Background:
The conquest of Vietnam by France began in 1858 and was completed by 1884. It became part of French Indochina in 1887. Independence was declared after World War II, but the French continued to rule until 1954 when they were defeated by Communist forces under Ho Chi Minh, who took control of the North. US economic and military aid to South Vietnam grew through the 1960s in an attempt to bolster the government, but US armed forces were withdrawn following a cease-fire agreement in 1973. Two years later, North Vietnamese forces overran the South. Despite the return of peace, for over two decades the country experienced little economic growth because of conservative leadership policies. Since 2001, Vietnamese authorities have committed to economic liberalization and enacted structural reforms needed to modernize the economy and to produce more competitive, export-driven industries. The country continues to experience protests from the Montagnard ethnic minority population of the Central Highlands over loss of land to Vietnamese settlers and religious persecution.

Economy - overview:
Vietnam is a poor, densely-populated country that has had to recover from the ravages of war, the loss of financial support from the old Soviet Bloc, and the rigidities of a centrally-planned economy. Substantial progress was achieved from 1986 to 1996 in moving forward from an extremely low starting point - growth averaged around 9% per year from 1993 to 1997. The 1997 Asian financial crisis highlighted the problems in the Vietnamese economy, but rather than prompting reform, reaffirmed the government's belief that shifting to a market-oriented economy would lead to disaster. GDP growth of 8.5% in 1997 fell to 6% in 1998 and 5% in 1999. Growth then rose to 6% to 7% in 2000-02 even against the background of global recession. These numbers mask some major difficulties in economic performance. Many domestic industries, including coal, cement, steel, and paper, have reported large stockpiles of inventory and tough competition from more efficient foreign producers. Since the Party elected new leadership in 2001, Vietnamese authorities have reaffirmed their commitment to economic liberalization and have moved to implement the structural reforms needed to modernize the economy and to produce more competitive, export-driven industries. The US-Vietnam Bilateral Trade Agreement entered into force near the end of 2001 and is expected to significantly increase Vietnam's exports to the US. The US is assisting Vietnam with implementing the legal and structural reforms called for in the agreement.

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