Vietnam suffered two major domestic financial crises on either side of the global economic crisis of 2008. This extended period of turbulence destabilized the economic model that had been in place for most of the doi moi or “renovation” period since the late 1980s. The model had consisted of export-oriented and labour intensive “vent for surplus” sectors welded to a state-dominated economy producing goods and services for the domestic market. The former generated employment and export earnings, while the latter distributed economic rents throughout Vietnam's highly commercialized and fragmented state apparatus.

By the early 2000s, rapid credit growth was fuelling speculative investments in equities, property and other risky ventures by domestic businesses and households, both in the state and non-state sectors. This process gradually undermined bank, corporate and household balance sheets. By 2011 the decay could no longer be concealed, and major scandals broke in the state economic groups, notably in the shipbuilder Vinashin and the state shipping company Vinalines. The export sector continued to grow, led by surging exports of mobile phones and other electronic goods as global producers sought to diversify production bases away from China, where wages and other costs were rising quickly. However, domestic investment and consumption stagnated as businesses and households struggled under the weight of a heavy debt burden, frozen asset markets and tight credit conditions. Moderate rates of growth have been sustained but they remain heavily dependent on foreign direct investment and external demand. The challenge facing the government is to devise a new growth model that builds on the country's export success and stimulates investment in domestic supplier and downstream industries, while at the same time opening domestic markets to greater competition.

This chapter sets out to do three things. First, it briefly describes the growth model that evolved during the doi moi period and remained intact until the crises of 2008–11 played themselves out. One of the most interesting features of the model is the concentration of domestic commercial activity within the state, and the resulting absence of large-scale private firms in the dynamic export sectors or the importsubstituting sectors. Second, we revisit the crises of 2008 and 2010 to emphasize the central importance of these events to the breakdown of the old model.