Do Muoi was crucial to Doi moi's success: economist

Recalling and recounting the attributes that he saw up close as an economist assistant to Do Muoi, Le Duc Thuy, 70, said the former Party leader was key to the success of the country's economic reform process called Doi moi launched in 1986.

While he was working as deputy head of Vietnam Institute of Economics in 1988, Thuy was invited to work as assistant for Do Muoi, who was then Chairman of the Council of Ministers, in effect the Prime Minister, for one month.

Later, Thuy learned that he got the invitation thanks to a suggestion by Le Xuan Tung, personal assistant to then Party General Secretary Nguyen Van Linh.

Do Muoi, born Nguyen Duy Cong, had asked Tung to find him someone good in economics.

Thuy had returned after completing a postgraduate course from the Soviet Union and made up his mind to continue working as a researcher for the rest of his life, he told VnExpress Tuesday.

But Do Muoi told him: “It’s up to you. But if I let you sit in a position that allows you to directly, deeply and fully understand the country's real economic issues and you turn that proposal down, then I really don’t understand what kind of research you have been working on.”

Chastened, Thuy accepted the offer.

Thuy had no idea then that the “one month” would extend to many years.

“There was a time we stayed in the same house when traveled to the south for a business trip. My room and his [Do Muoi’s] stood across each other. He usually went to bed at 10 p.m. The others and I slept much later. But however early I woke up in the morning, I already saw a light in his room. Later, I learned that he always woke up at 3 a.m. to work and for him, I spent too much time sleeping,” recalled Thuy, who went on to become State Bank of Vietnam's Governnor between 1999 and 2007.

When Do Muoi started to work as Chairman of the Council of Ministers, Vietnam had just embarked on the path breaking Doi moi, economic reform initiated in 1986 with the goal of creating a "socialist-oriented market economy."

Less than two years into the reform campaign, the government was still struggling to ensure the most daily basic needs for its people.

Thuy is absolutely clear that, Do Muoi, as head of the government and then head of the Party between 1991 and 1997, was one of the most crucial factors in the success of the ecomomic reform.

With this new program, Vietnam turned to boosting the strength of all economic elements, including encouraging the private sector, and for Thuy, Do Muoi and the government worked hard to make things work.

Firstly, Do Muoi himself faced public criticism.

After the Vietnam War ended and reunification was achieved in Vietnam in 1975, Do Muoi was in charge of reforming the private sector in southern Vietnam, but then, as Chairman of the Council of Ministers in 1988, he worked to “encourage the private sector.”

For this, Do Muoi once told Thuy that when carrying out socialist reform, he "had tried to implement the direction of the Party with the common knowledge that for socialism (to work), there was only the public-owned system, that is built on state-owned firms and cooperatives."

"At that time, there were not any formal opinions, policies, guidelines or studies in Vietnam or other socialist countries that went against this common knowledge. It's possible that I have certain responsibility for the shortcomings in the process, but I couldn’t do it differently. But now, this economic reform has pointed out faults in the old solution, so we have to fix it,” Do Muoi told Thuy.

“For me, Do Muoi was serious about his work during his entire lifetime, from wartime to peacetime. Every task he was assigned, he always tried his best to complete it and never thought about dismissing the task or leaving it half done," Thuy said.

Le Duc Thuy, former asisstant of late ex-Party chief Do Muoi, gestures during an interview with VnExpress. Photo by VnExpress/Viet Tuan

The first Tet, or Lunar New Year, as Chairman of the Council of Ministers, Do Muoi traveled to the south and met private firms.

“I wish you a prosperous year,” the head of the government told those companies, and the public then understood that Do Muoi had been actually “reformed.”

The inflation fight

But reform cannot be achieved in one day.

Just after the reunification in 1975 and before Doi moi, Vietnam went through the subsidy era, when the life of its people was shaped by a reliance on government rations. During this period, food, goods, and services were purchased with coupons or food stamps. Those with government positions received more coupons and had access to special shops. Those without such a status could expect to spend almost a day waiting in line to buy rice and other basic commodities; and everything was controlled by the government. 

To reform the economy, the government had to follow market prices, abolish subsidies and eliminate the food stamps and coupons.

And while it made changes from the inside, Vietnam had to find solutions to open its doors to the global markets.

In 1987, the Vietnamese government decided to attract foreign investment at a time it was still under the U.S. imposed sanctions, had yet to normalize relations with China, and the Soviet Union and Eastern Europe were on the verge of collapse.

That year, inflation rose up to nearly 700 percent before falling down to 300 percent in 1988. In January and February of 1989, inflation increased 8 percent each month.

The reason for inflation, Thuy explained, came from the banking sector.

As the banks were still subsidized and kept interest rates low, people did not deposit their money in the banks and since the banks did not have money to lend, the government decided to print money.

The same “money printing policy” was applied for State budget collection, and as a result, inflation kept rising endlessly.

On a plane from the south to the north in 1989, Do Muoi told Thuy: “No one can do business with this inflation, you have to put aside everything and focus on fighting inflation.”

Every ministry, department, institute and college was told to come up with plans for Vietnam to fight inflation.

Four plans were picked. From those four plans, Do Muoi tasked a team of 10, including Thuy, to build the final one.

The key to this plan was real interest rates. This solution can surprise many people these days, but it was the only method back then, Thuy said.

In line with the plan, the deposit interest rate was raised from 2-3 percent to 9 percent per month and 12 percent every three months.

Do Muoi agreed with the plan. He decided that the deposit interest rate moved in the same direction with market prices. When the prices rose, then the interest rate must go up too.

Thanks to the plan, the inflation in 1989 fell to 35-40 percent.

But the plan did not go smoothly. Before it was implemented, the Vietnamese currency had easily lost its value in a very short time and each family had to rush to buy goods to store in their houses as soon as they got their monthly income.

But after the plan came out, people turned to depositing their money in banks instead of storing goods at home. This led to high inventories, causing many factories to shut down and around 600,000 workers to lose jobs.

Many people said then that Vietnam could not keep its inflation that low, because the high inventory and high jobless rate led to many social issues.

But Do Muoi stuck with the plan and thanks to his determination, inflation stayed at 10 percent in 1992 and kept falling later.

Also in 1989, Vietnam went straight from being a nation with a plan to import 200,000 tons of rice to a rice exporter, as it had stored 500,000 tons of rice already.

“It’s a great honor of my life to have been an assistant to late General Secretary Do Muoi. He impressed me as a good listener, a good learner who always dared to test himself with true experiences and however busy he was, Do Muoi was one who always made time for studying on his own. He read a lot of documents written by both Vietnamese and foreign authors; every time he had free time, he chose to read.”

Former Party chief Do Muoi passed away at 11:12 p.m. on October 1 at the 108 Military Hospital in Hanoi, after battling ill health for a long time. Vietnam has announced to hold two-day state mourning for him on this Saturday and Sunday, October 6 and 7.

“It’s safe to say that not all opinions from a leader are true and innovative, and not all decisions they make are right. But to me, the enthusiasm of Do Muoi and the fact he always listened to people around helped him accomplish all his tasks, and now, he has gone in peace," Thuy said.