed for private ownership of small enterprises and the creation of a stock exchange for both state and non-state enterprises.
After reunification in 1975, the economy of Vietnam was plagued by enormous difficulties in production, imbalances in supply and demand, inefficiencies in distribution and circulation, soaring inflation rates, and rising debt problems. Vietnam is one of the few countries in modern history to experience a sharp economic deterioration in a postwar reconstruction period. Its peacetime economy was one of the poorest in the world and had shown a negative to very slow growth in total national output as well as in agricultural and industrial production. Vietnam's gross domestic product ( GDP) in 1984 was valued at US$18.1 billion with a per capita income estimated to be between US$200 and US$300 per year. Reasons for this mediocre economic performance have included severe climatic conditions that afflicted agricultural crops, bureaucratic mismanagement, extinction of entrepreneurship, and military support of Cambodia (which resulted in a cutoff of much-needed international aid for reconstruction).
From 1978 until 1991, Vietnam was a member of the Comecon, and therefore was heavily dependent on trade with the Soviet Union and its allies. Following the dissolution of the Comecon and the loss of its traditional trading partners, Vietnam was forced to liberalize trade, devalue its exchange rate to increase exports, and embark on a policy of economic development. In the years immediately prior to the Đổi Mới Reforms, Vietnam faced an economic crisis; inflation soared to over 700 per cent, economic growth slowed down, and export revenues covered less than the total value of imports. In addition, Soviet aid decreased, increasing Vietnam's international isolation. This resulted in intense debate within the Communist Party about the efficacy of the command economy system and the possibility of reform in the run up to the 6th National Congress of the Communist Party of Vietnam in December 1986.
One of the important developments which provoked change within the Party was the death of Party General Secretary, Lê Duẩn, who died in July 1986. In December 1986, the Sixth Party Congress elected as Party Secretary the more liberal Nguyễn Văn Linh, a reformist and former leader of the National Liberation Front.
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While Đổi Mới was officially introduced at the 6th National Congress of the Communist Party of Vietnam in 1986, the state had initiated reforms in the early 1980s. Specifically, in October and November 1978, cooperative leaders in the north were permitted to rent out fields to members during the winter as long as the latter produced winter crops collectively for required number of days and return the land in time for growing paddy in the spring.
At the Six Party Plenum in August 1979, the Party allowed for the decentralization of economic decision making related to farming and introduced more incentives for production expansion. In 1980, Provincial governments were permitted to establish trading firms, breaking the monopoly of foreign trade by the central state in Vietnam. In 1981, agricultural reforms were introduced, which allowed farmland to be distributed to individual workers, individual management of a collective, and farmers could retain all production beyond their farming quota. These agricultural reforms contributed to the recovery of industrial output. Following these measures, price controls were removed from numerous consumer products to increase trade at real-market prices and ease shortages of them within the state trade system.
Creation of the Socialist-Oriented Market Economy
The 6th National Congress of the Communist Party of Vietnam was convened on 15 December 1986 and lasted until 18 December. The Congress reaffirmed its commitment to the reform program of the 8th plenum of the 5th Central Committee, and issued five points;
- "concerted efforts to increase the production of food, consumer goods and exportable items";
- "continue the efforts to control small merchants and capitalists, while at the same time acknowledging the reality of supporting a mixed economy";
- "to regenerate the planning bureaucracy while making the economic management system more efficient by decentralizing authority and making room for more independent decision-making";
- "to clarify the powers and jurisdiction of the Council of Ministers, and the reorganization of state management apparatus to make it more efficient;
- "to improve party organizational capabilities, leadership and cadre training."
Võ Văn Kiệt, a Deputy Chairman of the Council of Ministers, delivered the Economic Report to the 6th National Congress. The political and economic reports stressed Đổi Mới (Renovation), and Vietnam specialist Carlyle Thayer wrote that Võ Văn Kiệt may have been the foremost advocate of this concept. In his speech to the Congress, Võ Văn Kiệt said, "in the economic field, there will be renovation in economic policies and the management system."Võ Văn Kiệt said that agriculture and not heavy industry would be most important during the 4th Five-Year Plan. During the 4th Five-Year Plan, Võ Văn Kiệt said, "[t]he ... main orientation for heavy industry in this stage is to support agriculture and light industry on a proper scale and at an appropriate technical level." Võ Văn Kiệt stressed the role of exports and the production of grain, food, and consumer goods to revitalize the Vietnamese economy. The main objective of the 4th Five-Year Plan was the production of grain and food products; "a target of 22–30 million metric tons of grain in paddy" was set for 1990. While several methods were to be used to reach this goal, material incentives and end-product contracts would play a prominent role. The Central Management System was abolished and the economic focus was shifted to the creation of a market-driven economy with different sectors, and competition between the private sector and the state in non-strategic sectors. In 1987 there were significant reductions in the number of checkpoints set to prevent domestic trade. Markets where private agricultural products were allowed to be sold were rapidly growing.
Privately owned enterprises were permitted in commodity production (and later encouraged) by the Communist Party of Vietnam. The first half of the 1990s observed changes in the legal framework for the private sector. In 1990, Law on Private Enterprises which provided a legal basis to private firms was enacted, while Companies Law acknowledged Joint-stock company and private limited liability company. The constitution established in 1992 officially recognized the role of the private sector.
In the agricultural sector, the Land Law was enacted in 1988, which recognized private land use rights. In addition, Central Committee Resolution 10 was issued; according to this resolution, farmers were not obliged to participate in cooperatives and were permitted to sell their products on the free market.
In the early 1990s, Vietnam accepted some World Bank reform advice for market liberalization, but rejected structural adjustment programs and conditional aid funding requiring privatization of state-owned enterprises. With the reforms, the number of private enterprises increased; and by 1996, there were 190 joint stock companies and 8,900 limited liability companies registered. The private sectors played an important role in the service industry, as the share in the retail trade activity increased from 41% to 76% in 1996.
While foreign trade was centrally controlled by the state, the state started to loosen control of foreign trade. Consumer goods were sent back home by Vietnamese who worked or studied in the socialist countries in the first stages up to the reunification. The sources of commercial goods diversified since then; these varied from gifts shipped by overseas Vietnamese to their families, to goods left over during the US occupation of the south which were tradable in the Soviet for raising capital. Further, neighboring countries such as Laos and Cambodia provided opportunities to smuggle goods into Vietnam. There were two types of goods smuggling from Cambodia; the first one included those left behind by victims of the Khmer Rouge, while the other were those imported from Thailand. For instance, Thai beer being imposed high duties was usually smuggled by the sea route into Vietnam.
The Communist Party of Vietnam maintains that the socialist-oriented market economy is consistent with the classical Marxist view of economic development and historical materialism, where socialism can only emerge once material conditions have been sufficiently developed to enable socialist relations. The socialist-oriented market model is seen as a key step for achieving the necessary economic growth and modernization while being able to co-exist in the contemporary global market economy and benefit from global trade. The Communist Party of Vietnam has re-affirmed its commitment to the development of a socialist economy with its Đổi Mới reforms.
- Five-Year Plans of Vietnam
- Economic history of Vietnam
- Socialist market economy
- Socialist-oriented market economy
- Transition economy
- Socialism with Chinese characteristics
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