How does change happen in Vietnam?

March 24, 2010

     By Duncan Green     

Fascinating talk with an academic insider in the Vietnamese establishment, who set out some thoughts on how big changes happen in Vietnam (eg the introduction of the Doi Moi process of economic opening or the land reform of the early 1990s). Particularly important because Vietnam’s record on growth with equity, and poverty reduction, is second to none.

He saw certain features as characterizing big change processes in Vietnam
1. Reforms are typically driven by crisis, as in the near collapse of the economy before Doi Moi, or the combination of lost Soviet aid and the oil price spike during the first Gulf War that triggered the land reform.
2. But the Vietnamese method, like China’s, is to use trial and error to assess a range of options, drop the worst ones and go large on the ones that work. So from 1979-86, various experiments were piloted, but only scaled up when crisis hit. He saw trial and error as particularly important in a large country like China or Vietnam, as you need learning and consensus to spread across the economy if you are to make these changes successfully – a real aversion to shock therapy, there.

The latter aspect reminds me of the discussion on whether development should model itself on venture capitalism. Rather than think you can predict the future and pick development winners, it’s better, like a venture capitalist, to invest in 20 small ones, in the expectation that one or two will flourish. The trick then is to spot losers and cut them adrift, freeing up the resources to allow you to keep experimenting. It also resembles the evolutionary model of change that arose from Eric Beinhocker’s book ‘the Origin of Wealth’, which I previously reviewed at some length.

So what changes might emerge form the current crisis (from which the Vietnamese economy is fast emerging)? He thought now might be the moment for the government to take on the job of restructuring economic institutions to sort out Vietnam’s problems of corruption, inefficiency and macro-instability. He reckoned Vietnam might follow the Chinese model, which he saw as getting the economy onto a high speed growth path, then sorting out the economic institutions and finally the political institutions. In China, he sees the first stage as more or less complete, the second as under way (eg the emphasis on public administration reform, or rediscovering equity and a harmonious society) requiring twenty years, and the third, fifty. He didn’t offer a timescale for Vietnam, but is proposing ideas for piloting a range of governance reforms on a small scale, involving things like new legal frameworks (he seemed very keen on the British legal system), and direct elections at local levels (something that is already happening to some extent).

On future drivers of change in Vietnam, he saw the emerging middle class, both rural and urban, as the backbone of future change, with a knowledge of rights and ‘something to protect’. He said all the hardest questions in the National Assembly come from the business community.

Vietnam is nothing if not ambitious – the government plans to treble per capita GDP by 2020. On past performance, and despite some big new challenges like climate change, I wouldn’t bet against it.

March 24, 2010
Duncan Green