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Vietnam and the experience of the Asian crisis

Vietnam and the experience of the Asian crisis. Pietro Masina University of Naples “L’Orientale” (Italy) A decade after: recovery and adjustment since the East Asian crisis Bangkok , 12-14 July 2007. The Vietnamese transition.

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Vietnam and the experience of the Asian crisis

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  1. Vietnam and the experience of the Asian crisis Pietro Masina University of Naples “L’Orientale” (Italy) A decade after: recovery and adjustment since the East Asian crisis Bangkok , 12-14 July 2007

  2. The Vietnamese transition • Reforms started already in the late 1970s, through ‘fence breaking’ and experiments in agriculture and industry • In 1986 the CPV launched the doi moi: from central planning to market economy • The reform process was accelerated in the late 1980s by the collapse of Soviet Union • By the early 1990s ‘price mattered’ but the government maintained a prudent step-by-step attitude

  3. A new fifth dragon? Lights and shadows • Growth is sustained and less unbalanced than in China • Poverty reduction has been outstanding • Inequality has increased - so far not dramatically, but risks are high • The WTO accession presents many opportunities and many challenges • But the government is still in command of many economic leverages • Financial liberalization has been resisted – the booming stock market may become a vehicle of destabilization

  4. GDP growth rates, trendline

  5. Households living below the government poverty line, percentage

  6. From hero to villain, to hero again, to undisciplined pupil • Hero: in the early 1990s Vietnam was supported by the IFIs - it was moving towards the market (and they hoped towards the US) • Villain: by 1996 it had become a poor performer, too slow in implementing reforms • In 1997/98, it was told that its problems were locally rooted – without bold reforms, it would miss recovery • Hero again: in the early 2000s growth and poverty reduction made Vietnam popular • Undisciplined pupil - it should do better/faster

  7. Resilience during the Asian crisis • Vietnam was hit already before the crisis by a contraction of Asian FDI • Its currency remained stable, i.e., appreciated in relation to Asian currencies • Economic growth slowed down, but the country was insulated by the financial storm (the dong was not convertible) • Growth of the agricultural sector played a counter-cyclical role

  8. GDP growth by sector,1996–2005

  9. GDP, annual growth rate(ASEAN 6)

  10. Saving and investment (in percent of GDP)

  11. FDI inflows, 1986–2005

  12. Net FDI inflows 2004(% of GDP)

  13. GDP by ownership

  14. GDP per capita as % of GDP per capita in Asian countries, PPP

  15. GINI Index, Asian countries

  16. Income ratio of richest 10% to poorest 10%

  17. Privatization of SOEs • Privatization of SOEs regarded so far small and not strategic companies • The ‘equitization’ process is due to accelerate and to touch large SOEs • Risk of loss of sovereignty and creation of foreign monopolists • Risk of higher inequality through appropriation and sale of SOEs shares

  18. Current challenges • Agricultural diversification played a major role in poverty reduction - there is little scope to move further in this direction • Employment generation in the formal industrial sector is insufficient • Inequality may play a destabilizing role • The alliance between SOEs and FDI may alter the political nature of the leadership

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