Industrial Development, Liberalisation and Impacts of Vietnam–China Border Trade

Abstract

Successful industrial development among third world countries is rare. In the past century, only a handful of countries were able to make the big leap to become industrialised countries more or less equal to the US and Europe. This is because industrialisation requires resources, state planning, coordination, resilience to external shocks and sustained performance of firms. These requirements are extremely difficult to achieve in the context of a weak state, low levels of skilled labour, underdeveloped credit markets and timid economic demand for goods and services. This paper assesses the development of the textile and garment industry in a transitional economy, Vietnam, from the political-economy perspectives of state intervention and trade liberalisation. The paper analyses in depth (1) Vietnam’s industrial policies for the textile and garment industry and (2) Vietnam–China border trade and impacts of China’s economic rise on the industry’s development. It illustrates Vietnam’s multiple failed attempts in implementing industrial policies, the political economy of Sino-Vietnam border trade and the penetration of Chinese industrial surplus in the Vietnamese market. The analysis suggests that the Vietnamese model of liberalisation exposed its industries to excessive competition, making them unable to reach the technological level and production scale needed to be globally competitive.