Until recently, most of Vietnam's economy was based on agriculture, mainly rice. Even during French colonial rule, agriculture was important, although other crops were added for export such as coffee, tea, and rubber, among other things. It wasn't until 1954 when Vietnam was divided that the national economy was actively developed. The Communist North was a very centralized planned economy, while the South was mainly a free-market economy with little government involvement. After they redeveloped their economic plan in 1986 to support a mixed economy (one that can function privately or with state control), Vietnam's economy has taken off.

The economic reform package called "Doi Moi", (renovation), in 1986 introduced market reforms and dramatically improved Vietnam's business climate. Vietnam became one of the fastest-growing economies in the world, averaging around 8% annual gross domestic product (GDP) growth from 1990 to 1997 and 6.5% from 1998-2003. Vietnam's inflation rate, which stood at an annual rate of over 300% in 1987, has been below 4% since 1997 (except in 1998 when it rose to 9.2%).

Simultaneously, investment grew three-fold and domestic savings quintupled. Agricultural production doubled, transforming Vietnam from a net food importer to the world¹s second-largest exporter of rice. Foreign trade and foreign direct investment improved significantly. The shift away from a centrally planned economy to a more market-oriented economic model improved the quality of life for many Vietnamese. Per capita income, $220 in 1994, had risen to $483 by 2003 with a related reduction in the share of the population living in acute poverty. However, average income is widely disparate: $483 for whole but $1,640 in Ho Chi Minh City and much lower than average in poorer provinces of the central and northern highlands.

The Asian financial crisis in the late 1990s slowed the pace of economic growth that marked the earlier part of the decade. While returning to pre-crisis levels of growth and development has been slow, the pace has picked up in recent years, primarily as the result of ongoing economic and trade liberalization. Vietnam¹s economic stance following the East Asian recession first emphasized macroeconomic stability, then shifted its focus toward growth. While the country has moved toward a more market-oriented economy, the Vietnamese Government still continues to hold a tight rein over major sectors of the economy, such as the banking system and state-owned enterprises. The government has plans for emphasis on private sector development is critical for job creation. Urban unemployment has been rising in recent years, and rural unemployment, estimated to be between 25% and 35% during nonharvest periods, is already at critical levels. Layoffs in the state sector and foreign-invested enterprises combined with the lasting effects of an earlier military demobilization further exacerbate the unemployment situation.

The December 10, 2001 entry-into-force of the Bilateral Trade Agreement (BTA) between the US and Vietnam was a significant milestone for Vietnamese's economy and for normalization of US ­ Vietnam relations. Implementation of their agreement, which includes provisions on trade in goods, trade in services, enforcement of intellectual property rights, protection for investments, and transparency, is fundamentally changing Vietnam¹s trade regime and helping liberalize its economy. The BTA gave normal trade relations (NTR) status to Vietnamese imports in the US market. Bilateral trade between the two countries has expanded dramatically, reaching $5.88 billion in 2003. [W.T.O.]