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When Vietnam was reunited under one communist government in 1975, it began a campaign of Stalinist type economic changes. The communist development phase turned out to be an economic disaster. In 1986, the government decided to change the economy again to make it more productive. These changes were called Doi Moi which means change and newness.
The major reason why the communist government decided to try a new economic approach was that they could not grow enough rice to feed their own people. Economic stagnation resulted from the communist ideas adopted in 1975. In 1986 Vietnam had to import 1.5 million tons of rice and starvation was a reality for many Vietnamese .
Doi Moi was started in 1986 and it was a transition from a centrally planned economy to a market economy with socialist direction. This has also been called market socialism.
The government in Vietnam wanted a gradual change with political stability. By admitting mistakes under their previous policies, the communist government in 1988 began some major changes across the nation. 1. Payment of wage and salaries on a cash basis.2. Pricing of inputs to state enterprises Based on costs.
3. Permission for private employers to employ up to 10 workers.4. Abolition of internal customs check points.5. Revised Foreign Investment Law.6. Virtual decollectivization of agriculture.7. Elimination of virtually all direct subsidies and price controls.8. Increased autonomy for enterprise managers.
9. Devaluation of currency to market rates.10. Elimination of the State’s monopoly in foreign trade.11. Provision for foreign participation in banking.12. Reduced restrictions on private enterprise.
13. Creation of export processing zones for 100% foreign owned enterprises.14. Legislation on shareholding corporations.15. Dismantling of major elements of central planning and bureaucracy.
16. A 15% reduction in the government workforce.17. A return to former owners or their heirs of businesses in the South that were nationalized in 1975. Not all measures were implemented. Cooperative and private sectors account for 2/3’s of the gross national income due to these changes.
The Vietnamese government wants foreign investment but has several problems. They are unwilling to give up their total political control. There is also not a western rule of law so that foreign investors can be at the mercy of party officials without any way to stop corruption.
Although there are still problems in Vietnam, Doi Moi has significantly changed their economy. Between 1995 and 2004, Vietnam grew at a rate of 7.5% per year- second only to the growth of China in the same period. Vietnam’s foreign trade is about $20 billion per year. In 2003, Vietnam took in foreign investment equal to 8% of its GDP.
Vietnam has been working on changes necessary for it to become a member of the World Trade Organization. Hanoi has worked since 1995 to become a member and it is expected that Vietnam will be recommended for membership in November,2006.
Coffee is a cash crop introduced to Vietnam in 1857. They grow the Robusta type which is lesser quality than the Araibica beans. In 1997-98 they produced 355 thousand tons of beans. The government forced settlement in the Central Highlands. Minorities lost out when Vietnamese got the land. Many conflicts resulted over this land policy.
In 1989, the Coffee Cartel collapsed. It had kept coffee prices stable. Vietnam produced so much coffee that many small farmers in Latin America were hurt. The Vietnamese caused a glut on the market. In 2004, 10,000 Montagnards protested and many left Vietnam. The government is now trying to get them to return.
