The Making of a Market Economy: Monetary Reform, Economic Transformation and Rural Finance in Vietnam

This paper discusses the major steps that Vietnam has taken of its own towards its goal of poverty alleviation, relying on its own strength, rather than external financial or technical assistance.

The paper examines the transformation, and finds that there are three outstanding policies that have created the right environment for economic development:

• Capital-generating policy - creating incentives to encourage capital formation, increase efficiency and raise production;
• Market policy - replacing the state-run subsidy system by a competitive market economy;
• External economic policy - broadening external economic relations and building up an export orientation.

The paper presents the reforms in Vietnam guided by these policies:

• Improvement in planning, monetary, banking and price strategy;
• Restructuring of finances and enterprise taxes;
• Modification of domestic trade, enterprise and labor policies.

Finally, the article concludes with the following six major factors that have been instrumental in the transition of Vietnam towards a market economy:

• Political stability;
• Human rights;
• Equality and equal opportunity;
• Privatization;
• Prudential deregulation;
• Macroeconomic stability.