Vietnam's road of economic reform

December 4, 1991

By Stephen Robson

"Although we have achievements such as the increase of food production, the reduction of inflation, the expansion of foreign economic relations including foreign trade and investment, big problems are still there", Do Duc Dinh told Green Left Weekly.

Dr Dinh, head of the Developing Countries Economic Study Department at the Institute for World Economy in Hanoi, was in Australia to speak at the Vietnam Update Conference held at the ANU at the end of October.

The economic reform process, doi moi, began in earnest after the Sixth Congress of the Vietnamese Communist Party in 1986.

The top priority is food production. With average income of about US$200/annum, Vietnam is a country where the population are still "on the edge of starvation." The Seventh Congress set an ambitious goal of doubling per capita income to US$400 by the year 2000.

The death of 2 million people from starvation in 1945 is a haunting reminder of the urgency of stabilising agricultural production. Until recently Vietnam could not produce enough food to feed its rapidly growing population; only in the last two years has increased domestic production ended rice imports.

Average food production reached 326 kg per capita in 1990, a modest increase over the past few years. Dinh pointed to several factors influencing the improvement: favourable weather conditions; introduction of new varieties of plants; improvements in irrigation and drainage through electrified pumping stations; a four-fold increase in inorganic fertilisers since 1981; material incentives to peasants; stabilisation of distribution.

While the people of Vietnam are absolutely poor compared to western standards of living, market forces have brought about the "expansion of the gap between the high income and the low income groups".

Household farming now accounts for 40% of production. Some families now had built two or three houses.

Land is still collectively owned, but peasants have extensive rights to use of the land. Families are able to pass on this right to their sons and daughters. There are also provisions to allow long-term transfer of land to others.

The government is opposed to "the concentration of land by a few people" and therefore retains ultimate ownership, including the right to adjust regulations on the right to use it.

Incentives

Prior to 1986, the situation was one of "egalitarianism", with minimum use of material incentives to stimulate production. Dinh said that this "did not encourage the good workers". Now the problem is how to "avoid the fast and large differentiations in income".

Dinh pointed to the "rise of millionaires [US$83] or even billionaires [US $83,000] in Vietnamese dong". This is more pronounced in the south "where the commercial thinking is more developed than in the north".

The challenge is "how to encourage the people to produce and to facilitate high growth but at the same time how to limit the negative effects of the reform".

Taxation is being used to modify this gap in income. "We have a tax to the maximum of 50% of the highest income, so we already have some idea of getting back some of the earnings of the high income groups to invest in social welfare and education and medical care", Dinh explained.

State role

The resources at the disposal of the Vietnamese state are severely limited. Federal government revenue in Australia was $5761/person in 1990-91. In Vietnam in 1987, it was 1685 dong per person — barely the price of one meal. Thus the recent decision to increase the budget allocation of education from 2.0% to 3.5% of GDP, while important, hardly takes education off the critical list.

In a health care system barely able to budget for equipment and maintenance, staff get an allowance which leaves them having to work one or two other jobs to survive. To meet this inadequate state of affairs, fees have been introduced into health and education.

Dinh explained that students "do not need to pay the full fees to the education system, but they need to pay a part of the investment for education".

Similarly with health care. "People who go to the hospital in the past did not have to pay, but now they have to pay between 20 and 30% of the cost of their stay in hospital."

During the fight for national independence and freedom from colonialism, the Vietnamese people demonstrated their social commitment by defeating the world's most powerful country. With the war years already history for a new generation of Vietnamese workers, material incentives are now the main motivation for production. Won't this lead to sharp contradictions in Vietnam?

"Most of the people do not want to move to the free market or to the capitalist economy but neither do they want to follow the old model of socialism", said Dinh.

Reliance only on moral persuasion today would not improve the e or the nation as a whole. The old model of socialism "motivated people to work for a moral ideology but not for real needs and basic needs of the people's own lives".

He described the current policy as one of a "just redistribution of income", which he contrasts to the earlier egalitarianism.

"When we talk of just redistribution, we mean that we need to encourage the people to work harder and better for higher income and at the same time we can protect the masses from starvation."

The basic wage for a government employee is "only enough for 7-10 days and they have to live 20 days more." The government wants this to change but must find the money to increase salaries.

Democracy

Dinh said that democracy is seen as a central part of the reform process. Describing Vietnam as a "civil democracy", he explained, "We encourage the people to have more talks and recommendations for the government. Whenever they want to say anything, they can bring it to the government, and in the newspaper the journalists have a larger voice and more responsibility."

Whilst there is only one political party, in the National Assembly, "there are more and more people who are not members of the Communist Party [including] a number of people who were members of the old government, from before the time of liberation, like No Ba Thang, the lawyer in the Thieu regime".

The reforms of the past few years seek to separate the roles of the state and the Communist Party. "We try to make the party the guiding organisation, the place where we have the strategy, policy and program, and the Council of Ministers and the National Assembly the places that decide the concrete measures to implement the strategies."

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