Economy, Government Role in the Economy

In Vietnam, as in other states ruled by Communist parties, the government is expected to play a guiding role in all matters, including the national economy. Classical Marxist economic theory calls for all major industries and utilities to be nationalized and for farmland to be placed under state or collective ownership.

Such was the situation in North Vietnam during the Vietnam War and initially in the reunified country established in 1976. However, Vietnam’s economy performed disastrously in the first decade after the war. Excessive government controls, lack of managerial experience, limited capital resources, and the absence of a profit incentive all contributed to the weak economy. In 1986 the government launched a reform program called doi moi (economic renovation) to reduce government interference in the economy and develop a market-based approach to increase national productivity.

In the years since the doi moi reforms were launched, Vietnamese economic growth has accelerated, and some observers predict the country will soon emerge as one of Asia’s developed nations. Using funds derived from customs revenue and the limited tax base, as well as a recent infusion of foreign capital, the government is energetically seeking to modernize the infrastructure as a means of attracting additional investment. But a variety of factors have impeded rapid growth, and today Vietnamese leaders are encountering growing difficulties in their effort to renovate the system. Among those obstacles is the reluctance of party leaders to further privatize the economy as well as a high level of bureaucratic interference in economic affairs. Such conditions often frustrate foreign investors and international lending organizations. Vietnam’s current leadership insists that the trend toward a market-based approach will remain but maintains that state-run enterprises will continue to play the flagship role in the economy.