Doi moi

Doi moi (Đổi mới), which translates, in English, to "change and newness", "renovation" or "innovation" is the current economic model of the Socialist Republic of Vietnam, which replaced earlier Stalinist centrally planned economics. It is intended to fit the Vietnamese culture, and avoid both the rigidity of failed classic Communist activities, but also the disruption of rapid privatization in Eastern Europe and Russia. It is most associated with Nguyen Van Linh (1915-1998), who had been purged from the Communist Party leadership in 1982, but returned as General Secretary and Politburo member in 1986.

Factors that encouraged change was the elimination of large-scale foreign aid from the Soviet Union, and the continuing need to repair damage from the many Wars of Vietnam.

At a 20 year international conference reviewingdoi moi, Deputy Prime Minister Nguyen Tan Dung said, in 2008,

Doi moi (renovation) has to be for the benefit of the people, based on the people, making full use of the people's initiative and creativity, suitable to reality and adaptable to changes, Doi moi has to be based on making full use of internal strength while at the same time, exploring external assistance, combining national strength with the strength of the time in the context of globalisation and international economic integration.

Previously, the policy of bien che, defined as "the number of people who officially work in an organization, or a state-owned enterprise, in accordance with the state's regulations", gave job security. Among the younger work force, people are more interesting in competing for interesting and remunerative jobs than some of the older population.

Policy development

Among the new policies stated in 1988, but not fully implemented, include:

• Payment of wages and salaries on a straight cash basis. The Vietnamese currency, the dong, was devalued and tied to international financial markets. Foreign participation in banking was prermitted.
• Pricing of inputs to state enterprises on the basis of costs. In virtually all cases, subsidies and price controls were eliminated.
• Managers of enterprises, both state-owned and private, were given more freedom to operate. Much of the central economic planning apparatus was abolished, and the government workforce was cut by 15 percent.
• Restrictions on private enterprise were relaxed, including the ability to hire workers and to have foreign participation. Foreign trade was no longer solely under State control. Businesses, which were nationalized in 1975, were returned to their owners or the owners' heirs
• No more internal customs checkpoints
• Encouragement of foreign investment, with export processing zones for 100% foreign-owned enterprises
• Collective farming was largely abolished.
• Share-based corporations were allowed.

Local Implementation

Party officials still have real power, and small business, especially, can be put under significant pressure by local bureaucrats. The larger economic development zones presumably have government workers who see their own success tied to the success of the zone.

There has been marked development of economic development zones, with some now quite busy and others in startup. They includeg:

• Dung Quat Economic Zone in Quang Ngai, focused on the oil industry
• Chu Lai Open Economic Zone in Chu Lai, general industrial
• Dinh Vu Industrial Zone in Haiphong
• Vung Ang Zconomic Zone in Ha Tinh
• Van Don Economic Zone in Quang Ninh

One zone is on the border between Cambodia and Vietnam, the Manhattan (Svay Rieng) Special Economic Zone, funded by the Manhattan International Group of Taiwan. There are also joint developments in Haiphong with the People's Republic of China.

Infrastructure, from banking to transportation, is still being developed.

International

Vietnam's membership in the ASEAN Free Trade Area (AFTA) and entry into force of the US-Vietnam Bilateral Trade Agreement in December 2001 have led to even more rapid changes in Vietnam's trade and economic regime. Vietnam's exports to the US increased 900% from 2001 to 2007. Vietnam joined the WTO in January 2007, following over a decade long negotiation process. WTO membership has provided Vietnam an anchor to the global market and reinforced the domestic economic reform process.

Among other benefits, accession allows Vietnam to take advantage of the phase-out of the Agreement on Textiles and Clothing, which eliminated quotas on textiles and clothing for WTO partners on 1 January 2005. Agriculture's share of economic output has continued to shrink, from about 25% in 2000 to less than 20% in 2007.

Economic results

After reunification in 1975, the economy stagnated for the next ten years. After the introduction of doi moi in 1986, there was progress in increasing development and decreasing poverty. Deep poverty, defined as a percent of the population living under $1 per day, has declined significantly and is now smaller than that of China, India, and the Philippines. Vietnam is working to create jobs to meet the challenge of a labor force that is growing by more than one-and-a-half million people every year. Employment remains a major concern. The 1997 Asian financial crisis highlighted the problems in the Vietnamese economy and temporarily allowed opponents of reform to slow progress toward a market-oriented economy. GDP growth averaged 6.8% per year from 1997 to 2004 even against the background of the Asian financial crisis and a global recession.