VIETRADE - Looking back at the last period, since the country embarked on the process of Doi Moi (Reform) in 1986, Viet Nam has achieved spectacular results in socio-economic development. Viet Nam has made lots of progress in the transition from a centrally planned economy to a market economy with socialism orientation.

Many positive changes have taken place in the past nearly 30 years

Viet Nam was able to reach and sustain an important growth rate of around 7% for the period 1990-2012. From 2012 to now, due to the world economic slow down, Viet Nam’s growth rate has been reduced to roughly 6%, being relatively high in comparison with regional average level.

Liberalization of prices was initiated since the mid 80s and by the beginning of the 1990s. Prices of most commodities were in principle set by the market;

Liberalization of agriculture: Since the end of the 1980s, a series of important market institutions were established to enhance agricultural liberalization, for example Resolution 10 in 1988 by the Party Central Committee on agricultural households has led to a fundamental change in economic incentives for agricultural sector. Thanks to a much higher productivity, agricultural exports have increased continuously. Viet Nam is now one of top world exporters in rice, rubber, coffee, pepper, cashew nuts, timber and fisheries. Export volume of Viet Nam in 2013 was 132.17 billion USD.

Viet Nam poverty reduction rate has been improved unceasingly for a long period, with a very impressive rate of 2% per year. Thanks to the rapid growth rate, in only two decades, nearly 30 million people were lifted out of poverty. Viet Nam is currently the second biggest rice exporters in the world after Thailand, and also the second largest coffee exporter following Brazil. The nation, in addition, is the biggest pepper exporter.

Liberalization of non-agricultural sectors: In the 1990s, many market institutions were established to speed up the liberalization process and to encourage the development of private sector in non-agriculture in particular and of the overall economy in general, reaching its peak through the approval of the Law on Enterprises in 2000, and which was subsequently amended in 2005, 2011 and 2012. For State Owned Enterprises, reforms have been in place since early 1990s.

Viet Nam’s Reform process was accompanied by a period of liberalization and international integration, through which the market economy was developed following international regulations and standards to further enhance the country’s participation to the global production networks, open up to foreign investment and technology to serve its modernization process. Thanks to the open door policy, Viet Nam normalized relations with the World Bank, International Monetary Fund, Asia Development Bank. IMF and WB supported Viet Nam through different programs for socio-economic development.

Apart from the assistance for economic development, poverty reduction, IMF, WB and ADB brought about valuable technical assistance, which helped Viet Nam in applying international standards. In 1995, Viet Nam officially joined ASEAN, AFTA and now actively contributes to the completion of ASEAN Community. In 1996, Viet Nam became a founding member of Asia-Europe Meeting (ASEM), and has been contributing to the development of ASEM in both political and economic cooperation. Viet Nam was the host to ASEM 5 in 2004. Viet Nam was admitted to APEC in 1998 after two years of application.

Over the past 15 years, APEC has strived to become one of the largest investors in Viet Nam. Importantly, Viet Nam signed the Bilateral Trade Agreement with the US. This BTA came into effect on December 11^th, 2001, which opened up new prospects and opportunities for bilateral trade. A significant achievement of Viet Nam’s international integration is when Viet Nam became the 150^th WTO Member in 2007, ending 11 years of persistent and active negotiations. This is the time that marked a new phase for Viet Nam to participate in the global economy on an equal foot with other members of this largest trade organization in the world. Along with the trend of trade liberalization, Viet Nam officially announced to be a negotiating party of the Trans Pacific Partnership agreement on November 13^th, 2010. TPP is a new and high standard Free Trade Agreement, with wide scope that covers almost sectors of the economy, not only trade but also investment, intellectual property rights, labor and environment.

All such important institutional changes, international integration, accompanied by the fairly sufficient allocation of initial endowments as social programs and policies, particularly in health, education and poverty reduction that were consistently implemented in the past 30 years have helped opening up opportunities for Vietnamese people to enhance their capacity in seizing opportunities.

Challenges ahead to the development in Viet Nam against new backdrop

The international integration process of Viet Nam brings about some shortcomings to the national socio-economic development as well as the inclusive growth of Viet Nam in general. Being connected with the world economy, Vietnamese economy is vulnerable to any changes of the world economy. Studies have identified some causes of economic slowdown in Viet Nam, especially since 2008, including the slow structural reforms which have led to a growth primarily based on a mobilization of resources while institutional inadequacies undermined the effective allocation and efficiency of resources, making the economy more vulnerable to world economic shocks and crisis.

Therefore, obstacles need to be removed also as the development of institutions that are necessary to promote the development of labor market and livelihood for unskilled and vulnerable workers are vital. Such sectors include agriculture, labor intensive industries, construction, trade and services. Small and medium enterprises in formal and informal sectors also need special attention. Institutional and policy constraints that these businesses face, especially those related to access to bank credit need to be addressed. Supporting industries are often labor intensive and therefore, also needs special attention to help their rapid and inclusive growth. In addition to improvements of outcomes relating to decent employment, the social protection system needs to be continually expanded and improved to enhance peoples’ access to important social services.