Vietnam: Economy

Viet Nam stands at an important crossroads in its transition from a planned to a market-orientated economy. While it has moved considerably from being an inward-looking, stagnant and financially dependent planned economy during the early 1980s to an outward-orientated, globalized and market-orientated economy by the early part of the new millennium, much remained to be done if the status of a middle-income economy was to be achieved by 2010. The initiation of economic reform under the slogan ofdoi moi (renovation) in 1986, supplemented by further reform from 1989, led to rapid and inclusive economic growth during much of the 1990s, resulting in a doubling of gross domestic product (GDP) and a halving of poverty incidence. The financial and economic crisis that afflicted the region in 1997-98, with its related decline in foreign direct investment (FDI) inflows and in exports, however, contributed to a slowdown in Viet Nam's growth in its immediate aftermath, but this was nowhere near as severe as in a number of other regional economies. Subsequently, during 2000-06, economic growth steadily recovered in Viet Nam which achieved an average annual real rate of 7.5%, making it one of the best performing developing countries in the world. This was led by the non-state sector, in particular private sector small and medium-sized enterprises (SMEs) and the sector with foreign investment. These two sectors would be pivotal in sustaining growth into the future according to the Asian Development Bank (ADB) in 2007.