Journey to prosperity

From a nearly empty treasury…

Looking back at 8 decades of Vietnam's economic development, economist Dr. Nguyen Minh Phong has not forgotten the extremely difficult period after 1945. The newly established government had to deal with three enemies: hunger, ignorance and foreign invasion. It had nothing but a backward agricultural economy, severely devastated by war; prolonged floods and droughts that left more than half of the land uncultivable; and famine. Manufacturing industries declined and stagnated, goods became scarce, the market stagnated and desolate. The treasury was completely empty. "That year, inflation was skyrocketing, the price of rice went from 4-5 dong/quintal to 700-800 dong/quintal by mid-1945. GDP per capita in 1945 was only 60 dong with more than 90% of the population unable to read or write. Therefore, at the first meeting of the Provisional Government on September 3, 1945, President Ho Chi Minh outlined 6 urgent tasks, in which he affirmed that "fighting hunger" was the top priority, urgent and urgent task number one," Mr. Phong said.

Photo: Dao Ngoc Thach - Graphics: Van Nam

" The government and the entire people joined hands to build the country, boost production, and redistribute public land more reasonably. In particular, the policy of great solidarity was widely implemented among all components and classes in society, from farmers, workers, industrialists and merchants... Thanks to that, by 1946, famine was basically pushed back across the country," Dr. Nguyen Minh Phong recalled.

By October 1950, Vietnam officially established and expanded and developed economic and trade relations with socialist countries including China and the Soviet Union to promote the exploitation of forest products and improve people's lives. Thanks to that, the economic recovery of the North achieved many great achievements during this period. By 1953, for the first time after the August Revolution, state budget revenue exceeded expenditure by 16%.

However, according to Dr. Nguyen Minh Phong, economic development in the context of fighting against the destructive war in the North and the national liberation revolution in the South was still extremely difficult. By 1975, when the country was unified, the GDP per capita in the North was only estimated at 232 VND, equivalent to 80 USD (exchange rate at that time). Not to mention, the newly unified country had to enter into two wars to protect the southwestern and northern borders, along with the embargo and isolation of the West. The country's economy was almost exhausted, and its infrastructure and transportation were devastated.

The subsidized economy faltered for the next 10 years until the 6th Party Congress (December 1986), when Vietnam reached an important and vital milestone, marking the first economic reform, through the unfettered thinking, viewpoints and economic model transformation. Thanks to that, the country overcame the crisis, becoming one of the most dynamic economies with a remarkably increased GDP scale. However, the difficulties were not over yet…

…to break the siege of isolation

Financial economist Bui Kien Thanh - who served as an advisor to three Prime Ministers , actively participated in the renovation process and campaigned to lift the embargo on Vietnam - recalled that although a turning point in renovation had been created, the problem at that time was how to break the siege of isolation and prolonged embargo in order to develop.

Because of an exhausted economy after the war, with great restrictions on international trade, according to Mr. Bui Kien Thanh, "even making enough to eat was too hard, let alone developing". In fact, during nearly 20 years (1975 - 1994) of embargo, Vietnam's economy suffered many negative impacts when trade development was limited, international import and export of goods and services was dim, cross-border trade activities were interrupted or encountered difficulties. This led to limitations in access to capital, technology and world markets - necessary tools for economic reconstruction and recovery after the war. The embargo also prevented Vietnam from accessing partners related to the US market to expand trade and attract investment. Therefore, despite abandoning the subsidized economy in 1986, Vietnam's economy still had difficulty accelerating due to trade restraint.

Going back in history, in 1973, the US withdrew its troops from Vietnam and by April 1975, the country was reunited, independent and unified throughout the territory. However, also in 1975, the US imposed a trade embargo on Vietnam. From 1977 to 1978, the two sides negotiated to normalize relations but were unsuccessful due to some disagreements. After many years of hard work, from negotiations, lobbying, diplomacy, and exchanges between the two countries, in February 1994, US President Bill Clinton announced the complete lifting of the embargo on Vietnam, marking the beginning of a period of normalization of relations and cooperation. In November 1995, Prime Minister Vo Van Kiet and President Clinton officially announced the establishment of diplomatic relations between Vietnam and the US. Two years earlier, in 1993, Vietnam became a member of the World Bank, the International Monetary Fund, and the Asian Development Bank.

Last year, on the occasion of the 30th anniversary of the US lifting of the embargo on Vietnam, the US Consul General in Ho Chi Minh City at that time commented that this event paved the way for all the great developments that the two countries have achieved in bilateral trade and economic relations. The numbers themselves show us the results since 1995. For example, in 2022, bilateral trade turnover reached nearly 139 billion USD, 300 times higher than in 1995. "This means that Vietnam is the 8th largest trading partner of the US in the world and the largest trading partner of the US in ASEAN. The US is the second largest trading partner and the largest export market of Vietnam. We have a strong belief in the importance of Vietnam in global supply chains," he said.

Expert Bui Kien Thanh agrees that the normalization of relations with the US has opened up many opportunities for Vietnam to join hands with many countries around the world. "The greatest achievement that Vietnam has achieved is the increasingly enhanced national position and deep integration with the world economy by attracting hundreds of billions of USD in foreign investment capital, becoming one of the 20 countries with the largest international trade in goods in the world, signing 17 bilateral and multilateral free trade agreements (FTAs), and connecting with more than 60 developed and key economies around the world," he said.

...and reach out to the ocean

Thanks to the removal of trade blockades, also in 1995, Vietnam began to apply to join the World Trade Organization (WTO); signed the Framework Agreement on Economic Cooperation with the EU, joined ASEAN; in 1996 participated in founding the Asia-Europe Forum with 25 members; in 1998, Vietnam officially joined APEC - an important milestone in economic integration. In particular, in 2000, the Vietnam - US Trade Agreement was signed, helping Vietnamese goods to the US increase continuously. At the same time, it created an important stepping stone to join the WTO in 2007. Dr. Nguyen Minh Phong assessed that the most clearly recorded result from joining the WTO was making Vietnam a highly open economy and improving the balance of trade in goods, shifting from a trade deficit to a continuous trade surplus.

Important cooperation agreements with the world, the region and other countries have opened up a new sky for Vietnam to take off. From an insignificant export turnover, with no data to count, even in 1990, the export turnover only reached 2.4 billion USD, but by 2001, this figure had reached 15.1 billion USD. Trade between Vietnam and other countries in the world has also increased sharply. In 2024, import-export turnover reached over 786 billion USD, with a trade surplus of nearly 24.8 billion USD. From mainly exporting to Eastern European countries, Vietnam now has economic and trade relations with 176 markets.

Dr. Vo Tri Thanh, former Deputy Director of the Central Institute for Economic Management, affirmed that international economic integration has opened up many opportunities to promote the country's economic growth and development, especially in the field of attracting foreign direct investment (FDI).

Specifically, after Doi Moi, in the period of 1988 - 1990, Vietnam attracted 1.6 billion USD of FDI capital, this number skyrocketed to 17 billion USD in the period of 1991 - 1995. By 1996, one year after the normalization of Vietnam - US relations, FDI capital in Vietnam jumped to 10 billion USD, gradually increasing in the following years and by 2024, total foreign capital had reached about more than 38 billion USD. "FDI is still an important channel of the Vietnamese economy, contributing greatly to total social investment and state budget revenue. Many corporations with large financial and technological potential in the world such as Samsung, Intel, Apple, LG... are present in Vietnam, contributing to changing the production level as well as the Vietnamese brand to the world. Recently, FDI capital has created a spillover effect on technology, contributing to improving the level of technology through transfer, creating competitive pressure, and technological innovation for domestic enterprises...", Mr. Thanh emphasized.

"Although my generation did not witness the historic moment when Uncle Ho read the Declaration of Independence - giving birth to the Democratic Republic of Vietnam, being immersed in the country these days, I have a very strange surge of emotions," Dr. Vo Tri Thanh shared. For him, over the past 80 years, Vietnam's economy has overcome many ups and downs, and has undergone dramatic changes. What he feels most clearly is that no matter how difficult it is, the Vietnamese people and the Vietnamese nation have maintained a strong vitality. That is also the foundation for Vietnam to enter a new era - an era of national growth as called for by the Party and State.

The Vietnamese people are a nation that is striving to rise, not only looking at the past but also always observing, looking around, and looking towards the future. Especially in this new era, we do not forget when the country faced famine, ignorance and foreign invaders, with many difficulties. Uncle Ho still talked about how to make Vietnam stand shoulder to shoulder with the world powers. That is a simple lesson that we need to remember in this era of rising.

Dr. Vo Tri Thanh ,
Former Deputy Director of the Central Institute for Economic Management Research

Thanhnien.vn

Source: https://thanhnien.vn/hanh-trinh-den-khat-vong-thinh-vuong-185250822230854662.htm