Economy - November 23, 2022 | 01:16 am PT

Vo Van Kiet: Remembering Vietnam's economic reformer

The contributions of late Prime Minister Vo Van Kiet, who led Vietnam through vital economic reforms in the late 1980s, were recalled on his 100th birthday on Wednesday.

Kiet helped transform the country from a subsidized economy experiencing triple-digit inflation to a market economy that propelled Vietnam towards modernization and industrialization.

As government leaders gathered Tuesday to pay tributes to the late PM, leading economists recalled the leader’s contribution to Vietnam’s development.

"Former Prime Minister Vo Van Kiet was a leader with market oriented economic thought. He was willing to learn and to listen. He quickly adopted what was good for the people," economist Pham Chi Lan told VnExpress.

Others called him "the chief engineer of many breakthrough projects."

Dire straits

Kiet’s contributions were made during a time of great difficulties for the Vietnamese economy. In 1985, after a decade of pursuing the subsidized economy model, Vietnam had become increasingly dependent on foreign assistance of up to 8.5 rubles (around VND3.5 trillion) and foreign loans of $1.9 billion (nearly VND45.6 trillion).

To make up for the deficit in the state’s coffers, Vietnam had to print more money to cover expenses, and this caused its inflation to surge by nearly 775% in 1986. It continued to stay in the double digits in 1990 and 1991, and the unemployment rate was 12.7%.

The alarming situation prompted Party and government leaders to end the subsidized economic period in December 1986 and initiate transition to a market economy. The initiative was commonly known as doi moi, meaning transformation and renewal.

Kiet, who was the Deputy Chairman of the Council of Ministers at the time, was a force behind this initiative.

He issued many breakthrough policies, including giving state-owned companies freedom to expand their businesses without direct government control.

He also allowed prices to follow the supply and demand principle and restructured the banking system.

Just as these changes were being initiated, Vietnam was negatively impacted by the dissolution of the Soviet Union in 1991, which abruptly took away a major chunk of financial assistance. With a U.S.-led embargo in effect, Vietnam also had trouble trading with other markets.

It was amidst this tumult, in October 1992, that the National Assembly voted in favor of Kiet being Vietnam’s Prime Minister.

Prime Minister Vo Van Kiet speaks before the National Assembly on September 23, 1992. Photo courtesy of Vietnam News Agency

Developing a market economy

With inflation above 67% in 1991, Kiet kick-started his tenure as PM by stopping the State Bank of Vietnam from printing more money and only allowed commercial banks to use deposits to give loans. Deposit interest rates were raised to 13% a month.

Inflation declined to 17.5% in 1992 and 5.2% in 1993, while the U.S. dollar depreciated against the dong by 25.8% and gold prices dropped by 31.3%.

Vietnam recorded a trade surplus in 1992 and achieved all growth targets set by the National Assembly.

In 1993, in an unprecedented decision, Kiet established a team of consultants to advise the government. The 24-member team comprised experts from across the country as well as foreigners, businesspeople and leading intellectuals.

The team met every Friday to help Kiet make many policy changes to reform the banking and finance system, attract foreign investment and build key infrastructure projects.

Le Dang Doanh, an economist who was part of the team, said Kiet was a straightforward and friendly person who always listened to people and businesses.

"He met with enterprises, listened to them and told us what he heard. He then asked us to respond and come up with policy changes to untangle issues. We learned a lot from that."

Economist Lan said Kiet had always been steering Vietnam in the direction of a market economy. But he did not forget state-owned enterprises and pushed for them to follow market principles and have greater autonomy.

When experts advised him that the private business law at the time was outdated, he agreed to make a new one.

"Kiet wanted to push private companies to grow and create pressure on state-owned businesses so they can implement better reforms," Lan said.

Prime Minister Vo Van Kiet speaks with Nguyen Thi Mai Thanh, director of the Refrigeration Mechanical Company. Photo by Tu Trung

Several other laws were also issued, including a land law, banking and credit organization law, commerce law and tax law.

Thanks to these moves, Vietnam recorded an average growth of 8.2% a year in the 1991-1995 period, exceeding the target of 6.5%.

In the 1992-1997 period, growth was nearly 8.8% a year, compared to 4.67% in the 1986-1991 period.

Transnational projects

Several key infrastructure projects were built when Kiet was the Prime Minister. One of them, the 500 kilovolt North-South Electric Transmission Line, was controversial at the time.

"The north has an oversupply of electricity, while the south has shortages. Do you have any solution to transmit electricity to the south?" Kiet asked Vu Ngoc Hai, who was the Minister of Energy at the time.

No country in the world had built nearly 1,500 kilometers of 500 kV transmission lines at the time. Some European countries had 400 kV lines but only for short distances.

Kiet, however, wanted the project built in the shortest time possible.

"The earlier the better, and whatever the difficulties, we were asked to build it within two years," said former deputy director of Vietnam Electricity (EVN), Tran Viet Ngai, who was deputy head of the Steering Committee for constructing the 500 kilovolt line.

The project was even deemed impossible by some foreign consultants. Hai met with several Australian experts, but they only provided consultancy on maps and Vietnamese engineers and workers were responsible for construction.

Hai recalled in a book he wrote: "He told me, ‘If the project fails, I will resign.’"

The project was completed on schedule and successfully transmitted electricity on May 27, 1994. The line, covering 1,487 kilometers in 17 provinces with 3,437 iron towers, brought about major economic advances, analysts say.

Vo Van Kiet (wearing glasses) is seen on the completion day of the North-South 500 kilovolt Transmission Line. Photo by Nguyen Cong Thanh

Besides the 500 kV power line, Kiet is also widely considered to be responsible for the Ho Chi Minh Highway running across the country.

In his book "Vo Van Kiet – A great personality, a lifelong talented leader for the country for the people," author Ha Dinh Can says that one spring morning in 1996, Kiet met with the then Minister of Transport and told him that a North-South highway must be built.

"That idea came to the transport ministry as a surprise; it was much bigger and bolder than other previously suggested road projects, like the Thang Long-Noi Bai or the Lang-Hoa Lac roads," Can wrote.

On September 24, 1997, Kiet signed a decision to approve the general plan for the North-South Highway. According to some people, it was the last document signed by him as a Prime Minister. The decision was made a year after over 1,000 engineers, experts and workers from multiple fields in the country were mobilized to carry out surveys and complete design documents.

"If the Ho Chi Minh Trail in the past helped us with the liberation of our people, the Ho Chi Minh Road of today is not just a road in the times of industrialization that protects and makes our country prosper, but also the road that connects both the North and the South," Kiet said.

In August 1998, the road’s construction was passed by the Politburo, and it was named after Ho Chi Minh.

Besides the two construction projects that connected one end of the country with the other, Kiet also left his mark on other major infrastructure projects like the Tri An hydropower plant and the Dung Quat refinery.

Kiet approached each project with a scientific mindset. One example of this is how he thought of flood control in the Mekong Delta in order to bolster the region’s agriculture capabilities.

In 1995, an irrigation plan reached Kiet’s hands, waiting to be signed. But Kiet knew what the Delta was like and what it needed.

"Floods in the Mekong Delta need to be considered as a resource to be exploited," he said at a 1996 conference in HCMC.

So he put forward a new flood control aim for the Delta wherein the region would be gradually expanded, with more and more alluvium being added each year, while other aspects like traffic, residence and national defense had to develop synchronously.

All projects in flood-prone areas have since adopted Kiet’s approach.

Former President Tran Duc Luong once called the 500 kV power line as one of the "symbols of innovation;" and said the construction of infrastructure networks for traffic, agriculture and drainage was of vital importance for the Mekong Delta.

"Today, the region has become a true basket of rice, not just for Vietnam, but for the entire world," Luong said.

Diplomatic advances

Besides his contribution to the market economy and to infrastructure development, during his time as Prime Minister, Kiet has also made official visits to 34 countries and the EU; and received several high-profile world leaders in Vietnam. These events not only elevated Vietnam’s position on the global stage, but set the stage for the country’s greater integration into the global economy

Can’s book quotes former Deputy Prime Minister Vu Khoan as saying Kiet pulled him aside during a meeting break and proposed ideas to expand Vietnam’s diplomatic reach.

First, relations with countries in Southeast Asia need to be improved and relations with China need to be normalized, he said. Next would be the establishment and improvement of relations with certain countries in the West Pacific, like Japan, South Korea, Australia and New Zealand, and then the EU. Eventually, those relations would create opportunities for the U.S. to end its embargo on Vietnam.

How Kiet approached diplomacy with Southeast Asian countries can be highlighted in his interactions with Singapore’s first Prime Minister Lee Kuan Yew. Lee was one of the most vocal critics of Vietnam on the Cambodia issue in the late 70s and 80s.

But Vietnam-Singapore relations began to change starting in 90s, thanks to unstinting efforts by Kiet.

In his memoir, Lee Kuan Yew retells the story of Kiet’s visit to Singapore in 1991. Lee was no longer in office then, but still played a major role in Singapore’s politics.

Lee said that despite his not being the Prime Minister then, he and Kiet met at a party hosted by Lee’s successor, Goh Chok Tong. When the party was about to end, Kiet walked to Lee and asked if he would help Vietnam. Kiet wanted Lee to become Vietnam’s economic advisor.

Later, Kiet wrote twice to Lee, mentioning the proposition. In 1992, Lee visited Vietnam for the first time, opening up new opportunities for economic cooperation between the two countries. The Vietnam-Singapore Industrial Park in Binh Duong is an enduring symbol of those opportunities.

"Regarding economics and external relations, this was a major success, because after Lee Kuan Yew began to cooperate with Vietnam, leaders from other countries were more willing to open up with Vietnam as well," Lan said.

Vo Van Kiet and Singaporean Prime Minister Lee Kuan Yew talk during a meeting. File photo

With his diplomatic trips as Prime Minister, Kiet delivered success after success to Vietnam. Starting October 1993, development cooperation relations between Vietnam and the international donor community were revived.

The most important diplomatic achievements were seen in July 1995. Following years of economic isolation, the U.S. announced the normalization of relations with Vietnam on July 11 and established diplomatic relations with the former foe. A week after, Vietnam and the EU signed a general agreement on economic, trade and technological cooperation. On July 28, 1995, Vietnam became the 7th member of the Association of Southeast Asian Nations (ASEAN).

Prior to Vietnam joining ASEAN, when Nguyen Manh Cam, then the Minister of Foreign Affairs, visited Thailand to sign documents for joining, there was still some hesitation among officials back home in Vietnam. Vu Khoan received a call from Cam to request approval from the Prime Minister. When Khoan went to see Kiet, he was immediately told that everything has already been discussed and that Cam should sign the documents.

"If there are other opinions, I will convince them and I will take responsibility," Kiet said.

Thanks to Kiet’s diplomatic achievements, Vietnam’s external trade over the decade saw remarkable changes. By 2000, total external trade reached $29.5 billion, 5.7 times that of 1990. Exports and imports reached $14.3 billion and $15 billion, six times and 5.5 times that of 1990, respectively, according to the General Statistics Office.

Kiet’s visits also resulted in greater foreign investment. Economist Lan said that during each visit, Kiet encouraged other countries to invest in Vietnam with clear commitments. Vietnam received record-breaking amounts of foreign investment in 1995 and 1996.

Kiet was also the leader who created the framework for Vietnam’s new economy, Lan said. Starting in 1993, the economy began seeing bold innovations like official exchange rates. In 1995, when the WTO officially came into being, Vietnam quickly signed up to join, despite knowing the negotiation process would be long and arduous.

Economic and market policies introduced during Kiet’s time also helped Vietnam normalize relations with international financial organizations like the World Bank (WB), the Asian Development Bank (ADB) and the International Monetary Fund (IMF), which then helped Official Development Assistance (ODA) inflows from countries like Japan and France. Without such a framework, Vietnam might have found it more difficult to join ASEAN.

Economist Doanh said: "The Prime Minister was an active and practical man, always finding solutions to tough issues."

Vien Thong, Phuong Anh, Hoai Thu