The Impact Cold War On The Vietnam Economy History Essay

After two protracted wars with the Gallic colonial imperium, followed by a 30 twelvemonth struggle with the US world power, Vietnam was economically devastated. However, during the undermentioned 40 old ages Vietnam has developed a vibrant and progressive economic system and bit by bit achieved acknowledgment as a major economic power within the South East Asiatic part. Since the fusion in 1975, economic growing was identified as the most of import factor in the strategic development of Vietnam. However, the first decennary following the terminal of the war with the US was one in which the Cold War had a important impact upon the Vietnam economic system. Vietnam was lead by the Communist party and aligned its political and economic policies to rigorous socialist rules that mirrored the Soviet theoretical account and based decision-making on rigorous Communist standards ;

( I ) State or corporate ownership of production agencies ;

( two ) Government administered supply of physical input and end product ;

( three ) Lack of concern liberty, absence of factor markets, extremely regulated goods and services markets ; and

( four ) A prejudice toward heavy industry in investings.

( Vo Tri Thanh and Nguyen Thu Anh, ( 2006 ) Eaber Working Paper series: Paper No.8 Institutional alterations for private sector development in Vietnam. p.3 )

The authorities policy meant that Vietnam was limited to merchandise chiefly with other Communist states and the result was a dramatic diminution in the Vietnam economic system and increasing poorness amongst the huge bulk of the population. Further struggles with China in 1979 and Cambodia in 1978 placed Vietnam in a place of farther failing and instead than concentrate on “ economic recovery, the betterment of labor accomplishments, and agricultural and consumer goods production ” the Government focused on the edifice up of heavy industry. This period of Sovietisation brought even further jobs for the Vietnam economic system and the practical decennary of stagnancy merely began to stop in 1986 with the debut of “ Doi Moi ” . ( Bui That Thang, ( 2001 ) After the war: 25 old ages of Economic Development in Vietnam, NIRA Review, p21-22 ) . With ingestion on a regular basis greater than national income and legion periods of dearth relieved merely by foreign assistance, the decennary from 1976 to 1986 marked a period of economic prostration in Vietnam, and was merely ended with the debut of Doi Moi as the point taging when Vietnam switched from the Soviet theoretical account to a thrust towards a free market economic system.

The redevelopment ( Doi Moi ) in 1986 brought about a dramatic alteration for station war Vietnam, as described by Thanh and Ha ( societal inequality.. , chap2 p63 ) who declare it “ a existent turning point in the history of Vietnam ‘s economic development ” . It was shifted from a centrally planned economic system to a new system of a “ market oriented economic system ” . An of import factor to observe is that the determination to travel towards a free market and therefore, politically and ideologically change the footing of the Vietnam economic system was made prior to the prostration of the Soviet Union. The Vietnamese Government realised that the Soviet theoretical account was neglecting and that Vietnam faced a ‘major economic crisis, with acute deficits of nutrient, basic consumer goods, and inputs to agriculture and industry, and a turning external debt ‘ . ( Thanh and Anh, 2006, p.3 ) . It was decided to set up ‘synchronous establishments of a market economic system by socialism orientation ‘ ( Ibid, p.2 ) .

The terminal of Cold War in 1991 followed by the prostration of the Soviet Union was a new challenge to Vietnam. Fortunately, Vietnam was already reforming its political and economic sectors by the clip the prostration of the Soviet Union had ended and economic growing, policies to cut down macroeconomic instability and to present a multi-ownership construction were already in topographic point. However, the prostration of the Soviet Union still meant that Vietnam faced a new hereafter without the ideologically committed support of a Super Power, insulating Vietnam from much of the international community, a jobs exasperated by the continued control of the state by the Communist Party. However, this essay will reason that although the major factor that impacted on many of the Eastern European states for illustration, was the diminution and autumn of Communist disposals, in the instance of Vietnam, the Communist Party remained in power, and provided the stableness and security that provided the right conditions for impressive degrees of uninterrupted economic growing that has made Vietnam one of the ‘tiger ‘ economic systems of South East Asia. It will besides reason that the political and economic hereafter of Vietnam is dependent on Vietnam staying one of the most politically and security stable states in South east Asia, and that stableness is borne from the Communist party staying in control of the state. This contrasts with the former Soviet Union states who have made their economic hereafters dependant on the political system rejecting all the dogmas of Communism and traveling non merely from a centrally controlled economic system but besides rejecting the thought of a one- party system. However, Vietnam has remained true to its political individuality as a socialist democracy while leting reforms in political relations and economic sciences that has eventually brought it acknowledgment as a truly unfastened and free market economic system that has late been rewarded with rank of the World Trade Organisation.

The essay will follow the way through this procedure of reform and show how the economic system has managed to develop to international acknowledgment as one of the fastest turning economic systems in the World and still remained Communist. The terminal of the Cold War was universally seen as the terminal of Communism, and yet, like China, the Vietnam economic system has been transformed whilst non drastically reforming the political system, which has remained true to the ‘thoughts ‘ of Ho Chi Minh ‘ and commiserate with Marxist Leninism. The Communist Party still remains in power in Vietnam and its economic success is likely to re-enforce the belief that it will retain political control over the state for decennaries to come. This essay will demo how the Communist Party has managed to transform its economic system and remain socialist.

Prior to 1980s, Vietnam was still a backward agricultural state. In add-on, as a socialist state, Vietnam ‘s economic system was controlled and developed by a centrally planned system modelled on the Soviet Union. The Government played the dominant function in about all activities and people who worked for authorities were paid by the system of budget subsidies. And all the trading actions were dominated by big State owned Enterprises that had ‘collectivised ‘ about all countries of economic activity, while private concern was virtually non-existent ( Pham, 2005, p4 ) . Unfortunately, because of the mismatch between the direction and the existent patterns of the authorities, the economic system of Vietnam did n’t accomplish any of their economic marks laid down in subsequent four twelvemonth programs. The leaders so realised that centrally planned system was non a good construction for Vietnam ‘s development and whilst the Soviet Union was dramatically traveling towards political prostration for the same grounds, Vietnam ‘s Communist Party believed that its ideological control over the state through one-party regulation would really hold a positive impact on economic reform by supplying an environment of stableness and security, whilst set up an economic system based upon capitalist rules, free markets and an ‘open door ‘ set of policies.

The Communist Party identified eight major policies of reform that would be used to convey about a complete passage of the economic system and these were:

About complete monetary value liberalisation ;

Large devaluation and fusion of the exchange rate ;

Additions in involvement rates to positive degrees in existent footings ;

Significant decrease in subsidies to the SOE sector ;

Agricultural reforms through replacing of co-ops by families as the basic decision-making unit in production and security of term of office for farm households ;

Encouragement of the domestic private sector and foreign direct investing ( FDI ) ;

Removal of domestic trade barriers and creative activity of a more unfastened economic system.

( Thanh and Anh, p.6 ) .

The chief point here is that these are all important motions towards policies found in the ‘capitalist ‘ West and were merely possible in the former Soviet client provinces such as Poland and East Germany by besides traveling the political systems towards the Western democracy theoretical account. However, the Sixth Congress of the Vietnamese Communist Party-1986 believed that reform could follow the basic practical policies of the Western democracies but remain true to Communism by really increasing province control and direction and macro ordinance. Communism would let stableness to stay in the political sphere and the economic policies would themselves be directed towards ‘maintaining socialist marks ‘ . This mix of ‘socialist ‘ and ‘capitalist ‘ policies to retain some degree of equity amongst the general society is one now being discussed by many of the mainland European Union members who now identify a full Communist government as still unacceptable, but the monetarist free market economic system as every bit at mistake in the aftermath of the major fiscal crisis at the terminal of 2008. However, the chief contention is that Vietnam remains a one party system, but there is really small grounds of any deep protest or wish to alter this system by the huge bulk of the Vietnamese population. Although we are analyzing here the public presentation of Vietnam since the Cold War it is therefore indispensable to understand that unlike Russia and the former members of the USSR, Vietnam was able to transform its economic system without major political government alteration. ( Thang, 2001, p.3 ) . in the undermentioned paragraphs we look at how this was possible.

Up to 1990 the Doi Moi reforms did convey about a figure of betterments in the economic system. From 1989 onwards, Vietnam was on the manner to going one of the three chief large rice exporters in the universe, many province subsidies were vanishing and SOEs were invariably warned to reform and reconstitute, but non instantly encouraged to denationalise. Over these old ages the growing rate hovered around the 4.5 % grade and the reforms were merely easy impacting upon Vietnam ‘s overall economic public presentation.

Doi Moi involved a committedness to leveling co-ops and switching production off from a ‘household economic system ‘ to the ‘private sector ‘ , whilst besides reconstituting the state-owned sector to be more competitory. However, the existent impact of policies alterations did non truly take consequence until post-1990.The result was important development with the GDP growing averaging 8.5 % from 1990 to 1997 and averaging 6.5 % from 1998 to 2003. Average foreign trade and Foreign Direct Investment ( FDI ) improved to about $ 18 billion USD by 2007 and agricultural production doubled from 1990 to 2005, while exports reached $ 49 billion USD per twelvemonth by 2007. The per capita income rose from $ 220 USD in 1994 to $ 832 by 2007 and industrial production went from 27.3 % of GDP in 1985 to 41.6 % in 2007. Many industries reached impressive rates of growing, such as in the production of oil which went from 40,000 dozenss in 1986 to 7.6 million dozenss in 1990 and 12.5 million dozenss in 1998 ( Nguyen Ngoc Anh, Nguyen Thang ( 2007 ) ‘Foreign Direct Investing in Vietnam: an overview and analysis. ‘ MPRA Archive Paper No1921 ) . In the concluding portion of this essay we concentrate on how FDI has been illustration of how the Communist Party, its policies of reform and the growing of the economic system have become interlinked in conveying about a successful footing for even greater degrees of development in the hereafter.

The degrees of development are impressive with a decrease in the rising prices rate from a bloodcurdling 774 % in 1986 to a manageable 7.5 % in 2006, while besides accomplishing a poorness decrease degree of 22 % in 2005 from the 58.1 % recorded in 1993. By 2007 there were 7067 FDI undertakings with a capital of $ 63.5billion US. This dramatic success was as a consequence of the undermentioned factors:

Strategic location

Stable economic and political environment

Large natural mineral resources

A immature and knowing work force

The ability to be an export platform for US and EU markets

Broad investing environment and a committedness by the Government to economic reform.

In Vietnam it is the altering attitudes of the Communist Party and the Government towards the foreign economic sector as an of import measure towards economic growing that has significantly assisted the betterment of the economic system. Alongside this have been the increasing degrees of economic competition from other states in the part and progresss in international committednesss helped by a altering political and ideological attack to take parting in planetary economic trade ( 2006, 180 ) . A important factor in promoting this alteration in attitudes has been the realisation that FDI ‘has a critical function to play in the mobilisation of capital, engineering, organisational and managerial accomplishments ( 21 ) . The extremist alteration in the Communist Party attitude towards FDI was the institutionalization of FDI as a separate economic sector and acknowledgment that FDI was a critical drive forced towards the overall development of the Vietnam economic system ( ibid ) .

The betterment in investing in Vietnam has been assisted by a committedness throughout concern, authorities and society to better the image and individuality of Vietnam, non least being in its international engagement in political and economic forums. ( Pham Thi Huyen 2009 ‘The Nationality Factor in Assessing Hanoi Investment Environment ‘ in Business Environment and Policies in Hanoi, Hanoi, Vietnam )

A farther illustration of good the Vietnam economic system has developed under the counsel of the Communist Party is the increasing engagement of Vietnam in international forums and the successful entry into international forums such as the World Trade Organisation. Viet Nam joined the Association of South East Asiatic Nations ( ASEAN ) in 1995, and committed to AFTA prior to the Enterprise Law reform period. Viet Nam besides joined APEC in 1998.Vietnam has been an official member of WTO since 2007. Before that, there had been an progressively strong public policy committedness to fall ining the WTO in recent old ages, and mentions were made to the demand to reform to fall in the WTO in the policy argument on private sector development during the 2nd half of the 1990s. The endeavor reforms have been consistent with attempts to fall in the WTO, and the desire to fall in WTO has strengthened the manus of those forcing for betterments in the regulative environment for concern during the reform of the Enterprise Law. However, it is hard to measure the extent to which the desire to fall in the WTO provided drift for the Enterprise Law reforms Results, Challenges and Prospects ‘ , Vietnam ‘s Socio-Economic Development: A Social Science Review, No.31, Autumn Doanh, Le Dang, ( 2002 ) , ‘Foreign Direct Investment in Viet Nam:

While it is hard to place connexions between aspirations to fall in regional and international organic structures and the Enterprise Law reforms, contacts with regional and international organic structures have about surely helped the reform procedure. The economic public presentation of other ASEAN members and China are of import benchmarks with which Viet Nam ‘s policy shapers frequently compare their ain public presentation. Even anterior to fall ining ASEAN, Vietnamese functionaries went on survey Tourss to ASEAN member states to analyze issues related to bettering the enabling environment for concern development.

A important development in the reform of the economic system of Vietnam was the new Bilateral Trade Agreement ( BTA ) between Viet Nam and the USA, which was signed in December 2001, good after the major Enterprise Law reforms had been implemented. The private sector reforms implemented during the 2nd half of the 1990s about surely helped the procedure of making understanding on the BTA. This new understanding marked an of import watershed in the dealingss non merely between Vietnam and the US, but besides the remainder of the universe. The sign language of the understanding between Vietnam and its former enemy signified a leap forwards in the position of Vietnam and officially marked the terminal of most political and economic belligerencies between the two former enemies. However, its sign language was predicated on the absolute committedness of Vietnam to go on economic reform and besides suggested that political reform ; particularly in democratisation of Vietnam was about surely ‘on the cards ‘ for the hereafter ( Ibid ) .

Therefore, Vietnam is a particular instance to analyze in the survey of the impact of the terminal of the Cold War upon Communist and former Communist provinces. In the instance of Vietnam, non merely have they remained under the one party regulation of the Communist Party, they have besides successfully reformed their economic system, with the Communist Government able to supply the right degrees of stableness and security to go on to develop in the hereafter. Therefore, it is besides a instance of how the political orientation of a state and its economic reform are linked, but the instance of Vietnam it is an illustration of a state being ruled systematically under the socialist ‘thought ‘ of Ho Chi Minh, keeping one party regulation but was besides able to transform an economic system from province cardinal control to a free market. It is besides known as a peaceful, secure and safe environment in the Centre of a South East Asiatic part. A part that is more frequently now identified with the increasing jobs of Islamic fundamentalism and terrorist act, such as in Thailand and Malaysia. While economic growing continues, the degrees of utmost poorness are continually being lowered and the wealth of the economic success is to some extent spread down the multitudes through policies based on socialist rules, the one party regulation of the Communist Party in Vietnam is likely to go on


Nguyen Ngoc Anh, Nguyen Thang ( 2007 ) ‘Foreign Direct Investing in Vietnam: an overview and analysis. ‘ MPRA Archive Paper No1921 )

Le Dang, ( 2002 ) , Results, Challenges and Prospects ‘ , Vietnam ‘s Socio-Economic Development: A Social Science Review, No.31, Autumn Doanh, ‘Foreign Direct Investment in Viet Nam:

Le The Gioi ( 2004 ) , “ Moi truong dau tu Thai Viet Nam qua goc nhin cua nha dau tu nuoc ngoai ” , Le The Gioi, Journal of Economics and Forecast, vol 1, 2004.

Pham Thi Huyen ( 2009 ) ‘The Nationality Factor in Assessing Hanoi Investment Environment ‘ in Business Environment and Policies in Hanoi, Hanoi, Vietnam

Nguyen Ngoc Anh, Nguyen Thang ( 2007 ) ‘Foreign Direct Investing in Vietnam: an overview and analysis. ‘ MPRA Archive Paper No1921

Bui That Thang, ( 2001 ) After the war: 25 old ages of Economic Development in Vietnam, NIRA Review, p21-22 ) .

Vo Tri Thanh and Nguyen Thu Anh, ( 2006 ) Eaber Working Paper series: Paper No.8 Institutional alterations for private sector development in Vietnam.