Over the past ten years, Vietnam has faced substantial economic, political and foreign policy challenges. The country's efforts to deal with these challenges have produced mixed results, and how it continues to respond in the coming years will likely determine its long-term economic, political and strategic trajectories.

ECONOMICS: DIFFICULTIES AND RESTRUCTURING EFFORTS

After Vietnam joined the WTO in early 2007 and achieved an annual growth rate of 8.5 per cent the same year, there was high hope that the country would usher in a new phase of robust economic development to reach the goal of becoming an industrialized economy by 2020. However, the 2007–8 global financial crisis and the subsequent economic downturn have dampened this prospect. From 2008 to 2014, Vietnam registered an average annual GDP growth rate of 5.8 per cent, significantly lower than the 7.6 per cent for the 2000–7 period. Adverse global economic conditions together with poor management have also brought many Vietnamese businesses, especially state-owned enterprises (SOEs), to the verge of bankruptcy. Following the collapse of giant state-owned corporations Vinashin and Vinalines and the mounting bad debts within the banking system, the government had to embark upon an economic restructuring programme.

The policy for economic restructuring was officially adopted by the Central Committee of the Communist Party of Vietnam (CPV) in October 2011. The government then developed a blueprint for the restructuring, which was submitted to the National Assembly for review in 2012. The blueprint iden-tified three pillars for restructuring efforts: public (i.e. government-funded) investment, the banking system, and SOEs. By early 2015, all the three pillars of the restructuring programme were still underway, and showing mixed results.

Regarding the first pillar, the share of public investment in the economy's total investment tended to decline because of the private sector's increased involvement as well as the government's constrained budget. A revised law on public investment, with stricter regulations designed to make public investment more efficient, was passed by the National Assembly in June 2014 and took effect on 1 January 2015. Meanwhile, bad debts within the banking system decreased but remained substantial, accounting for 5.4 per cent of the banking system's total gross loans in November 2014 (CafeF 2014).