Is Vietnamese High Growth with Poverty Reduction Sustainable?

Since the adoption of Doi-moi (renovation) policy in 1986, Vietnam has experienced rapid economic growth, that was more than 7% per year in 1990s, and has reduced its poverty headcount by half. Backed by these favorable developments, huge amounts of funds in the forms of foreign direct investment and development assistance have flown into Vietnam. Currently, more than 20 donor countries are playing in the fields of this country. Vietnamese prosperous path toward further reform and economic growth looks firm at the first glance. However, there is a skepticism in which, without further advanced reform effort, the growth rate of this country would cease to reduce. Is the Vietnamese high growth with poverty reduction sustainable? What conditions and policies are required for Vietnamese growth to continue? Based on the discussion of David Dollar of World Bank Institute and other researchers, as well as the contemporary reform effort of Vietnam, this paper will elaborate the possibility of Vietnamese continued growth and poverty alleviation. Section 2 outlines the development of Vietnamese economy and society, particularly in 1990s, and shows the development was pro-poor one. The following sections identify the determinants of the economic growth in general, and in Vietnam, applying recent growth analyses and relevant data. Dollar asserts that the high growth of Vietnam in 1990s could be almost entirely explained by the reforms which the country endeavored. According to the conditional convergence the recent growth theory advocates, Dollar predicts that Vietnamese growth rate would decline if there would not be an acceleration of the reform efforts. This paper continues to examine the rooms for Vietnamese further reform, comparing with the situation of other emerging markets. It further indicates that, together with the Vietnamese PRSP, i.e. CPRGS, the international trade agreements, in which Vietnam has engaged or is about to engage, would foster the continued reform efforts in the areas of infrastructures, governance, SOE and State Owned Commercial Banks. These reforms would upgrade the level of income to converge, thus could contribute to sustained economic growth of Vietnam. In the supplementary section, a simple examination was made to see that the conditional convergence still holds even if Vietnam is classified in Globalizer countries