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ABSTRACT
This article explains Vietnam’s economic growth and industrial development despite the strong rent-seeking features of its economy. We employed three analytical rent-seeking models to assess three industries: textile-garment and telecommunications, both under a state capitalist system with varying degrees of state control, and the motorcycle industry developed in a crony capitalist manner. Our cross-industry analyses demonstrate how a developing country such as Vietnam overcomes pervasive rent seeking to achieve growth outcomes. Under conditions of controlled economic reform, the Vietnamese government managed rent seeking using various measures of state intervention coupled with gradual market openness in the industrial sectors.
RÉSUMÉ
Cet article explique la croissance et le développement industriel du Vietnam en dépit de l’intensité des activités de recherche de rente qui caractérise son économie. Nous avons défini trois modèles analytiques de recherche de rente pour évaluer trois secteurs industriels : le textile et les télécommunications, deux industries fonctionnant dans un système capitaliste d’État avec divers degrés de contrôle étatique, et la production de motocyclettes, industrie développée sous le mode du capitalisme de connivence. Nos analyses transversales montrent comment un pays en développement comme le Vietnam arrive à surmonter une recherche de rente généralisée pour obtenir des résultats de croissance. Dans un contexte de réforme économique contrôlée, le gouvernement vietnamien a géré la recherche de rente en utilisant diverses formes d’interventions étatiques couplées à une ouverture progressive du marché dans les secteurs industriels.
Notes
1. One important exception is China, which started its economic reform a decade before Vietnam.
2. For a review see Aligica and Tarko (Citation2015, chapter 6).
3. In an all-pay auction, every bidder pays what they bid regardless of whether they will win. For instance, lobbying, and research and development, require payment or spending regardless of whether a desirable outcome is achieved.
4. The historical context that led Vietnam to begin its economic and industrial reforms is provided in online Appendix A.
5. Vietnam became a member of the WTO in January 2007, at which time quota restriction ended.
6. Interviews, two government officials, Ha Noi, June and July 2011.
7. Ibid.
8. Interviews with two government officials, Ha Noi, June and July 2011.
9. Interviews, Ho Chi Minh City, May and June 2011.
10. Interviews with two industry experts, Ha Noi, April and June 2011.
11. This process of SOE reform in the T&G industry is rather similar to that of China. See More (Citation2002, Chapter 3) for details of the Chinese experience.
12. In the Cut-Make-Trim modality, foreign suppliers keep the development of styles and materials under their control and outsource labour-intensive jobs (cut, make, trim, pack) to producers in developing countries. In the Free-on-Board modality, foreign buyers order the final product, and local producers are responsible for producing the garments entirely and arranging shipment.
13. The 11 operators listed as active in 2013 were: VNPT, Viettel, FPT Telecom, HTC, CMC Telecom, GTel Mobile, Dong Duong, VTC, SPT, SCTV and Vishipel.
14. Interviews with government officials, Ha Noi, April and June 2011.
15. Two years later, the government removed the regulating body from VNPT. Thus, VNPT became a state-run monopoly without regulatory functions. This government unit is now the Ministry of Information and Communications, the managing ministry of all telecom operators (Ngo Citation2017b).
16. Interviews with former VNPT managers, Ha Noi, April 2011, and Ho Chi Minh City, May 2011.
17. A business cooperation contract is a written agreement between a foreign investor and a Vietnamese partner in which the parties agree to cooperate to undertake certain business activities in Vietnam and to share the revenue or profits from such activities. No separate legal entity or company is established, and there is no limitation on liability for participants (Allens Arthur Robinson Citation2010).
18. In general, Vietnamese SOEs are supervised by their managing industries. However, the prime minister supervises the state-owned general corporations and they report directly to him.
19. See Ngo (Citation2017b) for detailed analysis of Viettel's industrial development during this period.
20. Interviews with a Viettel senior manager, Ha Noi, April 2011 and June 2011.
21. Mobile telecom revenues constituted 68.4 per cent of total telecom revenues.
22. Fforde (Citation2018) observes that, similar to Vietnam, developing countries are moving more towards services in the recent decades, particularly focusing on telecommunications, financial services and tourism.
23. Foreign investors could invest by forming either a business cooperation contract or joint venture with local operators.
24. Interview with a government official, Ha Noi, July 2012.
25. Lead firms are brand-name companies that manufacture and assemble their own brand of motorcycles. They also source components from first-tier and second-tier suppliers.
26. Interviews with two local suppliers, Ha Noi, July 2016.
27. Interviews with local Chinese assemblers, Ha Noi, July 2016.
Additional information
Notes on contributors
Christine Ngo
Christine Ngo is assistant professor of economics at University of Denver in Colorado. She is the author of Industrial Development in Planned Economies: Rent Seeking and Politico-Economic Interplay in Vietnam (Routledge, forthcoming). She has published in Review of Political Economy, Journal of Contemporary Asia, Journal of Economic Issues and European Journal of East Asian Studies. She has worked at the United Nations Conference for Trade and Development, the UNDP, the World Bank and the German Society for International Cooperation.
Vlad Tarko
Vlad Tarko is an assistant professor of economics at Dickinson College in Pennsylvania. He is the author of Elinor Ostrom: An Intellectual Biography (Rowman & Littlefield International, 2016) and co-author with Paul Aligica of Capitalist Alternatives: Models, Taxonomies, Scenarios (Routledge, 2015). He has published in American Political Science Review, Comparative Economic Studies, Kyklos, Constitutional Political Economy, Journal of Economic Methodology and others.