In 1986, the Sixth Congress of the Communist Part of Vietnam instituted a new economic policy called “doi moi” , or renovation. As the Introduction to Vietnam and Hue by the Hue University International Center says, “doi moi” has three parts.
1. Transition from a planned economy depending on bureaucratic decisions and budget subsidies to a market economy, but managed by the State and oriented toward socialism.
2. Transition from a single sector economy of state-managed enterprises and collective agriculture to a multi-sector market economy, with the State sectors continuing to be the pillars of the economy.
3. Transition from a closed economy with foreign trade limited to other socialist countries to a more open economy with diversified foreign economic relations.
As a result Vietnam has grown steadily and successfully, although it took a few years to get going. The crash of the currencies of the Asian tigers in 1997 slowed progress somewhat, but the overall effect of “doi moi” has been positive. Before 1986, the inflation rate was over 100% per year. Now, according to 2006 estimates, it is 7.5%. In 1993, the percentage of poverty was 58% of the population. In 2004 the poverty rate is less than 20%. The literacy rate is high, as it is with most socialist countries. Defined as people over the age of 14 who can read and write, the literacy rate is 90%. With this reduction in poverty is an associated reduction in malnutrition among Vietnamese from 25% of the population classed as malnourished in 1992 to 15% in 1997. In 1993 the US ended its embargo of Vietnam and aid and financial assistance flowed from international organizations and agencies. The GDP real growth rate is now 8.2%, and the industrial growth rate is 11.3% (data from CIA Factbook).
One result of “doi moi” is unemployment. Instead of waiting for the state to provide employment or assign workers to work units, workers must seek work, and there is now unemployment, and much poorly compensated under-employment in the countryside. Approximately 1.5 million young people join the labor force each year, which last year was roughly 45 million people. The official unemployment rate is 2%. By US standards this rate is quite low, and the streets have very few people who live by begging. Yet, new jobs must be created for the new graduates, and only a booming economy could support this influx.
For the international tourist on the streets of Hue, there are numerous street sellers of transportation (cyclo, taxi, and motorbike) and other goods. The sales pitch by Boston standards is insistent, but is actually pretty gentle. Some just want to practice English, but most are selling something. Patrick and I have become adept at saying ?We are walking to work at the Hue University LRC? in Vietnamese which is sufficient to discourage the cyclo and motorbike drivers hoping for a fare. We have also become adept at ?No, thank you? and ?Too old, too tired? to turn away other types of offers. A smile and, in my case, some awful Vietnamese, are usually sufficient. Patrick?s Vietnamese is quite good.
The World Bank published Doing Business 2005: Removing Obstacles to Growth, and it is available as a pdf. It has some data that would seem to indicate that it is difficult to start a business in Vietnam. There are 11 procedures taking an average of 56 days to start a new business, for example. Yet despite certain structural obstacles, business flourishes in Hue, and changes in shops and stores are constant. Below are a series of pictures taken from outside of our hotel, next to some tennis courts. In a week, this space went from dirt to a Nokia store selling mobile phones. Two weeks later, next to the Nokia store from the same patch of dirt, a clothing store appeared, selling young styled clothes and playing loud music. If only new libraries could be built as quickly.