State-owned enterprise (SOE) restructuring has proceeded more rapidly in Viet Nam than, for example, in China and India. The government tightened the budget constraints facing SOEs virtually simultaneously with price liberalisation. While a large number of mostly small SOEs were liquidated soon after reform began, others were able to adjust through various cost-cutting measures, including sizeable labour force reductions. The government put in place a safety net composed of severance pay and early retirement schemes that, combined with natural attrition, yielded a reduction in the SOE workforce of almost one million people in less than a decade. While the largely voluntary nature of the schemes may have caused some adverse selection and made them more costly than necessary, the benefit has been to avoid social discontent. High private-sector employment growth has been a major contributor to the programme’s success.
Still, the process is not complete. Initial restructuring was ...
Apart from size of population and GDP, China and Viet Nam have a good deal in common. Both are economies in transition from socialist central planning to the market. Both were largely agrarian societies on the eve of their reforms and, in both, unleashing the productive forces of agriculture was an important early reform result. Indeed, a rapid improvement in rural living standards is among the outstanding achievements of both countries.
In the case of industrial development, the differences in their post-reform experience are more striking than the similarities. In both countries, industry has grown rapidly since reforms, much more rapidly on average than agriculture. Yet, the motor force of industrial growth has been different in the two countries. In China, rural township and village enterprises (TVEs) — first collectively and more recently privately owned — have led industrial growth, with state enterprises lagging far behind. In Viet Nam, growth has been comparable in state ...
Reform in Viet Nam is a protracted process. Beginning in 1979, it experienced both advances and reversals until 1986, a sudden acceleration in 1989-91, then gradualism hampered by a deepening entrenchment of interests in positions both for and against further liberalisation. A stop-go cycle has developed in which the new incentives and opportunities resulting from reform are sufficient to block broad reversion to earlier phases, but comprehensive advances would seem to depend on the occurrence of deeply unfavourable shocks. When crisis has seriously undermined performance, leaders have embraced reform to shore up legitimacy, while in good times they have tended to disagree over the long-term risks of reform and how to deal with those risks ...
- The Vietnamese economy was in the doldrums in the 1980s and until a certain progress had been made in the context of Doi Moi there was little incentive for businesses to invest. The following reasons are commonly given for the sluggish economic activity: a lack of appropriate infrastructure (causing market disconnectedness even within the country); weak links to the world market; a shortage of skilled labour and managerial capacity; and an inefficient or business unfriendly public administration. ODA to Vietnam was allocated in such a way as to remedy these obstacles and the donors’ well designed strategies are seen as a major factor behind the success of ODA.
- National ownership, an important feature of ODA programmes, has mostly been strong in ODA to Vietnam. Most of the activities of the past were closely aligned with the Vietnamese government’s development priorities. It should nevertheless be recognised that some ODA projects have aroused little enthusiasm among public ...
Over the past few years, the Vietnamese economy has enjoyed impressive growth rates. The country issued its first sovereign bond in 2005 with a total face value of USD (United States dollars) 750 million (which was sold out in the US, having been over-subscribed by a factor of four times). The investment environment has been good with increasing interest in both direct and indirect foreign investment. This positive picture seems to have made people overly optimistic and insufficiently cautious about the risk of a potential downturn in the economy.
During the 1990s, a large number of countries embarked on fundamental economic policy reforms. Centrally planned economies in Eastern Europe and East Asia, as well as highly protected and inward-looking economies like India and Brazil, were eager to reduce government involvement in economic decision-making in order to ensure macroeconomic stability and open up to international trade and capital flows. Different countries adopted different approaches and sequences of reform, which led to different policy outcomes. These experiences provide fertile ground for the political economy studies of economic reform. They provide considerable material on critical factors, like the timing, economic necessity, and political challenges of reforms.
This publication presents the results of the first OECD investment policy review of Vietnam. It finds that the progress Vietnam has achieved in less than two decades in putting into place a legal framework and implementing policies that mobilise private investment, including international direct investment, to support economic growth and the prosperity of Vietnam’s citizens has been remarkable. Starting from a situation in which the economy was essentially closed to private and international investment, Vietnam is now considered to be one of the very attractive economies in the world for investment.
In 1987, early in the process of transition to a more market-oriented economy, the Vietnamese National Assembly adopted the Law on Foreign Investment. Follow-up steps have been taken in the past two decades to encourage, protect and improve the quality of foreign investment. Such efforts resulted in strong investment flows in the mid-1990s (see Figure 2.1). Due to the Asian financial crisis, net foreign investment inflows dropped significantly in 1997, but began to grow again in 2001. Since 2006, there has been a major increase in the level of FDI in Viet Nam. Disbursed FDI in 2007 totalled USD 8 billion, and estimates from Viet Nam’s Foreign Investment Agency show that disbursements totaled USD 11.5 billion in 2008. Foreign direct investment as a percentage of total investment has increased also recently reached and exceeded the pre-Asian financial crisis levels, as FDI accounted for 30% of total investment in Viet Nam in 2008. Registered FDI in Viet Nam in 2008 totaled USD 71.7 billion.
After more than two decades since the launch of the country’s renovation strategy (1986 – 2009), Viet Nam has made an extensive effort to establish its legal framework and implement policies to mobilise investment from the private sector, including international investment, to stimulate economic growth and improve the standard of living of the Vietnamese people. Throughout this period, the Vietnamese economy has been transformed from a centrally planned model to a market-based one, featuring a dynamic private economic sector developing side by side with the state-owned sector for the good of the economy. Huge domestic economic resources have been unleashed. The economy has gone through important changes, both in quantity and quality. It has led to impressive growth of the private sector and to large inflows of foreign investment. Viet Nam is now seen as one of the most attractive destinations for foreign direct investment (FDI) FDI in the world, particularly for FDI from Asian and most developed countries as the figures for 2007-2008 clearly show.
This section evaluates Viet Nam’s reform efforts and provides an anatomy of the regulatory framework for investment based on the general matrix of the Policy Framework for Investment (PFI) (see Box 3.1).1 This assessment, as a cooperative endeavour, builds upon Viet Nam’s self-evaluation under the PFI. It focuses on the first four chapters and part of Chapters 9 of the PFI relating to investment policies, investment promotion and facilitation, trade policies, competition policies, tax policies and development of the service sector.
This publication presents the results of the first Policy Framework for Investment assessment of Viet Nam. This assessment is the product of a joint collaborative effort between Viet Nam and the OECD. It particularly reflects contributions by an interagency team in the Vietnamese government under the leadership of the Ministry for Planning and Investment.
The position of Vietnamese women has improved since the 1950s. In 2006, the National Assembly passed the country’s first Law on Gender Equality. According to the US Department of State, this law aims to address a range of issues (such as wage gaps) and eliminate discrimination based on gender.