Vietnam - The Economy Historical Background

More about the Economy of Vietnam.

Historical background

Post-1975 developments, including the establishment of new economic zones, did not eradicate distinctions between North and South. North, South, and Central Vietnam historically were divided by ethnolinguistic differences, but until the midnineteenth century and the beginning of the French colonial period, they were all agrarian, subsistence, and village-oriented societies. The French, who needed raw materials and a market for French manufactured goods, altered these commonalities by undertaking a plan to develop the northern and southern regions separately. The South, better suited for agriculture and relatively poor in industrial resources, was designated to be developed agriculturally; the North, naturally wealthy in mineral resources, was selected as the region in which industrial development was to be concentrated.

The separation distorted the basic Vietnamese economy by overly stressing regional economic differences. In the North, while irrigated rice remained the principal subsistence crop, the French introduced plantation agriculture with products such as coffee, tea, cotton, and tobacco. The colonial government also developed some extractive industries, such as the mining of coal, iron, and nonferrous metals. A shipbuilding industry was begun in Hanoi; and railroads, roads, power stations, and hydraulics works were constructed. In the South, agricultural development concentrated on rice cultivation, and, nationally, rice and rubber were the main items of export. Domestic and foreign trade were centered around the Saigon-Cholon area. Industry in the South consisted mostly of food-processing plants and factories producing consumer goods.

The development of exports--coal from the North, rice from the South--and the importation of French manufactured goods, however, stimulated internal commerce. A pattern of trade developed whereby rice from the South was exchanged for coal and manufactured goods from the North. When the North and South were divided politically in 1954, they also adopted different economic ideologies, one communist and one capitalist. In the North, the communist regime's First Five-Year Plan (1961-65) gave priority to heavy industry, but priority subsequently shifted to agriculture and light industry.

During the 1954-75 Second Indochina War, United States air strikes in the North, beginning in early 1965, slowed large-scale construction considerably as laborers were diverted to repairing bomb damage. By the end of 1966, serious strains developed in the North's economy as a result of war conditions. Interruptions in electric power, the destruction of petroleum storage facilities, and labor shortages led to a slowdown in industrial and agricultural activity. The disruption of transportation routes by U.S. bombing further slowed distribution of raw materials and consumer goods. In the North, all 6 industrial cities, 28 out of 30 provincial towns, 96 out of 116 district towns, and 4,000 out of 5,788 communes were either severely damaged or destroyed. All power stations, 1,600 hydraulics works, 6 railway lines, all roads, bridges, and sea and inland ports were seriously damaged or destroyed. In addition, 400,000 cattle were killed, and several hundred thousand hectares of farmland were damaged.

The economy in the South between 1954 and 1975 became increasingly dependent on foreign aid. The United States, the foremost donor, financed the development of the military and the construction of roads, bridges, airfields and ports; supported the currency; and met the large deficit in the balance of payments. Destruction attributed to the Second Indochina War was considerable. Hanoi claimed that in the South, 9,000 out of 15,000 hamlets were damaged or destroyed, 10 million hectares of farmland and 5 million hectares of forest lands were devastated, and 1.5 million cattle were killed.

For Vietnam as a whole, the war resulted in some 1.5 million military and civilian deaths, 362,000 invalids, 1 million widows, and 800,000 orphans. The country sustained a further loss in human capital through the exodus of refugees from Vietnam after the communist victory in the South. According to the United Nations High Commission for Refugees, as of October 1982 approximately 1 million people had fled Vietnam. Among them were tens of thousands of professionals, intellectuals, technicians, and skilled workers.

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