(a) physical location

(b) natural resources endowment

(c) human resources endowment including the level of education and entrepreneurship

(d) stage of economic development

(e) public administration and bureaucracy

(f) legal system

(g) political stability

(h) social conditions such as ethnic structure and land ownership

(i) international environment

In addition to these viewpoints, some specific factors are especially important in the case of transitional economies. It is historical background particularly (a) the length of the former regime of command economy and (b) the socio-economic conditions before the start of that regime. First, the longer the life of the centrally planned system, the harder the transition, as the former regime is well-established and firmly rooted. Second, the functioning of a market mechanism is more difficult if the society has insufficient experience in capitalism or a market economy before the introduction of the centrally planned system.

Let us illustrate these points by contrasting Vietnam with Mongolia. The experience of the centrally planned system in Vietnam is much shorter than in Mongolia. In the southern part of Vietnam, the centrally planned system started in 1975, after the fall of Saigon, only four or five years earlier than the beginning of the economic reform. In the north, extensive application of the centrally planned system began in the mid 1950s, after Geneva Peace Treaty, although the independence of North Vietnam was announced in 1945. The inheritance of capitalism or a market economy was still notable, particularly in the South, when the government started the reform. On the other hand, “For most of its 70-year history as an independent state, Mongolia has been a centrally planned economy with extremely close ties to the Soviet Union, particularly since 1946”. $ ^{13} $ Before that period, Mongolia was essentially a nomadic economy with very limited experience in market mechanisms. This historical background became a serious handicap in comparison with Vietnam.

The initial conditions in Laos and Cambodia were fundamentally similar to those in Vietnam, although the centrally planned system was rooted less deeply in these two countries. In the meantime, the situation in the Central Asian republics resembles that of Mongolia. The initial conditions in China could be placed in the middle between Indochina and Mongolia.

(2) “Reference Case”

For the leaders or technocrats of developing countries or transitional economies, learning from the experiences of other economies is very useful. They can follow success stories and avoid failures made by predecessors in order to minimize the costs and time of the transitional process, especially when the basic conditions are not so different between the predecessors and the transitional economy. The useful “reference cases” can be of two types; one is the experience of other transitional economies, and the other is the experience of neighboring developing countries.

Recent studies of East Asian economies such as the East Asian Miracle by the World Bank could furnish transitional economies with various hints of successful macroeconomic management and outward oriented development. As a matter of fact, some leaders and