The Macroeconomics of the Current Vietnamese GDP Dynamics: It's Effects upon Full-Employment, Price Stability, Growth, and Economic Development

Introduction

According to World Bank classification of economies Vietnam falls into the low-income, severely indebted exporter of non-fuel primary product category. With a GDP per capita income of less than $250 it is one of the poorest economies in Asia. In contrast its relative position in terms of HDI (0.514) is significantly higher than many of the countries in the world table. It has a population of about 74.1 million with an annual growth rate of 2.1 per cent. Its economy performed poorly throughout the 1980s despite large amounts of Soviet assistance. In response to this worsening crisis, Vietnam launched an ambitious programme of "renovation" (doi moi) in 1986 and accelerated its implementation in 1989. Under this programme the highly controlled economy was thrown wide open and market led-policies were introduced. More specifically, this included unifying and devaluing the exchange rate, trade liberalization, increasing interest rates above the rate of inflation, decontrolling the prices of food and most other commodities, decollectivization of agriculture, abolition of trade restrictions on inter-provincial trade, diversification of ownership and the abolition of employment limits on private enterprises.

The immediate response of these reforms were very positive. Real GDP growth was over 8 per cent in the early 1990s and it is expected to be around 10 per cent in 1996. The rate of inflation reduced from three digit level in 1989 to 8.5 per cent in 1993 and the overall budget deficit was reduced significantly from 10.4 per cent in 1989 to 3.7 per cent of GDP in 1992. Total exports nearly doubled in 1989 and the availability of foreign exchange dramatically improved.

It is important to notice that these positive results achieved from the reforms would have had both direct and linkage effects on employment, wage levels, equity and social welfare. A shift from a centrally planned to a market economy involves structural changes resulting in job losses and wage cuts for many. Moreover, in spite of the new opportunities that open up, for every winner there can be plenty of losers. For example, special preference towards industry at the expense of agriculture, private sector at the expense of state sector and the abolition of subsidy programmes that may result in negative effects on employment, income distribution and social security.

The primary purpose of this paper is to study and analyze these changes in the context of Vietnam with special reference to its recent policy shift towards globalization and liberalization. The more specific objectives of the present study are as follows:

a. to study the dynamic character of the Vietnam economy in response to macro and micro policy reforms introduced in the late 1980s and

b. to examine the implications for employment, equity and social welfare of a fast growing and increasingly internationalized labour surplus economy.

Discussion

The most decisive force at present in the world economy is globalization or internationalization of economic activities. It is a process of economic and social unification of the world ...