Vietnam's Đổi Mới Reforms

How Vietnam's 1986 market reforms turned a war-damaged, impoverished economy into one of the world's fastest-growing exporters.

In the mid-1980s, Vietnam was one of the poorest countries in the world. Decades of war had devastated the country, and a centrally planned economy suffered from food shortages and very high inflation. In 1986, the Communist Party launched a set of reforms called Đổi Mới, meaning “renovation”.

The reforms

Đổi Mới gradually introduced market mechanisms while keeping one-party rule:

Farming reform: farmers were given long-term land use rights and allowed to sell produce on markets. Rice production surged, and Vietnam went from food shortages to becoming one of the world’s largest rice exporters.
Private business: private enterprise was legalised and encouraged.
Foreign investment: laws welcomed foreign companies.
Trade opening: Vietnam normalised relations with the United States in 1995, signed a bilateral trade agreement in 2000 and joined the World Trade Organization in 2007.

Results

Vietnam became one of the fastest-growing economies in the world. According to the World Bank, the share of people living in extreme poverty fell from around half in the early 1990s to very low levels today. Vietnam moved into the ranks of lower-middle-income countries.

An export powerhouse

Vietnam became a major manufacturing hub. Samsung built huge factories there, making Vietnam one of the world’s largest exporters of smartphones. It also exports clothing, footwear, furniture and electronics. As companies diversified away from China, Vietnam attracted further investment.

Samsung in Vietnam

Samsung began large-scale phone production in northern Vietnam around 2009. Its Vietnamese factories came to produce a large share of the company's smartphones, and Samsung became one of Vietnam's largest exporters, at times accounting for a significant share of the country's total exports. The investment brought jobs and skills, though critics noted that much of the high-value work stayed abroad.

Challenges

Vietnam faces challenges including moving beyond low-cost assembly to higher-value production, improving infrastructure, reducing pollution and strengthening its banking system. Like other fast growers, it must avoid the middle-income trap.

Thinking Vietnam simply copied China

Vietnam's reforms resembled China's in combining markets with one-party rule, but they had their own timing and features, such as deep integration through many free trade agreements. Vietnam has become one of the most trade-open economies in the world.

Key takeaways

Vietnam launched Đổi Mới market reforms in 1986.
Farming reforms turned Vietnam into a major rice exporter.
Trade opening and foreign investment made it a manufacturing export hub.
Extreme poverty fell dramatically, though Vietnam must now move to higher-value production.