farmers transporting goods to market

SINCE REUNIFICATION IN 1975, the economy of Vietnam has been plagued by enormous difficulties in production, imbalances in supply and demand, inefficiencies in distribution and circulation, soarÍÍÍÍing inflation rates, and rising debt problems. Vietnam is one of the few countries in modern history to experience a sharp economic deterioration in a postwar reconstruction period. Its peacetime economy is one of the poorest in the world and has shown a negative to very slow growth in total national output as well as in agricultural and industrial production. Vietnam's gross domestic product ( GDP--see Glossary) in 1984 was valued at US$18.1 billion with a per capita income estimated to be between US$200 and US$300 per year. Reasons for this mediocre economic performance have included severe climatic conditions that afflicted agricultural crops, bureaucratic mismanagement, elimination of private ownership, extinction of entrepreneurial classes in the South, and military occupation of Cambodia (which resulted in a cutoff of much-needed international aid for reconstruction).

In the 1980s, the country was at a crossroads between economic liberalization and complete government economic control. It is possible that the leadership changes undertaken at the Sixth National Party Congress of the Vietnamese Communist Party (VCP, Viet Nam Cong Son Dang) in December 1986 marked the beginning of the end of an era dominated by revolutionaries who emphasized security at the expense of social welfare and modernization. In 1987 Vietnam took practical steps to resolve chronic economic problems such as rapid inflation, slow and erratic economic growth, deteriorating living conditions, and severe trade imbalances. The new economic policy laid out at the Sixth National Party Congress addressed these issues while avoiding others such as high unemployment and substantial arrearage on foreign debt payments.

At the party's Second Plenum in April 1987, a new, reform-oriented leadership proposed measures that would give greater scope to the private sector, reduce the budget deficit, and boost the output of agricultural and consumer goods in order to raise market supplies and exports. Specifically, the government sought to make prices more responsive to market forces and to allow farmers and industrial producers to make profits. Barriers to trade were lowered the checkpoint inspection system that required goods in transit to be frequently inspected was abolished and regulations on private inflow of money, goods, and tourists from overseas were relaxed. In the state-controlled industrial sector, wage raises were scheduled, and overstaffing in state administrative and service organizations was slated for reduction. Government leaders also planned to restructure the tax system to boost revenue and improve incentives.

Earlier efforts to reform the economy had employed methods similar to those proposed in 1987. These previous recovery policies, whil 428e achieveving short-term gains toward economic recovery, eventually faltered because of poor implementation, lack of commitment, and decisions to industrialize and socialize the country regardless of cost. The 1987 effort to cure Vietnam's economic ills held more promise of being sustained, however. The power of the new reform-minded general secretary of the party, Nguyen Van Linh, appeared to strengthen as other reformers assumed key party Political Bureau positions. Moreover, Soviet pressure to improve economic performance increased markedly during 1987. A high Soviet official attending Vietnam's Sixth National Party Congress pointed out Vietnam`s urgent need to reform and offered the Soviet Union's own reform efforts as a model for Vietnamese programs.

Data as of December 1987