In December 1986, at the Sixth Congress of the Communist Party, the new leadership began a far-reaching programme of economic and social change.
The new policy, 'doi moi' (literally 'our way', but known as 'renovation'), was comparable to Gorbachev's perestroika in its aim to move towards a more market oriented economy.
The country was desperate for international capital. To obtain it, Vietnam adopted the restructuring policies which had been urged by the IMF and World Bank.
The government stabilised the currency, put an end to the subsidised economy and introduced 'socialist business accounting' - capitalist management methods - in state enterprises.
Factory managers were given the authority to organise production, borrow capital at marketrates, retain profits and sell their products on the free market. The new slogan was 'produce and make a profit' and only those enterprises which could do so would survive.
As part of the austerity programme, the government cut a million jobs from the state payroll.
The success of 'doi moi' depended on the creation of millions of new jobs. To achieve this, the Vietnamese sought foreign investment and the access to modern technology and export markets it would bring.
To woo foreign investors, the reforms included an exceptionally liberal code of practice, allowing 100% foreign ownership, low taxes and guaranteed repatriation of profits.
Openness and the need for hard currency led to a more permissive attitude towards visits by foreigners and overseas Vietnamese, known as Viet Kieu. Those who had left in the seventies found it easier to obtain visas.
Import restrictions were lifted and Western goods and fashions began to appear in the shops of Hanoi and Ho Chi Minh City.
One obstacle to better relations with both China and the West was the continuing presence of 140,000 Vietnamese troops in Cambodia.
Vietnam had promised to pull its troops out by the end of the decade and, by 1989, the bulk of them had gone.
Talks began in Paris and, in October 1991, a peace accord was signed between the Vietnamese backed government in Phnom Penh and a US backed coalition of guerrilla groups, dominated by the Khmer Rouge.
There was to be a ceasefire followed by UN supervised elections in 1993. A summit meeting with the Chinese in November 1991 marked an improvement in relations and border links with China were reopened.
Rice production began to increase again - from 18 million tonnes in 1986 to 21 million tonnes in 1990. After years of shortages, Vietnam began to export rice.
By the early nineties, the social costs of 'doi moi' were becoming increasingly apparent. As state enterprises collapsed and the civil service was retrenched, unemployment climbed to around 7 million.
Free market scialism had been based on the delusion that the massive growth of a new consumer class could bring prosperity to all.
In June 1991, Nguyen Van Linh and six other Politburo members retired. There was no change in direction. The new leaders were Van Linh's proteges and continued the free market policies.
By 1993, inflation had been reduced to below 10% and the country had a growth rate of around 7% per year. Exports increased and the trade balance improved, despite the collapse of the Soviet Union.
However, much of this was due to increased oil production, the fruit of investment made in the early eighties, before 'doi moi'.
Foreign businessmen filled the hotels of Hanoi and Ho Chi Minh City. Many countries saw the potential for profits in Vietnam and lost patience with the American embargo. Taiwan, Korea and Hong Kong led the field.
They seized the opportunity to transfer production from their own countries, where labour costs were over $150 a week, to the low wage economy in Vietnam. The main focus of investment was in plant to produce low technology products, such as plastic goods, toys and textiles. Vietnam's relatively educated labour force was attractive to investors.
The second wave of investment, particularly from Japan, which lifted its ban in November 1992, was in the assembly of electrical products and motor vehicles. By early 1993, more than 600 foreign financed projects were underway.
After years without access to consumer goods, a domestic market emerged rapidly. A consumer class wanted all kinds of electrical and electronic products and markets were soon bursting with goods from China, Thailand, Japan and South Korea.
By the early nineties, US corporations were lobbying their government to lift the embargo. They were frantic to get into Vietnam in time to catch up with their Japanese and European competitors.
In December 1992, President Bush allowed US firms to sign contracts in anticipation of the rescinding of the ban.
In July 1993, President Clinton withdrew US objections to international loans and the IMF, World Bank and Asian Development Bank approved credits and loans totalling $721 million. In November, Japan and Western donor nations pledged $1.9 billion in aid. | 
