Aghevli, Bijan B., Borensztein, Eduardo and van der Willigen, Tessa, “Stabilization and Structural Reform in the Czech and Slovak Federal Republic: First Stage,” Occasional Paper No. 92 (Washington: International Monetary Fund, 1992).
Doanh, Le Dang, “Economic Reform and Development in Viet Nam,” Economics Division Working Papers. East Asia, Research School of Pacific Studies, Australian National University, May 1992.
Bruno, Michael, “Stabilization and Reform in Eastern Europe: A Preliminary Evaluation,” Working Paper WP/92/30 (Washington: International Monetary Fund, 1992).
Dollar, David, “Vietnam: Successes and Failures of Macroeconomic Stabilization,” in The Challenge of Reform in Indochina, ed by. Ljunggren, Borje and Timmer, Peter (Forthcoming, 1992).
Leipziger, D.M., “Awakening the Market: Viet Nam’s Economic Transition,” World Bank Discussion Paper No. 157 (Washington: World Bank, 1992).
McKinnon, Ronald I., “Macroeconomic Control in Liberalizing Socialist Economies: Asian and European Parallels,” Center for Pacific Basin Monetary and Economic Studies Working Paper 92-05 (San Francisco, Stanford University, 1992).
Oanh, Nguyen Xuan, “Some Reflections on Economic Development and Transitional Economics with Special Reference to Viet Nam,” (mimeo), November 1992.
Pike, Douglas, “Vietnam in 1991: The Turning Point,” Asian Survey, Vol. XXXII, No. 1 (Berkeley: Institute of East Asian Studies, 1992).
Rodrik, Dani, “Making Sense of the Soviet Trade Shock in Eastern Europe: A Framework and Some Estimates,” (Cambridge, Massachussets: Harvard University, CEPR and NBER, 1992) Mimeo.
Ronnas, Per and Sjoberg Orjan, “Economic Reform in Vietnam: Dismantling the Centrally Planned Economy,” The Journal of Communist Studies. Vol.7, No.l (Stockholm: Stockholm School of Economics, 1991).
Tanzi, Vito, “Financial Markets and Public Finance in the Transformation Process,” IMF Working Paper WP/92/29 (Washington: International Monetary Fund, 1992).
Van Arkadie, Brian and Vu Tat Boi, “Managing the Renewal Process: The Case of Vietnam,” UNDP (New York: United Nations Development Program, 1992).
Helpful comments by Messrs. Michael Braulke and Sungmin Kim are gratefully acknowledged, as well as the assistance of Ms. Florence Lee.
As in China, initial changes were made in the agricultural sector because of the pressing need to increase food production.
The reforms effectively strengthened the parallel economy, resulting in two interlinked economies, reflected in a “dual price system,” one for centrally allocated and rationed goods at low, subsidized prices and the other for goods sold on the free market at much higher prices. Large price distortions resulted.
“Numerous difficulties still beset the life of our people, especially workers and public employees. Many people of work age are jobless or still not fully employed. Many legitimate and minimal requirements of the people’s material and cultural life have not yet been met. The countryside is running short of common consumer goods and medicines; housing, sanitary and cultural life in many areas still leave much to be desired.” Sixth Party Congress of the Communist of Vietnam (15-18 December 1986), Documents, Hanoi: 1987, page 16.
“The bureaucratically centralized management mechanism based on state subsidies, which has been in force for many years now, far from creating a driving force for development, has weakened the socialist economy, limited the use and transformation of the other economic sectors, put a break on production, lowered labor productivity, product quality and economic efficiency, put distribution and circulation in a state of chaos and given rise to numerous negative manifestations in our society.” Ibid, page 71.
In contrast, the North was similar to most Eastern European countries: it accounted for the bulk of the country’s heavy industry (including iron and steel, chemicals, cement, fertilizer and vehicle manufacturing), agriculture had been collectivized, and, since 1956, the economy was administered under a central plan.
According to Rodrick (1992), the CMEA/Soviet trade shock consisted of three distinct effects; (i) a terms of trade effect arising from changes in the prices of Eastern European countries’ energy imports from the former Soviet Union and from changes in the prices of their manufactured exports; (ii) the market loss effect resulting from lower volumes of manufactured exports to the former Soviet Union; and (iii) the removal of implicit import subsidies and export taxes that resulted from inappropriate exchange rates.
The only exceptions were the prices of electricity, oil, cement, steel, and transportation, but even these prices were adjusted and thus better reflected operating costs.
The number of quotas, however, says little about their weight in total trade.
Prior to reform many public subsidies were implicit rather than explicit (extended through subsidized interest rates, overvalued exchange rates, etc) and did not show up in the fiscal statistics.
Viet Nam’s lack of access to a noninflationary source of finances inevitably meant that the enlarged public sector remained a source of pressure. Even though the government managed further to reduce its deficit in relation to GDP, by slashing both current and capital expenditure, nominal interest rates were lowered and credit expansion to the state enterprises increased as their financial position continued to weaken under the impact of the precipitous fall in assistance from the former Soviet Union (while employment was reduced substantially, the enterprises remained overstaffed and many laid-off workers continued to receive partial wage payments).
Essential to this process is the need to redefine the concept of bad loans. Without guideline for identifying and treating defaults on loan payments, loans are automatically rolled over if a request is made prior to maturity, and therefore there is no way of distinguishing between irrecoverable loans and merely overdue loans.