Comment on “Vietnamese Economy at the Crossroads: New Doi Moi for Sustained Growth”

Abstract

After almost two decades of rapid growth, the Vietnamese economy entered a new phase characterized by slower growth and macroeconomic instability. In view of the major challenges faced by the country in progressing toward the next stage of development, Tran (2013) provides a concise and informative analysis of the recent macroeconomic instability and its sources, focusing on two major issues: inefficiencies of state-owned enterprises (SOEs) associated with the gradualist transition strategy, and the resultant inability of the Vietnamese economy to cope with the rise of China. In what follows, I would like try to explore a little more on the background of the two issues, discuss their wider implications, and suggest areas where further research may be worthwhile. On SOE reforms, Vietnam’s experience over the past two decades would provide critical insights into the advantages and disadvantages of the gradualist approach.Within the “big bang versus gradualist” debate in the early 1990s, the proponents of gradualism argued that the evolutionary and experimental approach to SOE reform would make it possible to improve the performance of SOEs without sacrificing stability. The positive effects of initial reforms in Vietnam on the performance of SOEs notwithstanding, the country’s recent experience with what Tran (2013) refers to as“state conglomerates”suggests the danger that the gradualist approach might eventually push the reform process into a deadlock. Vietnam’s attempts at establishing state-owned business groups called “general corporations” started in the mid-1990s to drive the country’s industrialization and modernization. From 2006 onward, some of the general corporations were converted into diversified conglomerates formally referred to as “state economic groups.” They account for a dominant position in the Vietnamese economy because of growing