Political system

Over the past 75 years, the Communist Party of Vietnam (CPV) has been in the vanguard of the struggle for national independence, liberating the country from almost a century of domination by western colonialists and leading the people to total victory in the 30-year resistance war against powerful aggressors. Since the country's reunification, the CPV has led the Vietnamese people in carrying out the country's renovation, modernization and industrialization.

The CPV has established a nationwide political system with the Party serving as the core that assists the Party leadership and mobilizes the people to realize the goals of national independence, democracy, and social progress. At present, the CPV has worked out a program for national construction which may be described as: Rich people--strong nation--equitable, democratic and civilized society. To achieve these goals, the CPV, in accordance with the principle of "the people as the country’s roots", has set up a wide and diversified political system.

The current political system of Vietnam is composed of the following: the CPV, political organizations, socio-political organizations, socio-professional organizations, and mass associations.

I. The Communist Party of Vietnam
The CPV was established on February 3, 1930. Over 75 years of its existence, the Party has been renamed several times: the Vietnam Communist Party (February 1930), the Communist Party of Indochina (October 1930), the Vietnam Workers’ Party (February 1951), and the Communist Party of Vietnam (December 1976).

As stated in the Party's statute adopted in its 9th National Congress on April 22, 2001, the CPV, "established and trained by Comrade Hồ Chí Minh, has led the Vietnamese people to carry out successfully the August Revolution, establishing the Democratic Republic of Vietnam, now the Socialist Republic of Vietnam, to defeat foreign invaders, to abolish the colonial and feudalist regime, to liberate and reunify the country, and then carry out the cause of renovation and socialist construction and firmly defend national independence."

The CPV, vanguard of the working people and the whole nation, represents the interests of the working class and the nation.

The aim of the CPV is to make Vietnam a strong, independent, prosperous and democratic country with an equitable and civilized society, to realize socialism and ultimately, communism.

The CPV adopts Marxism-Leninism and Hồ Chí Minh Thoughts as the firm ideological foundations, serving as guidance for its activities, promoting the nation's traditions, and absorbing other nations' essential ideas. By thoroughly grasping objective laws, epochal trends and the country’s realities, the Party has worked out sound political programs and revolutionary policies to meet the aspirations of the people.

The Party is firmly organized and unanimous in ideological views and actions. It takes democratic centralism as its fundamental organizational basis, practicing criticism, self-criticism, and strict discipline, pursuing collective leadership and individual responsibility, and promoting comradeship and solidarity in line with the Party's political programs and statutes. The Party makes great efforts to maintain its close relationship with the people. The Party operates in accordance with the Constitution and other laws.

The CPV is the Party in power in Vietnam. It respects and promotes the mastery of the people over the country, and is under the people's supervision. The Party relies on the people to strengthen its organization, unites and lead the people in the revolutionary cause. The Party leads the political system and is a member of that system. The Party leads, respects and promotes the role of the State, the Vietnam Fatherland Front (VFF) and other socio-political organizations.

The Party combines genuine patriotism with the pure internationalism of the working class, proactively contributing to the struggle for peace, national independence, democracy and social progress of the world's people.

The Party, with its strong political base, firm ideology and stable organization, often carries out self-renewal and self-readjustment. It unceasingly strives to improve the qualifications of the cadres and Party members, affirming the Party’s fighting power and revolutionary leadership.

Organization and Structure of the CPV
The Party organizational system is established in line with the State administrative apparatus from Central level to provincial, city, district, and communal levels as well as in administrative bodies, schools, enterprises, political/social/professional organizations, army units and police forces. The Party cells are the Party's grassroots foundations.

Article 4, Chapter I of the current Constitution, adopted by the National Assembly on April 15, 1992, defined the role of the CPV: "as the leading force of the State and the society." "The Party’s activities are governed by the Constitution and laws."

Being the party in power whose mission is to lead the country in all fields, the Party directs State and socio-political organizations through:
- Deciding on political programs, strategies, and guidelines for national construction and defense; carrying out the leadership through ideological work, personnel management, and supervision over the implementation of its political programs, guidelines, and strategies;
- Consistently directing the personnel work and managing the contingent of cadres, at the same time promoting the responsibilities of organizations in the political system and their leaders in charge of personnel work;
- Introducing competent cadres for posts in State agencies and in socio-political organizations;
- All Party cells and members working in the State agencies as well as socio-political organizations must strictly observe the Party’s resolutions and directions; the Party cells direct the concretization of these documents into the State’s laws and organizations’ regulations as well as their implementation.

To consolidate its full leadership, the Party does not directly cover all activities but works through its affiliates, in line with the Constitution and laws:
- In the State leading agencies (National Assembly, People’s Councils) and socio-political organizations at the central level and in provinces/centrally-administered cities which are formed through elections, Party committees set up Party bodies at the same level, composed of some Party members who work for the related organizations and some members appointed by the same-level Party committees. The role of the Party bodies is to lead and make other members of the organizations implement the guidelines and policies of the Party, increase the influence of the Party, improve the close relationship between the Party and the people, realize the Party's resolutions on organization and personnel management and decide matters of organization and personnel management in line with the duties assigned by the Politburo.
- In judicial and executive bodies (the government, ministries, courts, the inspection agency, etc.) at the central level and in provinces/centrally-administered cities, Party committees set up the Party boards at the same level, which are composed of some Party members who work for the related bodies and some appointed by the same-level Party committees, including the secretaries. The role of the Party boards is to make other members of the bodies understand and implement the Party's guidelines and policies; give advice to the Party committees on operation, duties, organization, and personnel management; make decision within their competence; and to observe the implementation of the Party's guidelines and policies.
- As for the security and armed forces, there are the central military committees and the security Party committees.

With those bodies, the Communist Party of Vietnam has a nationwide organizational system, from the Central to grassroots levels, and in political- social organizations and economic entities.

II. State system
1. The National Assembly
The National Assembly is the highest representative organ of the people; the highest organ of state power of the Socialist Republic of Vietnam, the sole organ that has the constitutional and legislative rights.
a)     Functions:
The National Assembly decides the fundamental domestic and foreign policies, the socio-economic tasks, national defense and security issues, the major principles governing the State machinery, the social relations and activities of citizens. The National Assembly exercises the right to supreme supervision of all activities of the State.

The National Assembly has the highest authority to make Constitution and Laws. Legal documents promulgated by the National Assembly are the Constitution, codes, laws and resolutions.

The National Assembly has three main functions: legislative, deciding the important issues of the country and carrying out the supreme supervision power of all activities of the State.

The Legislative Function
The National Assembly is the sole body empowered to adopt the Constitution and the laws. The National Assembly not only adopts and amends the Constitution and the law, but also decides on the legislative program.

According to the 1992 Constitution, the President of the Republic, the Standing Committee of the National Assembly, the Ethnic Council, the Committees of the National Assembly, the Government, the Supreme People's Court, the Supreme People's Procuracy, the Vietnam Fatherland Front and its members, as well as the individual Deputies to the National Assembly have right to present bills to the National Assembly.

Before being presented to the National Assembly, bills are first examined and commented on by the Ethnic Council or the relevant Committee of the National Assembly. The bills are then sent to all Deputies to the National Assembly not later than 20 days before the opening date of the National Assembly session.

The bills which require public discussion are published and aired by the mass-media, so that the people and the state organs at all levels are able to have comment before presentation of those bills to the National Assembly.

All bills are discussed at the National Assembly session, first by groups of members, and then by all the members at a plenary session.

A bill becomes duly-adopted law when a single majority of the Deputies to the National Assembly vote in favor of its adoption.

After being adopted by the National Assembly, the bill must be signed by the President of the National Assembly. The President of the Republic promulgates the law, which becomes effective no later than 15 days from the date of its adoption.

The function of deciding the important issues of the Nation
As the highest state authority, the National Assembly make decision on the socio-economic development plans of the country; on the national financial and monetary policies and on the estimates of the national revenue and expenditure plans. It also decides the State budget, approves the national revenue and expenditure balance of account, and levies, amends and abolishes taxes.

The National Assembly elects the President of the Republic, the Chairman of the National Assembly and the Prime Minister. It approves all appointments of Ministers upon the recommendation of the Government.

The National Assembly has the authority to establish and dissolve ministries and ministerial level agencies of the Government, as well as to establish, merge, divide and adjust the boundaries of the provinces and cities directly under the central authority. It can also establish or dissolve special administrative economic establishments.

The National Assembly decides issues of war and peace. It also has the power to declare an emergency situation and may take other special measures to ensure national defense and security.

The National Assembly decides on amnesties and referenda.
With respect to foreign affairs, the National Assembly decides on fundamental external policies. At the request of the President of the Republic, it ratifies or revokes those international treaties that Vietnam has signed or adhered to.

The supervision function
The National Assembly exercises the supreme power of supervision over all activities of the State. This function is carried out through the activities of the National Assembly, the Standing Committee of the National Assembly, the Ethnic Council, the Committees of the National Assembly and individual deputies to the National Assembly.
The National Assembly examines all working reports of the President of the Republic, the Standing Committee of the National Assembly, the Government, the Supreme People's Court and of the Supreme People's Procuracy.

The National Assembly considers Activity Reports of the President of the Republic, the Standing Committee of the National Assembly, the Government, the Supreme People's Court and the Supreme People's Procuracy. It is entitled to abolish any legal documents issued by the President of the Republic, the Standing Committee of the National Assembly, the Government, the Prime Minister, the Supreme People's Court and the Supreme People's Procuracy, that is not conformed to the Constitution, the Laws and Resolutions of the National Assembly.

The Standing Committee of the National Assembly supervises the implementation of the Constitution, the Laws, and the Resolutions of the National Assembly, as well as the Ordinances, and Resolutions of the Standing Committee of the National Assembly. It also supervises the activities of the Government, the Supreme People's Court, the Supreme People's Procuracy. It may suspend the effect of any legal document of the Government, the Supreme People's Court, and the Supreme People's Procuracy, which is not in conformity with the Constitution, the Laws or the Resolutions of the National Assembly, and may request the National Assembly to consider abolishing any such documents, and to abolish any such documents of the Government, the Prime Minister of the Government, the Supreme People's Court, and the Supreme People's Procuracy, which are not conformity with the Ordinances and the Resolutions National Assembly of the Standing Committee of the National Assembly.

The Ethnic Council and the Committees of the National Assembly supervise the implementation of the Constitution, the Laws and the Resolutions of the National Assembly within their respective fields of responsibility. They may require the agencies, organizations and individuals under their supervision to provide documents and reports on the subjects under consideration. .

If any violation of the law is discovered, the Ethnic Council and the Committees of the National Assembly are entitled to require the violating organization or individual to cease such violation. They may also recommend measures against the authorities or/and and may also report the matter to the Standing Committee.

The results of the supervision, together with the recommendations of the Ethnic Council or the Committees, are reported to the Standing Committee of the National Assembly and the relevant agencies are notified.

The Deputies to the National Assembly may question the President of the Republic, the President of the National Assembly, the Prime Minister, Ministers and other members of the Government, the President of the Supreme People's Court and the Procurator General. The person who is questioned must answer in person to the National Assembly at its session. In case investigation is required, the National Assembly may decide to convey the question either to Standing Committee or to the next session, or by written response. The deputies to the National Assembly may also require the state agencies, social organizations, economic organizations, and the armed force units to answer any questions put to them. The Head of such agencies, organizations and units are obliged to answer within the period of time as provided by the law.

b) The terms of the National Assembly: The term of each National Assembly is five years.

c) Deputies to the National Assembly:

Any Deputy to the National Assembly must be a person, who is at the youngest of 21 and faithful to the Fatherland and the Constitution of the Socialist Republic of Vietnam, striving to implement the renovation for the course of wealthy people and strong country; having a sufficient level of qualification, and being capable of performing the duties of a Deputy to the National Assembly, deciding important issues of the Nation, having good conduct, moral and ethics, and who is otherwise exemplary in respecting the law and worthy of the people's trust.

Deputies to the National Assembly are elected directly by the people and act on behalf of the people in the National Assembly.

A Deputy to the National Assembly takes part in deciding issues within the competence of the National Assembly such as adopting the Constitution and all laws, deciding domestic and external policies, including those affecting economic and social affairs. Other issues within the competence of the National Assembly that a Deputy takes part in deciding include national defense and security, fundamental principles of organization and activities of the State apparatus, social relationships and activities of citizens, and the supervision of activities of state agencies.

d) The Chairman and Vice Chairmen of the National Assembly: They are elected by the National Assembly among NA deputies in the first session of every NA tenure. Vice Chairmen are the assistants to the Chairman as assigned by the latter.

e) The Standing Committee of the National Assembly:
The Standing Committee of the National Assembly is the permanent body of the National Assembly between the two sessions.

The Standing Committee supervises the implementation of the Constitution, laws and resolutions approved by the National Assembly, ordinances and resolutions issued by the NA Standing Committee; and the performance of the Government, Supreme People’s Court, Supreme People’s Procuracy.

The NA Standing Committee shall issue ordinances to clarify the Constitution, laws and ordinance.

The members of the Standing Committee of the National Assembly may not simultaneously be members of the Government. The majority of the members work on full-time basis. The terms of office correspond with the term of office of the National Assembly. When the term of the National Assembly, the Standing Committee of the National Assembly continues to work until the new National Assembly elects a new Standing Committee.

The 1992 Constitution stipulates that the Standing Committee of the National Assembly has twelve tasks and powers. Among them are the powers to announce, convene and chair the National Assembly sessions, to interpret the constitution, laws and ordinances, and to issue ordinances on those matters assigned by the National Assembly. The Standing Committee of the National Assembly also supervises and guides the activities of the People's Councils and directs, regulates and coordinates the activities of the Council of Ethnic Affairs and all Committees of the National Assembly.

g) Councils administered by the National Assembly: The National Defense and Security Council consists of the State President as the Chairman, the Prime Minister as the Vice Chairman and four members.

The Council of Ethnic Affairs consists of one Chairman and 38 members.
h) Functional committees of the National Assembly: Committee on Laws, Committee on External Relations, Committee on Economy and Budget, Committee on National Defense and Security, Committee on Social Issues, Committee on Education, Culture, Youth and Children, and Committee on Science, Technology and Environment

2. The State President:
The State President, as the Head of State, is elected by the National Assembly from among its deputies to represent the Socialist Republic of Vietnam internally and externally.


According to Article 103 of the 1992 Constitution, the President has major executive and legislative power as follows:
- Promulgates legal documents adopted by the National Assembly, such as the Constitution, laws and ordinances;
- Has overall command of the armed forces and holds the office of Chairman of the National Defense and Security Council;
- Appoints or proposes the appointment of, releases from duty, dismisses the Vice-Presidents, Prime Minister, Chief Judge of the Supreme People's Court, Head of the Supreme People's Procuracy;

The President is assisted by the Vice President, the President’s Office, and the National Defense and Security Council.
+ Vice President is proposed by the President and elected by the National Assembly from among NA deputies; The Vice President assists the President and may be authorized by the President to do some tasks or functions as the acting President.
+ The National Defense and Security Council can mobilize the country’s forces and potentialities to protect the fatherland. It is chaired by the President; its members are introduced by the President and voted by the National Assembly.

3. The Government:
The Government is the executive organ of the National Assembly, and the supreme state administrative agency of the Socialist Republic of Vietnam.

The Government is in charge of tasks assigned by the State in the fields of politics, socio-economy, national defense, security and external relations; maintains effective operation of the State apparatus from the central to grassroots levels; ensures the respect for, and implementation of the Constitution and laws; promotes the people’s sense of mastery in national defense and construction; ensures stability and improves the people’s material and spiritual life.

The Government is accountable to the National Assembly, the National Assembly’s Standing Committee and the President of State.

Components of the Government are: Prime Minister, Deputy Prime Ministers, and Ministers and Heads of ministerial-level agencies.

The Prime Minister is elected, released from office or dismissed by the National Assembly at the State President’s request.

The Deputy Prime Ministers are approved by the National Assembly at the Prime Minister’s request. They function as the assistants to the Prime Minister and may be authorized by the Prime Minister in the case of the latter’s absence.

Ministers and heads of the ministerial-level agencies are approved by the National Assembly at the Prime Minister’s proposal. They are in charge of State management over their assigned branches or affairs.

4. Supreme People’s Court:
The Supreme People’s Court is the highest judicial organ of the Socialist Republic of Vietnam.

The Supreme People’s Court consists of the Chief Judge, Deputy Chief Judge, jurors and court secretaries.

The structure: Council of Judges, Commission of Judges, Central Military Court, Criminal Court, Civil Court, Appeal Court, and assisting staff.

The National Assembly elects and dismisses the Chief Judge of the Supreme People’s Court. The State President nominates/dismisses Deputy Chief Judge and judges at the Chief Judge’s request. The People’s Jurors are introduced by the Central Committee of the Vietnam Fatherland Front and appointed by the National Assembly Standing Committee.

Main operating principles of courts: during the hearings, the judges and jurors are independent and only obey the laws. Justice and democracy are ensured by the open hearing process, in which jurors play an essential role, defendants have the right to defend themselves, or to hire lawyers. They also have the right to use their native languages in courts.

5. Supreme People’s Procuracy:
The Supreme People’s Procuracy observes the implementation of and respect for the Constitution and laws by Ministries, ministerial-level agencies, Governmental organs, local authorities, social and economic organizations, armed forces, security forces and all citizens; and to practice public prosecution as stipulated by laws, ensuring due law enforcement.

The Supreme People’s Procuracy consists of the Head who can be elected, dismissed, or removed from office by the National Assembly on the State President’s proposal, the Deputy Heads, prosecutors and inspector appointed or dismissed by the State President at the Head’s request.

6. Local authorities:

a) People’s Councils:

    - People’s Councils of the centrally-administered cities and provinces

    - People’s Councils of districts

    - People’s Councils of the provincial-level cities/towns

    - People’s Councils of communes, wards and towns.

b) People’s Committee:

    - Provincial level: consisting of services, subcommittees, other organs administered by the People’s Committees and the People’s Committee offices

    - District level: consisting of departments, sections, other organs administered by the People’s Committees and the People’s Committee offices

    - Communal level: sections and the offices.

c) Local people’s committees:

    - Provincial-level people’s courts

    - District-level people’s courts.

d) Local people’s procuracy: Provincial and district levels.

III. The Vietnam Fatherland Front
The Vietnam Fatherland Front (VFF) is a voluntary political coalition of political organizations, socio-political organizations, social organizations and individuals from all classes, social strata, ethnic groups, and religions, including overseas Vietnamese.

The VFF’s objectives are to gather and build up a whole-people unity bloc, strengthen the people’s political and spiritual consensus, encourage the people to promote their mastership, to implement the CPV’s guidelines and policies, and to abide by the Constitution and laws.

The VFF is governed by the principles of democratic consensus, coordinated and united action.

The VFF has its own statute.

The system of the VFF’s organs is in accordance with that of the State’s administrative structure from the central to grass-root levels.

IV. Vietnam Labour Confederation
The Vietnam Labor Confederation is the socio-political organization of the working class and is a member of the VFF.

Article 2 of the Law on Labor Union stipulates that: “the labor unions “represent and protect laborers’ legitimate interests and rights, cooperate with the State in developing production, generating more jobs and improving laborers’ spiritual and material life.”

According to Article 5 Section II of the Law, the labor unions “cooperate with State organs in building laws and policies on labour, salary, labour safety and other social policies concerning the rights, duties and interests of workers.”

The Vietnam Labor Confederation is well-organised, has various levels and operates all over the country. The organisation is governed by the principle of democratic centralism. All its directing organs are formed through elections. The highest directing organ of each level is the Union Congress of that level. In the period between the two Congress sessions, the directing organ is the Standing Committee which is set up by the Congress.

The Vietnam Labor Confederation is structured in accordance with occupations and geographical areas.

V. Other social and political organizations
Apart from the Vietnam Fatherland Front and the Vietnam Labour Confederation, in Vietnam, there are other political and social organizations, such as the Vietnam Women’s Association, the Ho Chi Minh Communist Youth’s Union, the Vietnam Veterans’ Association, and professional associations. These organizations played an important role in the struggle for national salvation. In the cause of renovation, industrialization and modernization, they have continued to contribute to the implementation of the Party’s guidelines and the Government’s policies.

General information about Vietnam's economy
Overview: Viet Nam embarked on the Doi Moi (reform) policy in 1986. Since then, the country has seen dramatic changes, first and foremost in the economic thinking. The centrally-planned economy was replaced by the socialist-oriented market economy; national industrialization and modernization were initiated together with the policy of multilateralization and diversification of external economic relations, openness and international integration. The Doi Moi process helped Vietnam rapidly escape hunger and poverty and lay the initial foundation for an industrialized economy, as well as maintaining a high growth rate and a relatively equal society.

The 1987 Foreign Investment Law was the first legal document that helped form the legal framework for the Vietnamese market economy. In 1991, the Private Enterprise Law and Corporate Law were introduced. The amended 1992 Constitution affirmed the existence and development of a multi-sector economy under a market mechanism, including the foreign-invested sector. This was followed by the promulgation of a number of laws essential for the formation of the market economy, including Land Law, Tax Law, Bankruptcy Law, Environment Law, and Labour Code etc. Hundreds of ordinances and decrees were enacted by the Government to guide the implementation of these laws, which help ensure national socio-economic development.

Along with the law-making process, market economy institutions have also been established. It is Government policy to eliminate the central planning mechanism, emphasize monetary - market relations, focus on economic management measures and establish an array of financial institutions, banks and basic markets for money, labour, goods and land, etc. The administrative reform was promoted so as to improve economic competitiveness  and to help create a more favourable business environment and mobilize all resources for economic growth. The political will of the Vietnamese Government is also reflected in the strategy for administrative reform in 2001-2010, which emphasizes the simplification of administrative procedures, amendment of laws and improvement of economic management. These changes will help establish a dynamic institution to meet the development requirements of the country in the new context.

Overall, tremendous economic reforms taking place over nearly two decades of Doi Moi have yielded encouraging results. Vietnam has created an ever more competitive and dynamic economic environment. The multi-sector economy has been encouraged to develop, thus mobilizing effectively all social resources for economic growth. External economic relations have been expanded and the flow of foreign direct investment increased. Export of goods and labour, tourism industry and remittances from overseas Vietnamese  have been strongly promoted to generate increasing foreign earnings for Vietnam.

During  20 years of Doi Moi, GDP of Vietnam saw a sustained growth, which stood at 8.2% in 1991-1995 as compared to 3.9% in 1986-1990. This rate dropped to 7.5% in 1996-2000 due to the impacts of the Asian financial crisis. Since 2001, GDP growth recovered on a year-on-year basis, reaching 6.9%, 7%, 7.3% and 7.7% for 2001, 2002, 2003 and 2004 respectively. The figure for 2005 was 8.4%. Vietnam has now succeeded in gradually replacing the centrally-planned economy, bureaucracy and a subsidy mechanism by a socialist-oriented market economy with growing dynamism. The GDP growth rate of 7 to 8% has been sustained, along with stronger industrialization and expanded integration with the world and regional economy. Vietnam has enjoyed a sharp rise in trade volume, especially exports, and an increase of foreign investment and income.

The proportion of the industry and construction rose from 38.13% in 2001 to 41.03% in 2005; the service from 36.63% up to 38.08%; and only the agriculture, forestry and fishery from 23.24% to respectively.

As Vietnam’s GDP continuously increases, the economic structure has also witnessed notable changes. From 1990 to 2005, the contribution of agriculture sector dropped from 38.7% to 20.89% ,  whilst that of the industry and construction was up from 22.7% to 41.03% . The service sector stayed relatively constant, 38.6% in 1990 and 38.08% in 2005. In each sector, the structure has also positively shifted. The agriculture sector has seen a decline in the role of agriculture and forestry from 84.4% to 77.7% during the period 1990-2003, while fishery gained a higher share. In the industrial sector, the proportion of the processing industry was up from 12.3% in 1990 to 20.8% in 2003 with improved product quality. In the service sector, the share of high-quality services such as finance, banking, insurance and tourism, etc. is increasing rapidly.

The economy is well on the road to a multi-sector model operating according to market mechanism and state regulations. This means that the private sector enjoys freedom to develop in all areas not specifically forbidden by law. The legal framework has been revised to facilitate gradual shift from the former centrally-planned economy to a market one, which unleashes production capacity, mobilizing resources effectively and creating a momentum for economic growth and development.

Upon the amendment of the Enterprise Law in 2000, private businesses have enjoyed strong encouragement for development. This Law institutionalized the freedom of all individuals to do business in areas not prohibited by law. It also removed administrative obstacles that hampered enterprises such as complex licensing procedures or fees, etc. In the 2000-2004 period, 73,000 private enterprises were registered, up by 3.75 times against the period 1991-1999. By 2004, the total number of private enterprises operating under the Enterprise Law amounted to 150,000 with the total capital of VND 182 billion. From 1991 to 2003, the private sector’s share in GDP was up from 3.1% to 4.1%; other non-state sectors increased from 4.4% to 4.5%; and foreign-invested sector from 6.4% to 14%; and the household sector was down from 35.9% to 31.2%.

With a view to raising the productivity of the state-owned sector, policies were formulated with concrete measures to adjust and reorganize SOEs. The management of SOEs' finance and state equity in SOEs was strengthened and the process of SOEs’ equitization well monitored. As the multi-sector economy has further developed, the proportion of SOEs in GDP decreased from 40.1% in 1991 to 38.3% in 2003. The collective sector dropped from 10.2% to 7.9% during the same period. In 2002 and 2003, 1,655 SOEs were listed for reorganization and reform. The figure for 2004 and 2005 were 882 and 413 respectively.

Vietnam has succeeded in translating economic achievements into social progress. Benefits of the Doi Moi process, for instance, are delivered to the majority of the population on a relatively equal basis. Economic growth is combined with the improvement of life quality and development of health care and education. The Human Development Index of Vietnam increased from 0.583 in 1994 with a rank of 120/174 to 108/177 in 2005. The average life expectancy was raised from around 50 in the 1960s to 70.5 at present. The poor household ratio dropped from 70% in 1980 to below 7% in 2005s.

Foreign trade and international economic integration: The policy of openness and industrialization has opened up new opportunities for Vietnam to make full use of its inherent comparative advantages, i.e. vast natural resources, and an abundant and inexpensive workforce. These advantages are being exploited to raise Vietnam’s exports, which generate an increasing flow of foreign income for economic growth and industrialization. Over the years of the Doi Moi process, Vietnam's export growth has averaged 20%. From around US$ half a million before the introduction of the Doi Moi policy, the total export volume of Vietnam reached US$ 26 billion in 2004 and US$32.23 billion in 2005. This foreign earning is a significant resource for the national industrialization and modernization.

The structure of exports has also seen a positive change. During the 1991-1995 period, major exports of Vietnam were crude oil, fishery products, rice, textiles, coffee, forestry products, rubber, peanut and cashew nuts. By 2005, apart from crude oil, textiles, rice and coffee, Vietnam was mainly exporting namely crude oil, garment and textile, footwear, seafood, woodwork, electronics appliances, and rice. This structure reflects the rise in processing and manufactured products and decline in unprocessed products, including agricultural, fishery, forestry products and minerals. Despite this shift, unprocessed export products still make up a large proportion. Therefore, greater efforts are needed to rapidly raise the proportion of industrial exports.

The policy of "multilateralization and diversification" of international relations has helped Vietnam integrate more deeply into the world and regional economy. Before 1990, Vietnam had trade relations with only 40 partners. Now with the foreign policy of openness, which is to befriend and cooperate with all countries in the world on the basis of equality and mutual benefit, Vietnam has established diplomatic relations with 167 countries, and has signed multilateral and bilateral trade agreements with over 80 nations. The country has been granted MFN status by more than 70 countries and territories, including countries and regions with large capital resources, high technologies and vast markets, such as the United States, Japan, the EU and newly industrialized countries in East Asia.

Following the introduction of Doi Moi, Vietnam signed an economic and trade cooperation agreement with the EU in 1992, joined ASEAN in 1995, AFTA in 1996 and APEC in 1998. Vietnam also signed the Bilateral Trade Agreement with the United States in 2000. Vietnam started negotiations for WTO accession in 1995 and is expected to become a member of this organization by the end of 2006[1]. 

Foreign Direct Investment: In December 1987, the Foreign Direct Investment Law of Vietnam was introduced to help form the basic legal framework for foreign investment activities in Vietnam. To better respond to business requirements and feedback from foreign investors, this Law was amended and supplemented several times, notably in 1996 and 2002, which created a more open and attractive environment to draw foreign investors into crucial industries such as export-oriented processing and manufacturing, and key economic zones of the country.

In recent years and especially in 2005, the Vietnamese Government made a number of adjustments and conducted reforms to create more incentives for foreign investors. They are now supported in tackling business obstacles. The Law on Personal Income Tax has been amended in favour of the tax payers. The one-stop-shop policy has been promoted, telecommunication tariffs lowered to gain competitiveness over other countries in the region. Infrastructure has been improved. More areas, including those previously closed to foreign investors, such as telecommunication, insurance and supermarkets, etc. are now open to investment. As such, Vietnam has become an attractive venue for foreign investment.

The aforesaid measures were conducive to recovery and rapid increase of the FDI inflows in 2005. The sharp rise of FDI is also attributed to political, economic and security stability, high economic growth rate, continuation of economic reform in accordance with market economy principles, improved living standards leading to higher domestic demand, greater international integration and the emergence in the international market of Vietnamese trademarks and Vietnam’s growing reputation.

Over the past years, Vietnam has drawn increasing inflows of FDI. From a negligible figure of 1986, FDI into Vietnam reached US$ 3.2 billion in 1997. Due to the negative impacts of the 1997 Asian financial crisis, the FDI flow then saw a drop during 1998-2000 period, with only US$ 1.58 billion in 1999. In the past few years, Vietnam has enjoyed a recovery of FDI, from US$ 2.6 billion in 2001 to US$ 4.1 billion in 2004. FDI not only generates profits for foreign investors but also represents a significant capital source which comes along with technology transfer and advanced managerial skills. FDI helps better tap national potential, creates tens of thousands of jobs and raises professional skills for Vietnamese workers.


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