Repression of the Banking Sector in the Transition to a Market-based Economy: The Case of Vietnam

Abstract

One of the characteristics of Vietnam’s transition from a planned to a market-based economy is that the Communist party-led government directed the process. The government demonstrated leadership in implementing a “shock therapy” stabilization program in 1989–91, which comprised price liberalization and the abolition of central planning. The stabilization program provided the basis for subsequent economic growth.¹ Real GDP recorded an average annual growth rate of 7.3 per cent for the period between 1989 and 2003.² In terms of the banking sector, the stabilized macroeconomic environment gave impetus to savings mobilization. The deposit-to-GDP ratio has tripled to over 50 per cent in 15 years in the process of transformation of a mono-bank system to a two-tier banking system.