Reform, Growth, and Poverty in Vietnam

Vietnam grew rapidly in the 1990s, and
yet by many measures it has poor economic institutions.
Dollar seeks to explain this apparent anomaly. Between the
1980s and 1990s Vietnam carried out significant economic
reforms, notably stabilization, the introduction of positive
real interest rates, trade liberalization, and initial
property rights reform in agriculture. Relating these
changes to the empirical growth literature, the author finds
that Vietnam's growth acceleration is about what would
be predicted. Conditional convergence also suggests that the
country's high growth rate will decelerate unless
further reforms are taken. The author then looks at the
level of institutional and policy development in Vietnam
compared with other emerging market economies. While
Vietnam's policies have improved, they did so starting
from a very low base. So, it can be simultaneously true that
Vietnam's policies have improved a lot and yet are
rather poor in comparative perspective. A comparison of
governance indicators, financial sector issues, and the
infrastructure of international integration reveals serious
institutional weaknesses in Vietnam that need to be
addressed if a high growth rate is to be sustained.