It found that Vietnam’s system was characterized by significant government intervention, controlled international integration and a financial system managed by state banks
Vietnam has earned its rank as an Asian Tiger since economic opening began in 1986, after the Doi Moi, or renovation, reforms launched two decades of impressive growth. From 2002 to 2007, Vietnam achieved a consistent annual growth rate over 7 percent. That allowed the middle class grew too, and although the urbanites of Hanoi and Ho Chi Minh City benefited most from expanding services and the professional job market, cities are blooming beyond these capitals, bringing a larger cut of Vietnamese into the privileged fold. And also has set its sights on becoming a developed nation by 2020.
It has experienced a steady annual gross domestic product (GDP) during 1991–2010 of 7.7 percent, which gradually increased its average income per capita from a scant US$98 to US$1,174 (Ohno 2009; Schwab 2011). As the result of this economic growth, Vietnam reduced the poverty level from over 58 percent to 10 percent (Asian Development Bank 2011). This was achieved by a combination of stimulants, such as an inflow of foreign direct investment (FDI), exports of low-value-added products and private-sector development. With a GDP of US$890 per head in 2008, Vietnam effectively became a ‘middle-income country’ (following the World Bank’s classification of GDP per capita between US$976–3,855) (Ohno 2009; Tran 2012).
The global crisis that started in 2008, impacted in Vietnam's growth, slowing to around 5 percent in 2012, but not only that, there is another important economic issue: the growing inflation, Vietnam has also struggled to restrain its trade and budget deficits. Its inflation rate reached double digits at the start of 2010 and approached 20% by the end of 2011, as food prices doubled, before falling back in 2012.
A 2013 study in the Socio-Economic Review examined the key characteristics of rising Asian economies. It found that Vietnam’s system was characterized by significant government intervention, controlled international integration and a financial system managed by state banks.
According to the Hall and Soskice definition (2001), Vietnam’s economy still seems to be more a ‘coordinated market economy’ (CME) than a ‘liberal market economy’ (LME)(after more than two decades of experimentation). It remains to be seen whether the Vietnamese development model ('the Vietnamese miracle') will succeed (Cain 2012).
Regarding the political situation, Vietnam remains a one-party state system under the sole leadership of the Communist Party of Vietnam (CPV). Party dominance and socialist principles, channeled through its controlled network of mass organizations, including trade unions; influence all business activities (Rowley and Truong 2009a). This provides privileges and monopolies to organizations under CPV control, especially SOEs. Socialist tenets such as ‘democratic centralism’ (dan chu tap trung) and ‘collective leadership and responsibility’ (lanh dao tap the), in the form of ‘resolutions’ (nghi quyet), are common practices in decision-making. The CPV leadership holds absolute power in deliberating strategic issues at country and enterprise level, leaving little room for bottom-up participation and grass-roots contributions.
The level of party/state control and involvement in the economy has been evolutionary and conditioned to the socio-economic challenges facing the country at the time.
Thus, prior to 1986 the state followed the Soviet model, characterized by centralized planning, forced agricultural collectivization, and nationalization of industry. The economy performed disastrously after unification in 1976.
The economic reform (doi moi) programme in 1986 was a reaction to save the country
from near-bankruptcy in the wake of the collapse of the Soviet Union and the abrupt cessation of all aid from the communist bloc, followed by an imminent embargo from the West. Despite the fact that economic policies were still highly dirigiste, this marked a dramatic shift towards becoming a more developmental/welfare state (Masina 2006), with priority targets in economic growth and welfare.
After 12 years of negotiations the country joined the World Trade Organization (WTO) membership in 2007, continuing integration into the global economy and set the highly ambitious goal of forging an industrialized country by 2020 (Communist Party of Vietnam 2010). Efforts focused on further reducing the role of the state and encouraging private-sector development, although SOEs continued to be ‘flagships’ of the economy. This mixture makes Vietnam more like a neo-liberalist (Masina 2010) or neo-capitalist (Le 2011) state than a genuine free-market economy.