The financial economy of Viet Nam in an age of reform, 1986–2016

Before the Doi Moi reforms in 1986, Viet Nam’s economy was devastated by 30 years of warfare with two major military powers, France and the US, ending in 1975. In the subsequent 10 years, Viet Nam suffered from failing economic experiments, including agricultural cooperatization, “industry-commerce rehabilitation,” price-wage-currency reform, among others, under the centrally planned mechanism (Wood 1989), as well as the international isolation and a US trade embargo when its troops entered Cambodia to overthrow the Khmer Rouge (Riedel and Turley 1999). Its per-capita gross domestic product (GDP) declined to USD 97 in 1989 whereas the ratio of external debt to GDP reached 330%. The economy languished and became one of the poorest in the world (VGP 2016). Things have since changed. With a population of 92 million, its GDP was USD 204 billion in 2015, after 30 years of socio-economic transitions. Doi Moi has enabled the marketization and internationalization of the economy, bringing about the fruits of the market (Dutta 1995; Riedel and Turley 1999), with the financial system facilitating the transformation (Siregar 1997). The banking system then had total assets of USD 307 billion, about 150% of GDP.