The Political Economy of Vietnam´s Transformation Process

Abstract

Reforms started by Vietnam in 1986 are far from complete. As a result of a slowdown in economic growth, growing unemployment, and social unrest, Vietnam faces renewed challenges for further reform. With doi moi (renovation) there has been greater openness and mounting pressure for more open discussions within the Communist Party of Vietnam (CPV). The country faces two options: continue with the same pace of change and risk falling economically behind neighbouring countries, or undertake more radical economic reform and risk losing control. This article explores the economic decision-making process in Vietnam. It argues that gradualism in reform is due internal strife, a trial-and-error approach, and the lack of capable human resources. Evidence suggests that prescription for economic reforms cannot be carried out effectively without modernizing the CPV's political decision-making process. Introduction Vietnam has been going through a transition from a command a socialist-based market economy since 1986. The renovation (doi moi) policy began with a reform in the agricultural sector, where land was redistributed among rural households. Wide-ranging economic reforms have been introduced since then. As a result, the has achieved a steady growth of about 8 per cent per year since 1992. According the 1997-98 Vietnam Living Standards Survey (VLSS), the ratio of poor [1] has dropped from 58 per cent of the population in 1993 37 per cent in 1998. [2] Living standards have improved but the benefits have been distributed unevenly. Poverty remains largely a rural phenomenon. Since the Seventh National Congress of the Communist Party (NCP) in mid-1991, Vietnam has moved normalize relations with China, Japan, the United States, the ASEAN states, and other countries. Vietnam's development strategy has been tilted towards protected and capital-intensive industries dominated by state-owned enterprises (SOEs). Once seen as the next tiger in Asia, Vietnam seemed ready boom in the late 1980s. However, growth stalled before an economic crisis hit the rest of East Asia in the second half of 1997 and, since 1996, Vietnam has experienced a decline in foreign direct investment (FDI), a fall in exports, a drop in economic growth, and came close a mini-banking crisis in 1997 and 1998. [3] These events were spark frantic calls by Vietnam specialists and international organizations for the government speed up the pace of structural reform. As doi moi reforms have deepened, there has been a lack of consensus within the Communist Party of Vietnam (CPV) as the speed, depth, and pace of further reforms. Heated debates came into the open for the first time during the Eighth National Congress of the Party. As a response, the Fourth Central Committee of the CPV plenum in December 1997 reaffirmed Vietnam's commitment to accelerating comprehensive and uniform renovation, but would do so at its own pace. [4] The problems of reform of the early doi moi period in Vietnam are well known. [5] The country began from a low base and many economic reforms started from below, while the political sector was left untouched. In recent years, slow growth has led higher unemployment, taken a toll on government revenues, and resulted in deep cuts in the social sectors. An obvious question arises: why is Vietnam reluctant pursue the rapid changes initiated in 1986? Internal strife has slowed the pace of change. Vietnam offers an interesting example of the dynamic process of reform and its economic consequences which could induce the process of change in the institutional and political sectors. This article tries explore the economic decision-making process in recent years. It offers explanations the politics of change, arguing that gradualism is due internal opposition, lack of human resources, and a trial-and-error approach followed by the government. It attempts show the need for political and institutiona l doi moi in the area of economic decisions. …