Socialist Industrialization in the Central Planning Economy, 1976-85

Post-war Vietnam faced three major economic challenges: (1) to repair the consequences of the destructive war and restore the country's infrastructure and industrial bases, including state entrepreneurship; (2) to adopt and unify the centrally planned system for the whole country; (3) to continue the North's interrupted FFYP to incorporate a Second Five-year Plan (1976-80) as the nationwide strategy to achieve the ambitious target of building a socialist economy within twenty years.

During this period, industrial planning was the central function of the state's economic administration, with the government defining input and output levels for the entire economy. There was no market-based price mechanism, as open trade and private entrepreneurship was not officially recognized. Without a company law in existence, all industrial producers and traders were SOEs, governed directly by the ministries and provincial authorities, which led to a highly bureaucratic and unprofitable situation.

In the early 1980s, more than 80 per cent of national income came from the agricultural sector which was dominated by village-level 'collectives'. Growth of the agricultural and light industrial sectors outpaced that of heavy industry. Based on the scarce statistics that were (irregularly) published, industrial production grew at 9.5 per cent per annum from 1981-5 and income per capita at 6.4 per cent. But the economy was characterized by small-scale production, low labour productivity, high unemployment, material and technological shortfalls, and insufficiency of food and consumer goods. During the years 1976-85, when the economy faced a slowdown, national income was said to have met 80-90 per cent of needs, and inflation throughout the period remained in double digits. By 1985-6, Vietnam was on the brink of a socio-economic crisis.