CAMBRIDGE, England -- When Vietnam set out on the path of economic liberalization in the early 1990s, everyone expected another Asian miracle, Chinese-style. The liberalization program adopted by the country, known as Doi Moi, was expected to bring about the same radical reforms of economic policy that had achieved so much in China. Many of the ideas of Doi Moi were borrowed from the program adopted north of the border by Chinese leader Deng Xiaoping. However, while Deng was able to bring the "Old Immortals" on board in China by persuading them that, to survive in the long run, the Communist Party had to adopt capitalist practices, Vietnam had no leader similarly capable of bringing the anticapitalist brigade on board.

The relative failure of the Vietnamese economic experiment can be measured in many ways. Its lack of success is illustrated by the World Bank's estimates that today "around 30 million people (37 percent of Vietnam's population) live in poverty, around 25 million (60 percent of the labor force) are underemployed or unemployed and around 1 million people are added to the workforce each year."

The excitement of the early years of Doi Moi has gone. In those years, foreign investors tripped over each other trying to get a piece of the action. Now they trip over each other on the way out. Five-star hotels built in Hanoi in the heady days of optimism for the expected hordes of foreign investors are mostly empty, or half-filled with low-spending tourists and honeymoon couples. Foreign direct investment fell from an average of around $2 billion a year over the period 1995 - 1997 to less than $500 million in 2000. What went wrong?