[2] After reunification into a unified communist state in 1976, the economy of Vietnam was plagued by enormous difficulties in production, imbalances in supply and demand, inefficiencies in distribution and circulation, soaring inflation rates, and rising debt problems.
Reasons for this mediocre economic performance have included severe climatic conditions that afflicted agricultural crops, sanctions enforced by the United States after their defeat, bureaucratic mismanagement, extinction of entrepreneurship and military occupation of Cambodia (which resulted in a cutoff of much-needed international aid for reconstruction).
[6] While Đổi Mới was officially introduced at the 6th National Congress of the Communist Party of Vietnam in 1986, the state had initiated reforms in the early 1980s.
[16] The political and economic reports stressed Đổi Mới (Renovation), and Vietnam specialist Carlyle Thayer wrote that Võ Văn Kiệt may have been the foremost advocate of this concept.
"[17] Võ Văn Kiệt stressed the role of exports and the production of grain, food, and consumer goods to revitalize the Vietnamese economy.
[5][page needed] In 1987, inspection stations along the national highway were removed to allow more efficient flow of goods and services between different municipalities.
In the same year, the Party began discussing the potential of privatizing state-owned enterprises (SOEs), while also normalizing relations with the People's Republic of China.
As a result, the agriculture sector and the rural economy began shifting from autarky to commodity production, allowing each region to produce according to their comparative market advantage.
In this renewed economic model, the state retreated to a regulative role, with the market determining the prices of goods and services.
[19][page needed] In the early 1990s, Vietnam accepted some World Bank reform advice for market liberalization, but rejected structural adjustment programs and conditional aid funding requiring the privatization of state-owned enterprises.
[5][page needed] The private sectors played an important role in the service industry, as the share in the retail trade activity increased from 41% to 76% in 1996.
[18] Throughout this period, the National Assembly introduced various corporate and income tax deductions to spur both domestic and foreign investment.
Unlike many other fast-growing economies, the Vietnamese government diverted tax revenue collected from the expansion of economic activities to ensure that underdeveloped areas receive adequate investment in infrastructure and welfare.
This increased FDI inflow provided the much-needed capital for economic growth, while also creating jobs for laborers in rural provinces and led to positive technological spillover.
Its economic reforms since the beginning of Đổi Mới in 1986 have helped to change Vietnam from being one of the world’s poorest nations to a middle-income economy in one generation.
[25] In major metropolitan areas, affordable housing was lacking, thus hindering further potential growth in living standards for internal migrant labor.
The working environment, at the same time, remains highly inefficient and unwelcoming towards further reform, so much so that the country now experiences a major brain drain.