## Working Together: Vietnam and the IMF

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**Canonical URL:** [Working Together: Vietnam and the IMF](https://www.imf.org/en/countries/vnm/vietnam-raising-millions-out-of-poverty)

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### Overview and historical turnaround
- Publication: Vietnam: Raising Millions Out of Poverty, August 2018.
- The Doi Moi (renovation) reforms began in 1986 and initiated Vietnam’s shift from a centrally planned economy to market-oriented policies, encouraging private enterprise and foreign investment.
- Between 1993 and 2014, Vietnam lifted 40 million people out of poverty; the poverty rate fell to 14 percent from almost 60 percent in that period.
- Per capita growth since 1990 averaged 5.6 percent a year as of 2017, second only to China’s among peers.

### Macroeconomic stabilization and IMF involvement
- In the mid to late 1980s, inflation ran at 400 percent; stabilizing the economy was prioritized through easing price controls, raising interest rates, limiting subsidies to inefficient state-owned enterprises, and devaluing the dong.
- By 1993, inflation had fallen to an annual rate of around 8 percent, down from 300-400 percent per year in the mid to late 1980s.
- IMF contributions included financial and technical assistance and advisory support to improve public administration, tax policy, central banking, and statistics gathering.
- IMF assessments of the economy helped improve Vietnam’s credit rating, supporting foreign investment inflows.
- Quoted institutional perspectives:
  - Vo Tri Thanh (Central Institute for Economic Management): “Cooperation with the IMF has been very, very, important for the whole process of reform.”
  - Jonathan Dunn (IMF’s resident representative): “Vietnam is now in a very strong position. It has a very dynamic economy; it's very integrated into the global system.”

### Structural reforms, trade openness, and foreign direct investment
- Key reform steps:
  - Move toward private ownership beginning with agriculture: dissolution of cooperative farms and household land rights led to a surge in food production.
  - Legal foundations for private companies and greater autonomy for state-owned enterprises.
  - Opening to foreign trade and investment: ASEAN accession in 1995 and WTO accession in 2007 spurred larger inflows of foreign investment.
- Foreign investment outcomes and firm examples:
  - Samsung began manufacturing mobile phones in 2009; it has three plants in the north and one in the south.
  - Samsung has invested $17.5 billion in Vietnam and employs 160,000 people.
  - Vinamilk: started in 1976; as of the source, employs 15,000 and has annual sales of about $2 billion, of which a quarter are exports.
  - FPT Corp.: founded from a small state-owned enterprise; listed in 2006; as of 2017 had sales of $2 billion and employed almost 30,000 workers.
- Quoted corporate view:
  - Ha Chan Ho (Samsung strategic adviser): “The labor force of Vietnam is very excellent... The people are very hard working and diligent.”
  - Mai Kieu Lien (Vinamilk CEO): “Now that the state has decided to give us autonomy, we have full discretion to do business according to the strategy that we have drawn up.”

### Recent setbacks and vulnerabilities
- A credit-fueled expansion in 2011-12 was followed by a real estate bust and a slowdown in economic growth; recovery has occurred but highlighted the need for sound economic management.
- Greater openness increases vulnerability to external shocks.

### Environmental, demographic, and long-run growth challenges
- Environmental costs of rapid growth: polluted air and water and deforestation.
- Geographic vulnerability: Vietnam has a 3,260-kilometer (2,2026-mile) coastline and is among the five countries deemed most likely to be affected by climate change.
- Demographics:
  - Population: 95 million.
  - Vietnam has benefitted from a demographic dividend in recent decades, but the window is closing; population will begin to age in a couple of decades.
  - Aging will slow labor force growth and raise costs for elderly care as per capita income may remain relatively low.
  - Nguyen Thi Hong (Deputy Governor, State Bank of Vietnam): “Vietnam has been enjoying the demographic dividend in the last two decades, but the demographic window is coming to an end.”

### Policy priorities and second-generation reforms
- Core objective: maintain rapid economic growth by improving productivity (output per worker-hour).
- Recommended and planned measures attributed to policy discussions and officials:
  - Add fresh capital to some banks and close others.
  - Restructure state-owned enterprises that still account for a large share of the economy.
  - Continue to streamline business regulations to foster private-sector dynamism.
- Potential payoff: If second-generation reforms are pursued, Vietnam could match the performance of the most successful Asian tiger countries such as South Korea and Taiwan (attribution: Jonathan Dunn, IMF).

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## References

- [More information about Vietnam and IMF](https://www.imf.org/en/Countries/VNM)

_Source: https://www.imf.org/en/countries/vnm/vietnam-raising-millions-out-of-poverty_