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8 - From AEC to RCEP: Implications for the CLMV
- from II - The Regional Comprehensive Economic Partnership (RCEP) Agreement
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- By Vo Tri Thanh, National University
- Edited by Basu Das Sanchita, Masahiro Kawai
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- Book:
- Trade Regionalism in the Asia-Pacific
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 05 July 2016
- Print publication:
- 11 April 2016, pp 147-166
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Summary
INTRODUCTION
In the past decades, the Association of Southeast Asian Nations (ASEAN) has evolved rapidly to become one of the key emerging regional institutions in the world. As one of its key agendas, ASEAN has promoted progressive regional integration alongside the reduction of the intra-regional development gap. The process of ASEAN integration has been wide-ranging and inclusive, leading to significant benefits to members, even the less-developed ones such as Cambodia, Lao PDR, Myanmar, and Vietnam (CLMV). Although the “CLMV growth story is one ASEAN success story with lessons … on the potential benefits of economic integration” (ERIA 2014), maintaining the momentum for further improvement is essential.
The idea of the Regional Comprehensive Economic Partnership (RCEP) is not new. The initiative actually represents a continuation of the “Concentric Circle Strategy”, which gradually builds on ASEAN integration in the form of the ASEAN Economic Community (AEC) to be created by 2015 and ASEAN-plus integration with “ASEAN centrality”. The RCEP was initiated by ASEAN itself in 2011 with the Association's Framework for RCEP. In 2012, leaders of all sixteen economies — including ASEAN members, China, Japan, Korea, Australia, New Zealand, and India — supported and agreed to launch the RCEP negotiations. Fundamentally, the RCEP resembles the various efforts around the region for broader regional integration, such as the East Asian Free Trade Area (EAFTA) initiative by China and the Comprehensive Economic Partnership in East Asia (CEPEA) proposal by Japan.
Since the RCEP originates from ASEAN's aspirations, a couple of natural questions arise. The first is whether the RCEP arrangement can be really effective for sustaining growth and narrowing the development gap in the CLMV countries. The second question is whether the RCEP can benefit from the AEC framework. In answering these questions, one may need to start by identifying their possible impacts on these member economies. Complications introduced by the new context of Asia-Pacific integration — i.e., the ongoing Trans-Pacific Partnership (TPP) negotiations — should also be considered carefully even though not all the CLMV countries participate directly in the process. These questions and issues constitute the main analytical focus of this chapter.
The remainder of the chapter is structured as follows. Section 2 summarizes the main possible impacts of the RCEP on the CLMV countries.
8 - Managing Domestic Consensus for ASEAN Community Building in Vietnam
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- By Vo Tri Thanh, Central Institute for Economic Management (CIEM).
- Edited by Siew Yean Tham, Sanchita Basu Das
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- Book:
- Moving the AEC Beyond 2015
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 06 January 2018
- Print publication:
- 11 March 2016, pp 179-200
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Summary
INTRODUCTION
Until 1986, Vietnam remained an autarky under a central planning regime with some of the following key characteristics: (i) state or collective ownership of all production means, including those in agriculture; (ii) government administered supply of physical input and output; (iii) the absence of factor markets; (iv) and highly regulated goods and services markets. Poor incentives and restricted information flows led to heavy distortions in resource allocation (Vo and Nguyen 2006). While ensuring the contribution of output to the state, cooperatives usually failed to meet half their members’ demands. Facing an economic crisis and severe food shortages, Vietnam carried out reforms in the early 1980s, but only at the micro-level.
The year 1986 marked a major breakthrough in economic reforms as the country rejected the rationale of the central planning model, and declared its intention to transform itself into a mixed-market economy. Since then, various market-oriented reforms have been undertaken, aimed at stabilizing and opening up the economy, and expanding freedom of choice for all economic units. Reforms of goods markets and factors of production took place gradually; legal and policy reforms were undertaken to create a level playing field for all economic entities, irrespective of their nationality or form of ownership.
The reforms brought about remarkable socio-economic success in Vietnam. The pace of economic growth increased steadily, averaging 7.8 per cent per annum during 1990–2010, despite moderating to below 6 per cent per annum during 2012–14. Exports expanded at an average annual rate of 18.8 per cent per annum during 1990 to 2014. GDP per capita improved from US$98 in 1990 to above US$1,910 in 2013, thereby helping Vietnam to become a middle-income country in 2008 (Vietnam News Daily, 14 April 2014). The poverty rate dropped sharply from 58.1 per cent in 1993 to just over 12.1 per cent in 2014.
The country's wide-ranging socio-economic success was the outcome of several factors. First, Vietnam had committed itself to bold and comprehensive reforms. After being severely challenged in 1985 by the failures of microeconomic reforms and by food scarcity, it recognized the importance of undertaking more comprehensive and consistent marketoriented reforms. Once they were initiated, these reforms gathered momentum and have now become practically irreversible. Moreover, these domestic reforms were largely inclusive and focused on benefits to people. This ensured sufficient domestic consensus for reforms and related policy adjustments.
6 - Vietnam's Economic Experience since WTO Accession
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- By Vo Tri Thanh, Central Institute of Economic Management, Ministry of Planning and Investment, Vietnam
- Edited by Suthiphand Chirathivat, Chayodom Sabhasri, Aekapol Chongvilaivan
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- Book:
- Global Economic Uncertainties and Southeast Asian Economies
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 22 July 2017
- Print publication:
- 04 May 2015, pp 123-147
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Summary
INTRODUCTION
The past six years have been a memorable experience for Vietnam. After a long period of continuous high growth and macroeconomic stability till 2007, Vietnam pitched itself to foreign investors as one of the most attractive investment destinations. The accession to the World Trade Organization (WTO) further consolidated optimism about Vietnam's growth prospects. However, after a short period of overly optimistic expectations in the first half of 2007, Vietnam had to start worrying about the overall economic situation. The accumulated inflationary pressures from continuous credit and public investment expansions, in combination with external shocks such as rising energy and rice prices, and inappropriate policy responses to a surge in capital inflows in 2007, sent the country into macroeconomic turbulence and saw it struggle to formulate a proper stabilization policy. A policy package to deal with macroeconomic instability has been implemented since March 2008. And whilst the macroeconomic situation somewhat improved by the end of 2008, the country suffered serious adverse impacts from the global financial crisis and recession. The policy stance then had to be reverted to prevent an economic downturn, via coordinated stimulus measures. Economic growth subsequently recovered but was accompanied by increasing macroeconomic instability. The situation necessitated a further switch in macroeconomic policies towards curbing inflation and restoring macroeconomic stability, which has been a dominant policy trend since early 2011.
This chapter will look into Vietnam's key experiences with macroeconomic policy management since the WTO accession in 2007. In doing so, the chapter portrays the main patterns of macroeconomic performance and related policy responses. The key focus is on the three sub-periods of macroeconomic instability or economic downturn that forced Vietnam to switch the policy stance. This will be the basis to determine the key lessons of policy management since 2007.
The remainder of the chapter is structured as follows: Section 2 provides an overview of Vietnam's macroeconomic performance and policy changes since the WTO accession in 2007. Section 3 analyses the issue of macroeconomic instability and the policy responses implemented in late 2007 to 2008. Section 4 focuses on the economic downturn and stimulus package implemented in Vietnam in late 2008 to 2009. Section 5 then summarizes the key policy responses by the Government of Vietnam to macroeconomic instability and structural problems since 2011. Finally, Section 6 draws out some key lessons from Vietnam's experience with macroeconomic stabilization since 2007.
9 - Effectiveness of Initiative for ASEAN Integration
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- By Vo Tri Thanh, Central Institute of Economic Management
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- Book:
- ASEAN Economic Community Scorecard
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 21 October 2015
- Print publication:
- 06 May 2013, pp 182-203
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Summary
I. Introduction
In December 1997, after years of expansion and cooperation, the ASEAN adopted its Vision 2020, emphasizing the objective of “… transforming ASEAN into a stable, prosperous, and highly competitive region with equitable economic development, and reduced poverty and socio-economic disparities”. In October 2003, the ASEAN member states agreed on the establishment of the ASEAN Community by 2020, with the three pillars of the political-security community, economic community, and socio-cultural community. To accelerate the realization of the Vision, in 2007 the ASEAN leaders expressed their commitment to establish an ASEAN Economic Community (AEC) by 2015 as a single market and production base, and later on signed the AEC Blueprint as an action plan for advancing the AEC. Within such a context, the Initiative for ASEAN Integration (IAI) was launched in 2000, seeking to narrow intra-regional development gap by providing assistance to the CLMV in accelerating their integration and development.
With such a big move, ASEAN member countries certainly have a sizeable workload. There remain challenges and impediments to each country and the region as a whole, the most pressing of which lies in whether the less developed members can catch up with more advanced ones. Yet the progress of ASEAN so far, particularly in amalgamating themselves as a single block in negotiating and implementing free trade agreements (FTAs) with other major trading partners, brought about hopes for in-time realization of the AEC goal.
There are several notes regarding the implementation of IAI. First, the scope of priority areas to be addressed by the IAI has been expanded. In the IAI Work Plan for the first phase (2002–08), priority is given initially to only four areas, namely infrastructure, human resources development, information and communication technology (ICT), and capacity building for regional economic integration. In 2005, this Work Plan was extended to cover seven areas, with the three additional areas being tourism, poverty and quality of life, and general coverage projects. The Work Plan for the second phase (i.e. 2009–15) retains all the seven priority areas. Both phases have emphasized the focus on public sector capacity building. However, the first Work Plan also contributed significantly in the area of ICT, while the second one currently supports projects in infrastructure development, regional economic integration, and tourism.
6 - Deepening GMS Cooperation in a More Integrated ASEAN and East Asia
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- By Vo Tri Thanh, Central Institute for Economic Management
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- Book:
- Greater Mekong Subregion
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 21 October 2015
- Print publication:
- 07 February 2013, pp 84-102
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Summary
Thanks to various measures for domestic economic reforms and regional economic integration, the East Asian economies in general, and the Association of Southeast Asian Nations (ASEAN) member economies in particular, have seen themselves becoming more deeply connected. Economic activities, particularly trade and investment activities, experienced a drastic increase in almost all sectors and all parts of the region. Cooperation between East Asian economies has also been enhanced, with the initial views to facilitating smoother flows of trade, investment, and labour, and eventually to joining hands in coping with more regionally common issues that arose in recent years.
In such a context, the Greater Mekong Subregion (GMS), with members Cambodia, the People's Republic of China (specifically Yunnan Province and Guangxi Zhuang Autonomous Region), the Lao People's Democratic Republic (PDR), Myanmar, Thailand, and Vietnam, is becoming an important and dynamic region. With assistance from the Asian Development Bank (ADB) in 1992, the six GMS countries launched a programme of subregional economic cooperation to enhance their economic relations, building on their shared histories and cultures, and covering priority sectors such as agriculture, human resource development, etc. Along with ASEAN integration and ASEAN-plus integration, economic integration under the GMS framework has also been rapid. This broadens the development opportunities for each member country while facilitating their joint efforts in a rising subregion with a relatively smaller development gap.
Nonetheless the GMS economies face a number of challenges in their integration and development processes. The challenge comes first from their low income levels, such as those prevailing in Cambodia, the Lao PDR, and Myanmar. Their economies also differ significantly in terms of labour and industrial structures. The gap in institutional settings across the GMS economies, which puts different constraints and presents various economic and integration-facilitating ingredients, is another source of difference. In the new development context, GMS economies, as part of the dynamic East Asia, encounter to a larger extent non-traditional security issues, such as food security, climate change, among others. As these are major impediments to GMS cooperation, they necessitate bolder and more effective measures to resolve them.
This chapter attempts to discuss the context of, and policy recommendations for, deepening GMS cooperation. Apart from the introduction, it consists of four sections.
18 - The Private Sector's Participation in Regional Integration: A Perspective from Vietnam
- from Part II - Challenges For The Private Sector
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- By Vo Tri Thanh, Central Institute for Economic Management, Nguyen Anh Duong, Central Institute for Economic Management
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- Book:
- Achieving the ASEAN Economic Community 2015
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 21 October 2015
- Print publication:
- 15 May 2012, pp 307-324
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Summary
After her national unification, Vietnam undertook continuous economic reforms under pressure from severe economic problems. During the period 1980–87, some micro-reform attempts were made with a bottomup approach, reflecting the enhancement of incentives at the micro level. These micro-reforms enhanced voluntary and decentralized interactions between individual agents and induced producers to increase outputs during the period 1982–85 (Vo and Nguyen 2006a). However, the micro-reforms in this period led to no fundamental changes in resource misallocation, trade restrictions, or macroeconomic management.
Since the start of doi moi (renovation) in 1986, Vietnam has strived to transform herself from a centrally planned economy into a socialistoriented market economy. Such a transformation relies to a large extent on its establishing and strengthening market institutions, developing the private sector, and undertaking proactive international economic integration. More importantly, these measures were combined, rather than undertaken separately. Specifically, the development of the private sector came in line with the facilitation of its participation in the international economic integration process.
As a key direction for more fundamental economic changes, Vietnam has improved its microeconomic foundations to support private sector development. Since 1979 two main steps have been implemented along the following lines: (1) the formal recognition of private ownership and right of doing business, and the promulgation and implementation of various legal frameworks on business/company types; and (2) the gradual relaxation of market entry.
In another aspect, Vietnam, recognizing the inefficiency of SOEs, attempted to “restructure and/or equitize state-owned enterprises (SOEs)” rather than “privatize” them. Whilst substantially reducing subsidies and “cheap” credit to these enterprises, it gave them greater autonomy. In recent years, SOE reforms in Vietnam included the listing of these enterprises in the stock market, equitizing large SOEs and some general corporations, transforming big SOEs and some general corporations into holding-subsidiary companies, and establishing business groups.
The acceleration of international economic integration, including the gradual liberalization of the trade regime, has played a key role in enhancing efficiency and promoting economic growth. Vietnam has had trade relations with almost all countries and territories to date and became a member of the Association of Southeast Asian Nations (ASEAN) and the World Trade Organization (WTO) in 1995 and 2007 respectively.
11 - Achieving an Efficient AEC by 2015: A Perspective from Vietnam
- from Part I - Challenges for Member Countries
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- By Vo Tri Thanh, Institute for Economic Management
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- Book:
- Achieving the ASEAN Economic Community 2015
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 21 October 2015
- Print publication:
- 15 May 2012, pp 161-178
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Summary
In December 1997, the Association of Southeast Asian Nations (ASEAN) adopted a vision till 2020, aimed at “transforming ASEAN into a stable, prosperous, and highly competitive region with equitable economic development, and reduced poverty and socio-economic disparities”. In October 2003, the ASEAN member countries agreed on the establishment of the ASEAN Community by 2020, resting on the three pillars of security community, economic community, and sociocultural community. In order to accelerate the realization of the vision, the ASEAN leaders in 2007 expressed their commitment to establish an ASEAN Economic Community (AEC) by 2015 as a single market and production base. In line with this, ASEAN agreed to develop “a single and coherent blueprint for advancing the AEC” and the AEC Blueprint as an action plan was signed by ASEAN leaders in November 2007.
For such a big move, ASEAN member countries certainly have a sizeable workload. There remain challenges and impediments to each country and the region as a whole, the most pressing of which lies in whether the less-developed members can catch up with more advanced ones. Yet the progress of ASEAN so far, particularly in amalgamating themselves as a single block in negotiating and implementing free trade agreements (FTAs) with other major trading partners, brought about hopes for on-time realization of the AEC goal.
This chapter attempts to provide a Vietnam perspective of the progress and challenges for ASEAN in establishing the AEC. Apart from the introduction, the chapter consists of four sections. The first briefly reviews the achievements ASEAN has recorded on the way from Vision 2020 to the AEC. The second describes the progress and the challenges in realizing the goal of the AEC. The third section covers Vietnam's experience and challenges in ASEAN integration. Finally, the author draws some concluding remarks on realizing the AEC by 2015.
6 - Tackling the Global Financial Crisis in Vietnam
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- By Vo Tri Thanh, Australian National University, Nguyen Anh Duong, Australian National University
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- Book:
- Managing Economic Crisis in Southeast Asia
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 21 October 2015
- Print publication:
- 27 December 2010, pp 214-245
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Summary
Introduction
The past couple of years marked a memorable experience for Vietnam. After a long period of continuous high growth and macroeconomic stability, Vietnam offered foreign investors one of the most attractive investment destinations. However, after a short period of overly optimistic expectations in the first half of 2007, Vietnam had to start worrying about the overall economic situation. The accumulated inflationary pressures from continuous credit and public investment expansions, in combination with the external shocks such as rising energy and rice prices, and inappropriateness of the policy responses to a surge in capital inflows in 2007, sent the country to macroeconomic turbulence and the perplexity in formulating a proper stabilization policy. A policy package for dealing with macroeconomic instability has been implemented since March 2008. As the macroeconomic situation improved somehow by the end of 2008, the country has suffered from very negative impacts of the global financial crisis and recession.
This chapter discusses the main economic developments in Vietnam in 2009. In doing so, the chapter also makes comparison with the changes in macroeconomic conditions in Vietnam in line with the external shocks after the country became a member of the World Trade Organization (WTO) in 2007. Besides, the chapter describes Vietnam's policy responses during the crisis and summarizes some economic projections for the economy in 2010.
The rest of the chapter is structured as follows. The first section analyses the economic development in 2008–09, focusing on merchandise trade, investment, economic growth, inflation, balance of payments, and the financial system. The next section then reviews the policy response in 2009, before providing a summary of several key economic projections for Vietnam in 2010. The concluding remarks, finally, list several challenges and issues that the country should consider in the years from 2010 onwards.
Vietnam's Economic Development in 2008–09
For many years since Doi Moi (Renovation), particularly since 2000, Vietnam focused its policies on promoting high economic growth and on sustaining macroeconomic stability. However, till 2007 the promotion of high economic growth depended heavily on expanding investment and credit. Total investment grew on average by 15.3 per cent per year in the years 2000–07, while the 2007 rate of growth in investment alone was 27.0 per cent. Similarly, outstanding credit increased by almost 53.9 per cent in 2007.
7 - Winners and Losers in ASEAN Economic Integration: A Perspective from Vietnam
- from II - Background Papers
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- By Vo Tri Thanh, Central Institute for Economic Management (CIEM), Hanoi, Vietnam
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- Book:
- ASEAN-Canada Forum 2008
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 21 October 2015
- Print publication:
- 01 February 2010, pp 142-157
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Summary
International economic integration has been a profound trend over the past couple of decades. The process took place in almost all parts of the world, with participation from almost all economically active countries and territories with expectations resting on both theoretical and empirical evidence of its benefits. These benefits are, however, largely in net terms. Various benefits of economic integration process are widely acknowledged, such as more efficient allocation of resources, competition-induced efficiency improvement and technological progress, domestic institutional and economic reforms, etc. Yet these benefits come together with challenges and/or costs in several aspects, from promoting sustainable economic growth to reduction of poverty and income gap, for each participating country.
At the regional level, international economic integration might also widen the development gap across participating countries and territories since they have different capacity to effectively grasp the opportunities and mitigate the risks brought about by economic integration, even if their commitments are uniform. For the region of Southeast Asia, widening development gap is among the major risks in economic integration, as the regional countries are vastly heterogeneous in terms of economic development level,culture, social progress, and political system.
This paper discusses the benefits and costs of ASEAN economic integration from the perspective of Vietnam — a member of the Association of Southeast Asian Nations (ASEAN). The paper is structured as follows. Section 1 briefly compares the common theoretical understanding with actual empirical observations of the impact of economic integration. Section 2 then contends that the development gap across ASEAN member countries can be narrowed through economic integration, and makes policy recommendations as to how this can be realized. Section 3 subsequently summarizes the lessons from Vietnam's experience in poverty reduction.
2 - Vietnam's Recent Economic Reforms and Developments: Achievements, Paradoxes, and Challenges
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- By Vo Tri Thanh, Australian National University, Pham Hoang Ha, Australian National University
- Edited by Philip Taylor
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- Book:
- Social Inequality in Vietnam and the Challenges to Reform
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 21 October 2015
- Print publication:
- 23 November 2004, pp 63-89
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Summary
Economic reform in Vietnam was initiated in the early 1980s. However, the real turning point in the history of Vietnam's economic development came with the renovation (doi moi) reforms in 1986 and especially the radical market-oriented reform of 1989. As for other economies in transition, Vietnam has had to deal with three key sets of reforms: liberalization and stabilization; institutional changes that support market exchange and shape ownership; and the establishment of social programmes to ease the pain of transition (World Bank 1996). Vietnam's reform process has also been uneven. It was recognized even in 1996 that the reforms were limited and were not keeping pace with economic development. Moreover, the reform process in general slowed down during the period 1996–99, especially after the Asian crisis. The years 2000–2003 witnessed new commitments to continue with the reforms and some progress was made, especially in the development of private sector and trade liberalization. Meanwhile, the reform of state-owned enterprises (SOEs), the banking system, and public administration were slower than expected and this has limited the effectiveness and efficiency of other reforms.
Since the 1989 reforms, the face of Vietnam's economy and society has changed significantly. Vietnam has recorded remarkable achievements in terms of growth in gross domestic product (GDP), control of inflation, export expansion, and poverty reduction. It is now generally recognized that Vietnam is among the best developing countries in terms of having achieved relatively high economic growth while reducing poverty incidence. But some are of the view that in international comparison Vietnam's performance is not really spectacular and that there are problems in sustaining economic growth and ensuring quality of development.
This chapter is about the reform process in Vietnam with particular focus on recent developments. It also identifies some key problems and even “paradoxes” associated with structural changes in the economy. Paradoxes are understood in the sense that these changes are not to be expected of an economy in transition that also has a prolonged and high economic growth.