The Politics of Economic Restructuring in Vietnam: The Case of State-Owned Enterprise "Reform"

By Painter, Martin | Contemporary Southeast Asia, April 2003 | Go to article overview

The Politics of Economic Restructuring in Vietnam: The Case of State-Owned Enterprise "Reform"


Painter, Martin, Contemporary Southeast Asia


Introduction

The aim of this article is to outline the nature of the influences and forces that are shaping the direction and pace of state-owned enterprise (SOE) reform in Vietnam. (1) The purpose of this analysis is to assess the capacity of the political leadership in Vietnam to shape the direction of structural reform more broadly during the process of transition, in the face of both external pressures and internal tensions and contradictions. Vietnam is run on democratic centralist principles under the leadership of the Communist Party of Vietnam, pursuing a policy of transition to "market socialism". The economy is being transformed from one that was officially managed by the state to one that is increasingly driven by global and domestic market forces. This is the result of a deliberate strategy of "renovation", or doi moi, which has been pursued since 1986 and is continually reaffirmed.

Vietnam is a poor country with a need to maintain a high level of growth to sustain living improvements for its citizens. Economic reform both solved a short-term crisis in Vietnam in the late 1980s and has proved to be successful in delivering economic growth subsequently. The government is pursuing a cautious programme of integration into the international capitalist economy to sustain this growth. Increasing integration is in turn a source of growing pressures for further structural reform. The signing of international agreements, such as the bilateral trade agreement with the United States and planned accession to the World Trade Organization (WTO), imposes direct demands for structural reform. Other sources of outside influence include international and national aid agencies, which are very active in Vietnam, and press structural reform as a key part of their agenda. The World Bank and the International Monetary Fund (IMF), as well as many bilateral donors, urge the government to implement pro-market ref orms, and provide technical and financial assistance to this end. IMF/World Bank loans have included conditions that seek to tie the government to a set of reform milestones in such areas as trade liberalization, banking, and SOE reform. (2)

SOE reform provides a test case for investigating the relative significance of and the interaction between international and domestic forces in the transition process. Is the Vietnamese state able to control and manage this transition successfully -- is it a "weak" or a "strong" state in this regard? (3) The Vietnamese party and government have set out a strategy to retain state ownership of key parts of the productive sector, while shedding (including privatizing) less important parts. In other words, SOE reform is about modernizing the SOE sector as much as it is about marketizing it. (4) In some respects, current policy and practice reflect an uneasy compromise. At the Third Plenum of the Ninth Party Central Committee Meeting in August 2001, the lack of consensus was acknowledged:

A high degree of unanimity of perception is yet to be obtained regarding the role and position of the state economic sector and state enterprises.. .many issues remain unclear, entailing conflicting opinions, yet practical experiences have not been reviewed for proper conclusions. There are many weaknesses and bottlenecks in the state administration of state enterprises... (5)

In this context, the international community views SQE reform as one of the least successful areas of structural adjustment, subject to policy equivocation and administrative failures. Policy incoherence, implementation failures, and a fragmented or decentralized administrative system have been taken as signs of a "weak" state in Vietnam. (6) However, different criteria by which one judges weakness and strength can produce different assessments. Discussions of "strong" and "weak" states in the literature have moved beyond one-dimensional, holistic categorizations to a more subtle, variegated view of different kinds of state capacities that are evident in multiple arenas of state action in particular states and societies. …

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