important factors in the positive economic performances in China, Vietnam and Lao PDR, these two determinants do not entirely explain the progress made in these economies, particularly in China and Vietnam. Another crucial element has been the mode of reform in these countries. This section identifies and describes three aspects of reform which played significant roles in their successful development-gradualism, the priority given to agriculture, and the slow pace of privatization of state-run enterprises.

## 5 -1 Gradualism

As has previously been pointed out, the transitions to market economies in China, Vietnam and Lao PDR were preceded by long periods of reform within centrally-planned economic frameworks. Chinese leaders carefully avoided using the term 'market economy' until 1992, having previously advocated an economic system which combined central planning and market forces. In Vietnam, the 'Doi Moi' movement, which signalled a clear commitment to abandon the centrally-planned system, came five years after the introduction of agricultural reform.

In addition to the length of time taken, the reforms in these countries shared another unique feature—the absence of a clear reform strategy or blueprint. Instead, a variety of measures, often partial ones, were tried. According to the World Bank (1992), Chinese reform has consistently maintained this feature, and in 1993 the IMF observed that in Vietnam piecemeal reform measures were taken until “the launching of a bold and comprehensive program of structural reform in March 1989 (under the guidance of the IMF)”.

Critics argue that this style of reform has fundamental shortcomings, the most serious of which are a lack of logical consistency in the measures taken and the possibility of provoking anti-reform political groups. On the other hand, this pragmatic approach allows people sufficient time to adjust to newly-introduced rules and modes of behaviour. In addition, the government has the opportunity to modify aspects of the reform program based on the results of experimentation. The experiences of China and Vietnam suggest that piecemeal reform measures, if adopted carefully, can contribute to progress in macroeconomic performance.

## 5 -2 The Priority of Agriculture

In China, Vietnam and Lao PDR, the first efforts at reform were made in the agricultural sector. A ‘contract responsibility system’ was introduced with the objective of restoring the family as the basic unit of production. At the same time, procurement prices of agricultural products were raised. The purpose of these measures was to give incentives to farmers who were (and remain) the largest group in the labor force. The improved agricultural production (Chinese agricultural production grew at an average annual rate of 5.4 percent from 1980 to 1992, and Vietnam became the third largest exporter of rice in the world), provided a firmer basis for subsequent stages of reform, as these economies were basically agricultural ones. In China in particular, capital accumulation in rural areas led to the evolution of town and village enterprises which served as a driving force for rapid growth. If reforms had been initiated in all sectors of the economy simultaneously (as was the case in Russia and Mongolia), farmers would have experienced a deterioration in their terms of trade from the