Transcript Issues in Vietnam`s Economic Strategies

Vietnam and the experience
of the Asian crisis
Pietro Masina
University of Naples “L’Orientale” (Italy)
A decade after:
recovery and adjustment since the East Asian crisis
Bangkok , 12-14 July 2007
The Vietnamese transition
• Reforms started already in the late 1970s,
through ‘fence breaking’ and experiments in
agriculture and industry
• In 1986 the CPV launched the doi moi: from
central planning to market economy
• The reform process was accelerated in the
late 1980s by the collapse of Soviet Union
• By the early 1990s ‘price mattered’ but the
government maintained a prudent step-bystep attitude
A new fifth dragon?
Lights and shadows
• Growth is sustained and less unbalanced than in
China
• Poverty reduction has been outstanding
• Inequality has increased - so far not dramatically,
but risks are high
• The WTO accession presents many opportunities
and many challenges
• But the government is still in command of many
economic leverages
• Financial liberalization has been resisted – the
booming stock market may become a vehicle of
destabilization
GDP growth rates,
trendline
Households living below the government
poverty line, percentage
From hero to villain, to hero
again, to undisciplined pupil
• Hero: in the early 1990s Vietnam was
supported by the IFIs - it was moving towards
the market (and they hoped towards the US)
• Villain: by 1996 it had become a poor
performer, too slow in implementing reforms
• In 1997/98, it was told that its problems were
locally rooted – without bold reforms, it would
miss recovery
• Hero again: in the early 2000s growth and
poverty reduction made Vietnam popular
• Undisciplined pupil - it should do better/faster
Resilience during
the Asian crisis
• Vietnam was hit already before the crisis by a
contraction of Asian FDI
• Its currency remained stable, i.e., appreciated
in relation to Asian currencies
• Economic growth slowed down, but the
country was insulated by the financial storm
(the dong was not convertible)
• Growth of the agricultural sector played a
counter-cyclical role
GDP growth by sector,
1996–2005
GDP, annual growth rate
(ASEAN 6)
15.0
10.0
5.0
0.0
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
-5.0
-10.0
-15.0
Indonesia
Malaysia
Philippines
Singapore
Thailand
Vietnam
Saving and investment
(in percent of GDP)
40
35
30
25
20
15
10
5
0
2001
2002
Gross national saving
Gross investment
2003
Private saving
Private inv.
2004
Public saving
Public inv.
2005
FDI inflows, 1986–2005
10,000
8,000
4,000
2,000
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
19
90
19
89
19
88
-2,000
19
87
0
19
86
US$ millions
6,000
-4,000
-6,000
Indonesia
Malaysia
Philippines
Thailand
Viet Nam
Net FDI inflows 2004
(% of GDP)
State
Non-State
FDI
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
19
90
19
89
19
88
19
87
19
86
GDP by ownership
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
GDP per capita as % of GDP per
capita in Asian countries, PPP
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1991
1992
1993
% China
1994
India
1995
1996
Indonesia
1997
1998
Malaysia
1999
2000
2001
Philippines
2002
2003
Singapore
2004
2005
Thailand
GINI Index,
Asian countries
6
0
4
0
2
0
0
Malaysia
Thailand
China
49.2
42
44.7
Philippines Indonesia
46.1
34.3
Viet Nam
India
37
32.5
Income ratio of richest 10%
to poorest 10%
2
5
2
0
1
5
1
0
5
0
Malaysia
Thailand
China
Philippines
Indonesia
Viet Nam
India
22.1
12.6
18.4
16.5
7.8
9.4
7.3
Privatization of SOEs
• Privatization of SOEs regarded so far
small and not strategic companies
• The ‘equitization’ process is due to
accelerate and to touch large SOEs
• Risk of loss of sovereignty and creation
of foreign monopolists
• Risk of higher inequality through
appropriation and sale of SOEs shares
Current challenges
• Agricultural diversification played a major role
in poverty reduction - there is little scope to
move further in this direction
• Employment generation in the formal
industrial sector is insufficient
• Inequality may play a destabilizing role
• The alliance between SOEs and FDI may
alter the political nature of the leadership