Title Page
Vietnam Transition to a Market Economy
John R. Dodsworth, Erich Spitaller, Michael Braulke, Keon Hyok Lee, Kenneth Miranda, Christian Mulder, Hisanobu Shishido, and Krishna Srinivasan
INTERNATIONAL MONETARY FUND
Washington, D.C.
March 1996
Copyright
© 1996 International Monetary Fund
Cataloging-in-Publication Data
Vietnam : transition to a market economy / John R. Dodsworth … [et al.].
p. cm.—(Occasional Paper ; 135)
Includes bibliographical references.
ISBN 1-55775-538-8 (pbk.)
1. Vietnam—Economic policy. 2. Vietnam—Economic conditions. 3. Mixed economy—Vietnam. I. Dodsworth, John. II. Series: Occasional paper (International Monetary Fund); no. 135.
HC444.V572 199696-7061
338.9597—dc20CIP
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Contents
Preface
I. Overview
II. Output Performance in Transition
Output and Employment Performance
Sectoral Output Performance and Supply-Side Policies
Agricultural Output
Industrial Output Restructuring
Services Sector
Role of Demand
Level of Demand
Demand Composition
Underrecording of Output
Acceleration of Growth
Conclusion
III. State-Owned Enterprise Performance
Output
Employment
Financial Performance
Reforms in the State Enterprise Sector
Enterprise Autonomy
Increased Competition
Hard Budget Constraints
Further Reform
IV. Foreign Direct Investment
Commitments
Disbursements
Outlook
V. Determinants of Inflation
Money and Inflation
Rice Prices and Inflation
Relative Prices and Inflation
Selective Trends in Rice Market
Conclusions
VI. Stabilization and Adjustment in the Presence of Currency Substitution
Dollarization Before Comprehensive Economic Reform
Dollarization and Problems of Economic Management
Stabilization and Adjustment in a Dollarized Setting
Policies to Deal with Dollarization
Impact of Policies to Date
Conclusions and Policy Implications
VII. International Integration and Exchange Rate Policy
Growth and Diversification of Trade
Trade Reform
Lowering Nontariff Barriers
Tariff Rationalization
Decentralization of Foreign Trade
Exchange Reform and Exchange Rate Policy
Exchange Reform
Exchange Rate Policy
Bibliography
Boxes
2.1. Stages of the Transition
2.2. Sectoral Composition of the Economy
2.3. Role of Cooperatives and Regional Agricultural Output Response
2.4. Employment Trends
3.1. Arrears
3.2. Share and Size of State-Owned Enterprises in the Economy
5.1. Money and Prices; A Long-Term Relationship
5.2. Inflation and Staples Prices: An Error Correction Model
7.1. Elements of a Successful Unification
7.2. Inflationary Impact of Devaluation When There Is a Large Parallel Market
Text Tables
2.1. Real Growth Rates, Adjusted for Special Factors
2.2. Importance of the State-Owned Sector in Various Countries
2.3. Selected Prices and Interest Rates
3.1. Share of State-Owned Enterprises by Sector
3.2. Bank and Budget Support of State Enterprises
3.3. Government Revenue Yield by Sector
4.1. Distribution of Licensed Foreign Direct Investment Commitments by Region
4.2. Distribution of Licensed Foreign Direct Investment Commitments by Economic Sector
4.3. Distribution of Licensed Foreign Direct Investment Commitments by Country of Origin
5.1. Inflation and Money: Regression Results, December 1990-June 1995
5.2. Inflation and Money: Actual Versus Projected Inflation
5.3. International and Domestic Prices of Fertilizer and Rice
5.4. Inflation, Money, and Relative Prices: Regression Results
5.5. Rice Costs and Price Levels, 1989-94
Charts
4.1. Licensed Foreign Direct Investment
5.1. Money and Inflation
5.2. Cointegrating Relationship Between Money and Prices
5.3. Consumer Prices of Staples by Region
5.4. Consumer Prices by Component
6.1. Foreign Currency Deposits and Lending
7.1. Exchange Rate Developments
7.2. Premium in the Parallel Foreign Exchange Market
Statistical Appendix
A1. Ranking of Low-Income Countries According to Share of Industry in GDP, 1987
A2. Food Production
A3. Value of Gross Agricultural Production
A4. Agricultural Production by Type of Crop, 1988
A5. Farm Households Organized in Cooperatives, 1988
A6. Number of State and Collective Units in Agriculture
A7. Industrial Production by Sector and Ownership
A8. Gross Industrial Production by Sector and Main Products
A9. GDP by Sectoral Origin and Ownership at Constant Prices
A10. GDP by Expenditure Category
A11. Total Employment by Economic Sector
A12. Employment by Sector and Ownership
A13. Government Revenue by Sector
A14. Net FDI Inflows: Selected International Comparisons, 1993
A15. Selected Agricultural Prices by Region
A16. National Consumer Prices by Component
A17. CPI (Excluding Staples Prices) and Results of Money Regression
A18. CPI Components and Results of Money Regression
The following symbols have been used throughout this paper:
… to indicate that data are not available;
—to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;
–between years or months (e.g., 1991-92 or January-June) to indicate the years or months covered, including the beginning and ending years or months;
/ between years (e.g., 1991/92) to indicate a crop or fiscal (financial) year.
“Billion” means a thousand million.
Minor discrepancies between constituent figures and totals are due to rounding.
The term “country,” as used in this paper, does not in all cases refer to a territorial entity that is a state as understood by international law and practice; the term also covers some territorial entities that are not states, but for which statistical data are maintained and provided internationally on a separate and independent basis.
Preface
This Occasional Paper reviews the process of Vietnam’s transition to a market economy. The papers, which reflect knowledge of the economy accumulated through recent staff missions and helpful discussions with Vietnamese officials, draw largely upon background work carried out for the 1995 Article IV consultation discussions. As such, the Occasional Paper represents a collaborative work, which was coordinated by John Dodsworth and Erich Spitäller, who contributed the introductory section. The principal authors of the other sections were Christian Mulder (Sections II andIII), Michael Braulke (Section IV), Krishna Srinivasan and Erich Spitaller (Section V), Kenneth Miranda (Section VI), and Keon Hyok Lee (Section VII). The sections were edited by Hisanobu Shishido.
Many individuals have assisted in the production of this Occasional Paper. Viola Chou provided research assistance, and Joy Gough and Mary Abraham provided excellent secretarial assistance. We also thank Elisa Diehl of the External Relations Department for editing the paper and coordinating production.
The views expressed here, as well as any errors, are the sole responsibility of the authors and do not necessarily reflect the opinions of the Vietnamese government, the Executive Directors of the IMF, or any other members of the IMF staff.