The Social Impact of the Reform Process

The economic performance of Vietnam in the 1990s would be classified as a “miracle” if such achievements were not so common in Asia in the latter half of the twentieth century. GDP growth rates between 8.1 percent to 9.5 percent during 1992-97 were led by industry and services, though the agriculture sector growth also increased by an impressive 4.8 percent per annum. Transition, typically identified as “starting” in 1986, was a relatively painless affair of structural adjustment and stabilisation for the first decade. The state sector was never large in Vietnam, where 80 percent of the population lives in rural areas, mostly growing rice. By 1986 the planned part of the economy was thoroughly undermined, and inflation had eroded any monetary overhang. The collapse of the Council of Mutual Economic Assistance (CMEA) trading relationship forced restructuring in the modest state-owned enterprise sector, which shed almost one-quarter of its workforce. However, institutional reforms created a boom in the urban household economy that soaked up the unemployed. The shift in employment was relatively easy without the burden of a large military-industrial complex, and Vietnam’s exports to CMEA found new Western buyers with ease. Therefore, Vietnam did not experience a transitional crisis in trade or even in the rate of GDP growth. This success was largely because the planning system declined to a residual by 1988. The failure to rigorously implement the central planning model in the ten years after 1976 became a virtue for transition. The social consequences of transition were due to fundamental changes in incentive structures and regulations. This paper examines these consequences in several areas: food, poverty, land, employment, social protection systems, health and education.