Lecture given at Hanoi University (August 2016) and RMIT University (September 2016).

1. Post-Cold War Vietnam
Economic Policy
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2. Major economic-related events: A timeline
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1986: Start of Doi Moi reform policy
92: New constitution adopted with certain economic freedoms
1994: removal of US trade embargo after 30 years
1995: Full member of ASEAN
2001: Application of the US-VN trade agreement
2007: 150th member of the WTO after 12 years of talks
Aug 2013: 19th negotiation round of the TPP (12 countries
March 2014: 7th negotiation round of the EU-VN

3. Commonly-known strengths
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◻ An important domestic market of 90 millions of habitants
◻ Young and increasingly well-trained population (70% of
the population age between 15 and 64) having potential
for high value added jobs
◻ Perfect location as a hub for South East Asia
◻ One of the most dynamic economies among the
Emerging Asia nations

4. A synthesis of overall performance
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◻ Vietnam has been recognized as one of Asia’s great
success stories in terms of economic and social
development over the last 20 years
⬜ Vietnam economy has a robust and steady growth since 1990
(average growth rate of 6.41% since 2000). China is the only
Asian country that performed better
⬜ The growth is relatively balanced, with industry and services
sectors contributing about 40% each to GDP
⬜ Trade openness and integration with the region and world
has substantially increased (163.67% of GDP)
⬜ Vietnam is among the most attractive countries in terms of
external financing (FDI and portfolio equity)
⬜ There is a certain level of resilience as extreme shocks (recent
crises have not caused serious effects on economic and
investment activity (good management of economic and
financial openness)

5. ◆ Stable socio-political environment
◆ Ongoing structural economic reforms
◆ Abundant labor force with enhanced skills
◆ Higher ability to meet debt obligations
◆ Towards more price stability
Key success factors

6. Stable socio-political environment
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◻ Since the “Doi Moi” reform policy, the social, political and
economic context has rapidly changed. It is mainly
characterized by
⬜ A higher openness of the economy and a gradual move towards
regional global integration through a number of bilateral and
multilateral trade agreements
⬜ A multi-dimensional and multi-partner model that enables the
country to develop the export-based economy

7. 7
⬜ A higher participation of most socio-economic
agents/institutions (governmental vs. non-governmental) in the
planning, implementation and monitoring of economic policies
⬜ An encouragement of foreign investment as part of the
country’s development strategy

8. Stable socio-political environment
8
◻ Country credit ratings (as of January 2015)
⬜ Standard & Poors: BB-
⬜ Moodys rating for Vietnam sovereign debt: B2
⬜ Fitchs credit rating: B+
⬜ Same group of speculative investment grade as Russia (BB+),
and one grade lower than Brazil and India (BBB-)

9. Ongoing structural reforms
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◻ Since 1986, Vietnam has embarked a vast program of
structural reforms with objectives of turning a
centralized economy into a market-based economy with
socialist orientation
⬜ Abolishing agricultural collectives
⬜ Removing price controls on almost all traded goods and
services
⬜ Encouraging the establishment of private businesses

10. 10
⬜ Opening up the domestic market to foreign investment,
including foreign-owned enterprises
⬜ Liberalizing gradually the banking sector so that interest
rates are determined according to market conditions
⬜ Developing and improving the efficiency of the domestic
markets for goods/services and for capital (stock/bond
markets)

11. Ongoing structural reforms
11
◻ Numerous regulatory reforms to enhance international
economic cooperation and to attract external financing
⬜ Focus on foreign investors: return, risks, legal barriers,
Investor protection

12. 12
⬜ Prior to joining the WTO, Vietnam has substantially
reformed its legal system through revising a number of Laws
and Codes:
■ Labor Code, Land Law, Civil Code, Law on Securities, Law on
Competition, Enterprise Law, and Investment Law
■ Objective: making the investment environment more stable
and transparent as well as to strengthen the enforcement of Laws
⬜ The presence of foreign investors also helped the
Vietnam’s legal environment more conform to international
standards

13. Ongoing structural reforms
13
◻ The Socio-Economic Development Strategy 2011-2020
⬜ Continues the previous structural reforms, while paying more
attention to environmental sustainability, social equity, and
emerging issues of macroeconomic stability.
⬜ It defines three “breakthrough areas”:
■ i) promoting human resources/skills development (particularly skills
for modern industry and innovation),
■ ii) improving market institutions, and
■ iii) infrastructure development

14. ◆ Weak labor productivity growth and skills
◆ Slow pace of economic sector transformations
◆ Unbalanced financing means
◆ Low quality of FDI inflows
◆ Economic integration is not without risk
Main challenges for the coming
years

15. Economic integration is not without risk
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◻ Advantages
⬜ A greater market for goods and services
⬜ Companies will have better access to international capital
markets for external financing
⬜ Reduced cost of capital and international risk sharing
⬜ Technology transfer (cleaner technology for a sustainable
development)

16. 16
◻Risks
⬜ Vietnam companies may not be ready for dealing with
challenges
■ Vietnam has a low competitiveness level (labor-intensive
economy), while main trading partners are productivity-driven economy
(Chile, Mexico), or innovation-based economy (US, Canada, Japan,
Singapore, Malaysia, Australia, New Zealand)
■ Exports of low value added products

17. ◆ Strategic partnership: purposes
◆ Roles of strategic partnerships for
Vietnam economy
◆ How to make it work?
Roles of strategic partnerships

18. Strategic partnership: purposes
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◻ Commitments between two nations
⬜ to build a strong and mutual trust to develop cooperation in
various aspects
⬜ to promote a stable and reliable environment for international
and regional cooperation
⬜ ensuring trade balance, and enhancing the international
profile of involved countries

19. Roles of strategic partnerships for Vietnam
economy
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◻ Strategic partnerships for sustainable economic
development
⬜ Larger market for capital, goods and services (3.5 billion of
habitants, and close to 33.5 trillion USD of GDP)
⬜ Attractiveness for FDI from 13 countries
⬜ Source of ODA financing for infrastructure, urban development,
and other priority sectors (agricultural equipment, food
processing, medical healthcare, railways, green energy and
technology, oil and gas)

20. 20
◻Strategic partnerships to create favorable business
environment and opportunities for solving current
challenges
⬜ Weak labor productivity growth and skills; Slow pace of
economic sector transformations; Unbalanced financing means,
Low quality of FDI inflows, Vulnerability due to economic
integration

21. Post-Cold War Vietnam
Foreign Policy

22. Vietnam’s foreign policy into three periods
1975-91 - Vietnam went from being a member of the socialist camp to a
member of the international community)
1991-2006 - Vietnam sought to multilateralize and diversity it foreign relations
by developing economic links and political relations with major powers in
Asia, America, Europe and Southeast Asia, as well as join regional
multilateral institutions)
2006-2015 - Vietnam consolidated its international role by forging strategic
partnerships with major world powers and major Asian powers and pursued a
policy of proactive international integratration.

23. Pre-1986
Antagonistic contradictions between socialism and capitalism
Two types of countries - friends and enemies (dich va ta)
International relations between these two worlds was a struggle of ‘who will
triumph over whom’ (ai thang ai)
Throughout the period 1965-85 Vietnam viewed itself as the outpost of socialism
on the front line in the struggle between socialism and imperialism.

24. Unification
In mid-1978 following unification, Vietnam joined the Council for Mutual Economic
Assistance (CMEA/COMECON)
Became a member of the socialist community headed by the Soviet Union
In November 1978, the Soviet Union and Vietnam signed a twenty-five year Treaty
of Friendship and Cooperation.
At this time Vietnam considered the Soviet Union as the cornerstone of its defence
and national security policies.

25. Mid-1980s
In the early to mid-1980s Vietnam began to adopt significant changes in its
national security policy.
At least two major factors influenced these developments.
1. The first was the grave socio-economic domestic crisis that confronted
Vietnam.
2. The second factor was external and arose from the ‘new political thinking’
emanating from the Soviet Union under the leadership of Mikhail Gorbachev

26. New Foreign Policy Considerations
Foreign policy structured by ideological considerations was transformed to a
foreign policy framework that placed greater emphasis on national interest and
pragmatic diplomacy.
Vietnamese analysts now stressed global economic forces and the impact of the
revolution in science and technology as key determinants of global order
Fears of dependency and assimilation (hoa nhap) gave way to a positive view of
economic integration (hoi nhap)

27. Two Key Turning Points
Politburo Resolution No. 32 (July 1986)
Politburo Resolution No. 13 (May 1988).

28. Politburo Resolution No. 32
Resolution #32 identified ‘peace and development’ as the highest priority
Laid the basis for ‘new thinking’ in the conceptualization of Vietnam’s national
security policy.
Clearly set out guidelines and revised diplomatic policies, and moved toward a
solution in Cambodia.
The Resolution clearly stated: “the external mission of Vietnam is to have good
coordination between the strength of the people and the strength of the era,
to...proactively create a condition for stability and economic construction...to move
proactively to a new stage of development, and peaceful coexistence with China,
ASEAN, and the United States, and build Southeast Asia into a region of peace,
stability and cooperation”

29. Doi Moi (6th Congress -1986)
Overcoming the domestic socio-economic crisis
Expansion and heightening of the effectiveness of external economic relations as
one of the means of addressing the domestic economic crisis
Open itself to foreign investment from non-socialist countries
Liquidate the Cambodian problem by withdrawing its military forces

30. Politburo Resolution No. 13 (1988)
Foreign policy objectives gave priority to economic development
Used the term national interest (loi ich dan toc) for the first time
New emphasis was ‘to maintain peace, take advantage of favorable world
conditions’ in order to stabilize the domestic situation and set the base for
economic development over the next ten to fifteen years
Called for a ‘multi-directional foreign policy’ orientation that had the goal of making
‘more friends, fewer enemies’ (them ban bot thu)

31. Politburo Resolution No. 13 (1988) (continued)
Resolution No. 13 not only called for a resolution of the Cambodian conflict but the
normalization of relations with China3 and developing relations with ASEAN,
Japan, European countries and “step-by-step” normalizing relations with the
United States
Signaled the abandonment of the ‘two worlds’ view in favour of the concept of an
interdependent world

32. Vietnam and Cambodia
End of 1989 Vietnam unilaterally withdrew the last of its armed forces from
Cambodia
Vietnam was no longer an international pariah state subject to an aid and trade
boycott
Vietnam succeeded in diversifying its foreign relations by moving from
dependency on the Soviet Union to a more diverse and balanced set of
external relations.
In 1989, Vietnam had diplomatic relations with only twenty-three noncommunist
states; by 1995 this number had expanded to 163.
During this period Vietnam normalized it relations all members of ASEAN,
acceded to the 1976 ASEAN Treaty of Amity and Cooperation, and in
November 1991 normalized it relations with China

33. Seventh National Party Congress (1991)
The Seventh Congress adopted an important modification to Politburo Resolution
No. 13
‘diversify and multilateralize economic relations with all countries and economic
organizations...’
1993-94 - The United States ended its long-standing objections to the provision of
developmental assistance to Vietnam by the World Bank and International
Monetary Fund

34. Mid-Term Party Conference (1994)
January 1994, the VCP convened its first Mid-Term Party Conference
After the conference the official Vietnamese media highlighted what it termed the
challenges of ‘four dangers’ facing Vietnam:
1. Being left behind (tut hau) economically by regional countries
2. Peaceful evolution against socialism
3. Corruption
4. Breakdown of social order and security

35. July 1995
Normalised relations with the United States
Became ASEAN’s seventh member
Signed a framework cooperation agreement with the European Union
For the first time, Vietnam had diplomatic relations with all five permanent
members of the United Nations Security Council and, equally importantly, with the
world’s three major economic centres - Europe, North America and East Asia

36. Vietnam and Russia
In March 2001 Vietnam consolidated its ties with the Russian Federation, a
‘traditional friendly state,’ by signing its first strategic partnership agreement during
the course of a visit by President Vladimir Putin to Hanoi
Russian arms sales to Vietnam are the largest and most significant component of
the strategic partnership. The Russian Federation is Vietnam’s largest provider of
military equipment and technology.

37. Ninth National Congress (2001)
Stepped up the rate of economic growth
Encouraged more foreign investment
Continued regional and global integration
Integrated Vietnam’s economy with the global economy
In 2001 the United States granted Vietnam temporary normal trade relations
status on a year-by-year basis

38. 2003
Two new ideological concepts ‘partners of cooperation’ (doi tac) and ‘objects of
struggle’ (doi tuong) in foreign relations
‘any force that plans and acts against the objectives we hold in the course of
national construction and defense is the object of struggle’.
‘anyone who respects our independence and sovereignty, establishes and
expands friendly, equal, and mutually beneficial relations with Vietnam is our
partner.’

39. Tenth National Congress (2006)
Full transformation from a Marxist-Leninist framework of a globe divided into
two hostile camps into a view of one global economy
Rejected the zero-sum view of the world divided into ‘friends and enemies’ and
sought to become friends with all countries
Developed a comprehensive view of national security that depreciates the
relative importance of military power and elevates the salience of economic
and other factors.
‘must strive to unswervingly carry out a foreign policy of… multilateral and
diversified relationships while staying proactive in integrating into the world
economic community and expanding international cooperation in other fields.’