Modern phenomenon: a country with socialist ideology and a market economy. How is it possible to establish a powerful market economy while having a socialist state? In this article I want to introduce an overview of Vietnam’s Doi Moi reforms that made the Vietnamese phenomenon come true.
The Socialist Republic of Vietnam was unified under a communist government in 1976 being an impoverished and politically isolated state until the strong reforms of Doi Moi (= Renovation) had been initiated in 1986.
Doi Moi aims at creating a „socialist-oriented market economy„. Here, the state sector plays a less active role in the coordination of economic issues and gives much more freedom to the markets in order to integrate into the global economy. This can be described as a necessary action due to Vietnam’s high inflation rate, persistent budget imbalance, a heavy dependence on imports and foreign assistance as well as massive military needs at that time. This situation had a strong negative effect on the Vietnamese wellbeing. This is why the Doi Moi reforms included a “food-first” conception while also focusing on the generation of energy. These essential aims were necessary to stabilise the country and provide the most basic goods for its population. It also helped to retain the belief in the communist system and the trust in its party. On the economic side, many things changed as well. Private enterprises increased from about 9,100 in 1990 to 95,357 in 2004. This influenced the Vietnamese GDP in a highly positive way.
Vietnam is now part of the Next Eleven (known also by the numeronym N-11) which are the eleven countries Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philippines, Turkey, South Korea, and Vietnam; identified by Goldman Sachs investment bank and economist Jim O’Neill as having a high potential of becoming, along with the BRICS, the world’s largest economies in the 21st century.
However, the long-term aim of Doi Moi is to develop socialism with the state regaining a crucial role in the Vietnam’s economy. Whatever the outcome will be, implementing this system in a well performing and stable country is a smart move in economic long-term planning.