IMPACT OF ECONOMIC DEVELOPMENT ON THE

POLITICAL ASPECT OF VIETNAM

Over the past decade, Vietnam has emerged as Southeast Asia’s most
intriguing economic story. Not because it is the region’s largest economy (a
title that belongs to Indonesia) or its fastest growing (a position that moves
between Myanmar, Cambodia, and Laos). It is because economic
restructuring has brought impressive gains in wealth, trade, and investment
— all while leaving the country’s fundamental power structure largely intact.

The most important changes in the political economy of Vietnam began

with the Doi Moi (Renovation) reforms of 1986. The changes in the
national economic system have been reflected almost immediately in urban
development patterns, where the diversification of capital investment
(especially the influx of foreign direct investment), the creation of a property
market (dealing with land use rights), and the commercialization of the
housing sector have created significant changes, while the planning system
has not been sufficiently adapted to the new political reality. 

DOI MOI
In 1986 Vietnam launched free-market economic reforms similar to
those launched in China under Deng Xiaoping in the late 1970s. The reforms
were called doi moi (economic rejuvenation) and seemed to have been
enacted out of desperation. Some scholars described the reforms as an
abrupt transition from Stalinism to capitalism. Some historians refer to this
period as "southernization." Others have called it "Cowboy capitalism" One
Harvard economist described it as a "twilight zone" between Stalinism and
Capitalism.

In 1986 Nguyen Van Linh, who was elevated to VCP general secretary
the following year, launched Doi Moi campaign for political and economic
renewal. His policies were characterized by political and economic
experimentation. Reflecting the spirit of political compromise, Vietnam
phased out its reeducation effort. The government also stopped promoting
agricultural and industrial cooperatives. Farmers were permitted to till
private plots alongside state-owned land, and in 1990 the government
passed a law encouraging the establishment of private businesses.
 Doi moi (literally translated as ‘to make a change’) was introduced
by the Communist Party of Vietnam (CPV) at its Sixth National Party
Congress in December 1986, about the same time as the Soviet Union
began perestroika. The party leadership regarded it as a new policy,
essential not only for the nation’s economic survival, but also for the
necessary political and social renewal in order to meet the country’s
development needs in the future. Leadership changes undertaken at the
Sixth Party Congress marked the beginning of the end of an era dominated
by revolutionaries who emphasized security at the expense of social welfare
and modernization. Reforms included the decentralizing the government,
devaluing the dong, ending price controls, encouraging the establishment of
private businesses, freeing markets, disbanding collective farms, giving land
titles to farmers, relaxing regulations for foreign investors, streamlining the
bureaucracy, closing down inefficient government monopolies and opening
up farming and small service industries to individuals and families.

When Doi Moi was launched in 1986, inflation was running at 700
percent, farmers were starving, store shelves were empty and the economy
was kept afloat of $4 million a day aid from the Soviet Union. The reforms
kicked in at a time when Vietnam’s main benefactor, the Soviet Union, was
reforming and breaking up. Between 1990 and 1993, when the reforms
really picked up steam, 5,000 state enterprises were liquidated or merged
and 0ver a million jobs—or a quarter of all state jobs—had been eliminated.
Growth was 8 percent to 9 percent between 1991 and 1996. After a decade
or so, inflation was brought down to the single digits, food production
soared, the standard of living rose and the poverty level fell. The irony of the
capitalist changes in socialist Vietnam was perhaps best reflected in central
Hanoi where a portrait of Ho Chi Minh with slogan "The glorious victory of
communism will last 1,000 years" faced a sexy billboard for a watch
company with Cindy Crawford.

POLITICAL AND ECONOMIC TRANSITION

During the 1980s, facing an economic crisis, Vietnam took the historic
step of making the change from producing for subsistence to producing for
profit and capital accumulation, a process formalized in 1986 by policy
reforms known as Doi Moi. However, rather than the privatization of existing
state companies, the Vietnamese transition took place through the
emergence of new state business interests. Politicians, officials and those
with close connections to them took advantage of the opportunities for profit
which came with marketization of existing state institutions (Gainsborough,
2010).

Because of this and other reforms, economic growth was rapid and
living standards of Vietnamese people improved considerably. For instance,
between 1990 and 2008, the average annual growth rate was 7.4%, while
between 1993 and 2008 poverty, based on the national poverty line, fell from
58% to 14.5% (Vandemoortele & Bird 2011).

But what impact did these changes have on the production of policy
relevant knowledge and on what one might call “think tanks” and their
functions in Vietnam? (Mendizabal, 2014).

Key features of the political context in Vietnam

Here, we explore four features of the political context: key policy actors
and spaces, dominant ideas, the role of networks, and formal and informal
institutions and describe where there has been change and where there has
been continuity.

 KEY POLICY ACTORS AND SPACES

Power in Vietnam is formally organised into several parallel but

entwined hierarchies (the State, the Party, the Fatherland Front and the
Military), each with vertical networks that extend down to the village level.
All hierarchies are bound together by most actors being members of the CPV
(Zink, 2011). After more than 20 years of rapid economic growth and
development, the Party, whose members account for around four percent of
the total population, has largely retained the power to decide who has the
right to run for office. This dominance results in the politicisation of most
social activities, including literature, science and education (Vu, 2009).

Nevertheless, economic development in the past two decades has led

to greater differentiation within the existing institutional set-up. Given the
new (often State) business interests; more robust government agencies, an
enhanced role for the National Assembly, a de facto, if not always de jure,
decentralisation to the provinces, and more diverse and vocal societal
interests (represented by mass organisations and quasi-NGOs)
(Gainsborough, 2010), decision makers have accepted and attend to a
greater plurality of interests than before (largely within and across the
aforementioned hierarchies).

 DOMINANT IDEAS: ECONOMIC PERFORMANCE, SOCIALISM,

NATIONALISM

The need to sustain economic growth, improve living conditions and

maintain macroeconomic stability continues to be important in sustaining the
Party’s credibility. The opening of the economy and increasing public
awareness of living standards in other Southeast Asian countries have
increased pressures for reform measures to accelerate growth. Leslie Holmes
(2007) concludes that, as long as the Party can maintain or improve its
economic performance, Vietnam’s communist system should be reasonably
legitimate and secure, assuming it is not accompanied by significant inflation
or unemployment (Holmes 2017).

The Vietnamese elite has had significant exposure to neoliberal ideas

through interaction with members of the donor community in the country.
Increasing numbers of the middle and upper classes in Vietnam, including
students and researchers destined for — or already working in — government
are travelling abroad (including to the West) to study and/or on business.
Nevertheless, the Party continues to promulgate socialism as the dominant
policy discourse. Party officials stress the pragmatism of “Ho Chi Minh
thought” and the formulation of a “socialist orientation” for Vietnam’s
emerging market economy, which are integral components of the curriculum
of instruction for civil servants in the country (Rama, 2008). As a result,
Vietnam’s transition has resulted in tensions between “old” and “new” ways
of thinking. The Party and State continue to wrestle with reconciling
international and domestic developments with socialist ideology in order to
adapt to economic integration and maintain older political structures (Balme
& Sidel, 2007).

In addition, nationalism remains a strong feature in the policy

discourse. From 1954 to 1986, the Party based its claim to political
legitimacy primarily on its success in defeating foreign aggressors, namely
France, Japan, the United States of America, the Khmer Rouge and China.
This involved appeals to Vietnamese patriotism (Thayer, 2010). Although
foreign threats have diminished somewhat, nationalistic tendencies remain:
safeguarding security, sovereignty and independence is of utmost
importance.

 THE ROLE OF NETWORKS

Policy-makers and researchers, like most other Vietnamese, are

members of a dense collection of multiple and interconnected networks and
relationships. Some of these relations are hierarchical, with an official owing
their position to someone more senior who might at the same time look out
for and protect them. This comes with obligations and responsibilities, such
as showing deference and loyalty or giving gifts. However, as new power
holders tied to new alliances arise, those seeking protection need to adjust
their strategies and cultivate new relationships (Gainsborough, 2010). To be
marginalised within an important network or to have ones’ political umbrella
dismantled can lead to dire consequences for one’s job, one’s family,
livelihood and one’s standing within the system.

 FORMAL AND INFORMAL INSTITUTIONS: THE RULE OF LAW,

INSTITUTIONAL COMPETITION AND STRUGGLES FOR POWER

Although the Party has had objections to Western-inspired legality

(Gillespie, 2007), it is increasingly linking its legitimacy to the rule of law, as
embodied in the 1992 Constitution and legislation passed by the National
Assembly (Thayer, 2009). In return for market access gained by joining
international treaties such as Asia-Pacific Economic Cooperation, the ASEAN
Free Trade Area and the World Trade Organization (WTO), Vietnam agreed to
harmonise its commercial laws with international standards. As a result, it
has revised and developed a host of new laws, and continues to do so: the
amount of legislation processed by the Assembly has doubled since WTO
accession (Datta & Lan Huong, 2013).

State officials tend to show a high degree of attachment to their office

or institution, are often reluctant to work with — or seek information from —
other institutions, and are generally hesitant to go beyond their areas of
competence. As a result, different institutions rarely sing from the same
hymn sheet (Gainsborough, 2010). This may be due in part to the legacy of a
centrally planned system in which many government offices were established
to regulate almost every aspect of society along with the rewards attached to
public office.

Against this background, institutions are continually finding ways to

defend and expand their territory, especially where there are overlapping
remits and where boundaries are ambiguous. Given these struggles, the
state is far from being a unitary bloc. It encompasses a multitude of
competing interests and is an interlocking matrix of factions overridden by
power struggles, with decision making like a “shadow-boxing match.” (Quinn-
Judge, 2004). Internal dissent, although officially frowned upon, is quite
common.

CORRUPTION ON POLITICS DURING ECONOMIC GROWTH

Corruption is a costly phenomenon for individuals, businesses,

orgnizations, the public sector and the economy in general. The harmful
effects of corruption on national economic development are widely
acknowledged in the economics literature. According to the World Bank’s
estimate, the cost of corruption at the global level is about 1 trillion US
dollars per year in a world economy of 30 trillion US dollars [5] (Kaufmann,
2005). According to the African Development Bank, the cost of corruption for
Africa may reach 25% of the continent’s GDP [6]. There is consensus that
corruption is a serious threat to the national development of Vietnam. In
particular, the government recognizes the threat that corruption poses to the
legitimacy and long-term survival of the political system and, as a result,
has taken some steps to address the problem. Although some progress has
been made (i.e., passage of the Anti-corruption Law, the Anti-corruption
strategy 2020, etc), Vietnam is still struggling to translate its policies and
comparatively strong legislative framework into practice on the ground.
Despite its important policy implications, there appears to be little research
into the costs of corruption in Vietnam. Previous studies on corruption have
mostly focused on measuring the prevalence of corruption, and identifying
its forms and causes ([7], [8]). More recently, there have been a number of
attempts to measure the costs of corruption. For example, in the annual
Provincial Competitiveness Index (PCI) survey, there is a questionnaire that
does try to capture the amounts of bribes firms have to pay as a percentage
of their sales [9]. Similarly, the recent survey in 2012 by DEPOCEN also
attempted to capture the actual financial magnitude of bribery at the firm
level [10]. Although interesting, the magnitude of these estimates only
capture a small part of the true total costs of corruption, as they ignore the
effects of corruption on system efficiency and performance, as well as the
particularly adverse effects of 4 corruption on the poorest populations. This
is somewhat surprising given that Vietnam needs to sustain high growth
rates for decades in order to avoid the middle income trap. There is thus an
urgent need for concrete, overall estimates of the harmful effects of
corruption on economic development in Vietnam.

Despite the Government’s recognition of the serious threat of

uncontrolled corruption to the legitimacy and long-term survival of the
current political system, Vietnam is still struggling to translate its policies
and comparatively strong legislative framework into practice.

REFERENCES

Datta, A., & Mendizabal, E. (2018, January 15). Political and economic
transition in Vietnam and its impact on think tank traditions. Retrieved from
https://medium.com/@info_92670/political-and-economic-transition-in-
vietnam-and-its-impact-on-think-tank-traditions-381ffd8ef303.

Hays, J. (2014, May). DOI MOI (VIETNAM'S ECONOMIC REFORMS) AND

VIETNAM'S ECONOMY DURING THE 1980s AND 1990s. Retrieved from
http://factsanddetails.com/southeast-asia/Vietnam/sub5_9g/entry-
3470.html.

Nguyen, Ngoc Anh and Nguyen, Ngoc-Minh and Tran-Nam,

Binh (2014): Corruption and economic growth, with a focus on
Vietnam. Published in: Crime, Law and Social Change , Vol. 65, No. 4-5
(2016): pp. 307-324. Retrieved from https://mpra.ub.uni-
muenchen.de/84728/