Doi Moi in review: The challenges of building market socialism in Vietnam

Abstract

Two decades ago the Vietnamese Communist Party embarked on a transformation from central planning towards a “socialist market economy under state guidance.” It looked to East Asian development models, particularly the role of state enterprises (SEs), combined with the creation of a “civilised and equitable” society. The article argues that, in the case of SEs, the state's inability, especially under donor pressure, to provide crucial investment support to the SEs meant that foreign investors and the domestic non-state sector began to dominate the economic landscape. While state-led development remains feasible, it requires a clear and more authoritative industry policy; otherwise, the balance of interventionism could eventually tip towards cronyism. Further, the vagueness of the term “civilised and equitable” society leaves open both conformity with the post-Washington consensus and the possibility to achieve more aggressive redistributive measures, including redistribution of power. In practice, inclusion in and exclusion from successful public-private networks has been crucial for the capacity of individuals to participate in the rising prosperity of the market economy and has driven a process of rising regional inequality and the emergence of a new social class structure.

Key Words:

• East Asian development
• socialism
• distribution of income
• industry policy
• transition economies

Notes

At the time Vietnam introduced its reforms, it was technically at war with China. Although peace was restored in 1989, it was several years before relations fully thawed. Chinese industrial reforms also proceeded more slowly than in Vietnam.

This term describes regimes that privilege certain groups that are considered politically reliable supporters, friends or “cronies.”

Weiss (1995) argued that authoritarianism is not a necessary feature of the model.

We should not ignore, however, the protectionism that is, for political reasons, afforded to declining sectors such as agriculture that are unable to maintain their advantage in the face of competition from low-cost regions.

The famous Nam Dinh Textile Mill, when I visited in 1992, was still using English spinning machines dating from the 1930s, manufacturing for itself the necessary spare parts that were no longer obtainable in the market.

This was a level comparable to that of Malaysia and Singapore at much later stages of their development. In per capita terms FDI was also much higher than in other countries with similar levels of GDP per head (Beresford, 2004).

Preliminary results from the 2006 enterprise survey showed 27.35% making losses (includes state, non-state and foreign-invested units) (GSO, 2007).

For example, at one factory I visited in 1996, only six out of 300 current employees were actually at work on a normal working day. While this may be an extreme case, it was nevertheless a common pattern in many enterprises.

Ratios are given because the source data are sometimes in constant and sometimes in current prices.

Between 1994 and 2001, the share of rural households reporting non-farm employment as their principal source of income rose from 8.6% to 21.5% in the Red River delta. In the Mekong delta and other southern provinces, the percentage fell over the same period.

To date I am aware only of DiGregorio's (1994) study covering similar ground; i.e. the subsumption of “informal sector” workers under capital.

One study suggested that the poor are especially reluctant to attend such meetings in case they are seen as only coming for the payment (or food and drink) (Tran, 2002).