10% over the five years of 1981 – 1985. Some of the achievements include agrarian reform such that land use rights were given to farmers; independent accounting for State-owned enterprises whereby the State no longer bears the losses of SOEs. SOEs are responsible for their contributions to state budget and their own expenses; encourage private sector through gradual reduction in trade restrictions. Perhaps the most important is the enactment of a new foreign capital investment law whereby provisions were made in favour of investors in Vietnam in January 1988. Thereafter, Vietnam experienced consistent and rapid increase in FDI. Vietnam has also been successful to reduce the hyperinflation rate of 300% in 1988 to about 10% in 1992 through sound monetary policies and liberalization of the exchange rate of the local currency to the US dollars in March 1989 (allowing it to devalue sharply). In 1989, Vietnam can be truly considered a market economy when price subsidies on all items were removed. In the banking sector, restructuring was carried out and foreign banks are allowed to operate in Vietnam As these policies were implemented during the late 80s, their impacts are limited though the economy gained some definite achievements. Productions recovered and the economy grew. The old management mechanism had gradually changed into a new one. The private sector emerged around 1987 and contributed about 60% of GDP in 1992. Details of significant policy changes are shown in Table 5 (Appendix). 5. Challenges ahead for VietnamVietnam became the seventh member of the Association of Southeast Asian Nations (ASEAN) on 28 July 1995 and indicated its intention to join the ASEAN Free Trade Area (AFTA) . From this perspective, Vietnam can obtain enormous benefits both politically and economically. In political terms, Vietnam can align itself to share the security and political interests with other ASEAN countries. In turn, it can create a stabl...
