evaluate Vietnam’s economic performance because Vietnam is unique among the transitional economies in several respects: like its giant neighbour China, it has retained a socialist one party political monopoly , taken a gradualist approach to reform, and its reform programme ‘doi moi’ has been very successful. In all, Vietnam successfully combined economic liberalism with political conservatism to create a Vietnamese variation of a market economy, that is still committed to socialism, to be considered as a potential "Asian tiger" economy, with a population of 77 million and a labor force that is well-educated, diligent, and young. The remainder of the paper is organized as follows. Section 2 will provide the background information on Vietnam. Section 3 will discuss on the theoretical framework of Vietnam’s transition process. Section 4 will evaluate Vietnam’s economic development plans up till 1990. Section 5 will discuss the challenges that Vietnam would encounter in its future economic development. Section 6 provides concluding remarks. 2. Background Information on Vietnam To better understand Vietnam’s economic transition, we need to examine its historical past. The 17th parallel at the 1954 Geneva Conference divided Vietnam into two parts: North and South Vietnam. The North, called Democratic Republic of Vietnam (DRV), was under the leadership of the Vietnamese Communist Party while the South, called Republic of Vietnam (RVN) was a puppet state under Western control. Civil war ensued. Moreover, the economies of the two evolved in different directions with the North following a Stalinist-Maoist model to construct socialism while the South set on the capitalist path under Western influence . On 2nd July 1976, the North and South were reunified and the Socialist Republic of Vietnam (SRV) came into existence. Following the completion of the liberation of South Vietnam, the country entered an era of economic recovery and development with the communist party set upon to impose its neo-Stalin model on the South and it led to severe economic problems. 3. Theoretical Framework of Vietnam’s Transition Process Vietnam’s overall reform from 1970 till the present can be divided into two distinct periods (Figure 1 below), each with its objectives, forces and mechanisms driving the process . The first period known as hard reform is between 1976, after the reunification, up to 1986. The central authorities maintain its tough stance against private sector and continue to control markets to defend its neo-Stalin economic model. However, reforms began to take places from the grass-roots level (e.g cooperatives and state-owned enterprises), and the government took a reactive attitude to ease the pressures of the shortage economy with the objective to achieve socialist transformation. The second period known as soft reform is began from the economic “renovation” (otherwise known as “doi moi”) in December 1986 till 1990s. The ideology behind the soft reform is the recognition of the fundamental flaw of Vietnam’s socio-economic system under the neo-Stalin model. The government initiated a stronger form of reform to move towards a market economy especially by opening up to foreign direct investments (FDI). Figure 1: Vietnam’s reform process Vietnam’s overall reform process Hard Reform Socialism: 1976-1986 Soft Reform Socialism: 1986 onwards Pre-Stage (up to 1979) Fence-breaking (up to 1981) Formal Transition (up 1989) Post-Stage (1990 onwards) Second Five-Year Plan (1976-1980) Third Five-Year Plan (1981-1985) Economic ‘Renovation’ (1986-1990) Subsequent Five-Year Plans In addition, Vietnam’s gradualist approach to transition can be further broken into a four-stage process within the two periods (Figure 1 above). The first stage is the Pre-stage, which is the period before the transition process takes place. An important feature was the distortions to economic structures and prices due to central-planning. It la

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