Viet Nam’s Economy: Success Story or Weird Dualism?

01 Jun 2003

The role of the United Nations Development Programme (UNDP) in Viet Nam has often been to provide the Government and the international development community with valuable alternative policy perspectives to help further advance Viet Nam’s impressive development process. It is in this spirit that this paper has been commissioned in partnership with the Viet Nam Program of Harvard University, the Fulbright Teaching Center, and the Prime Minister’s Research Commission. Prepared by Professor David Dapice, a long-time keen observer of the development process in Viet Nam, this paper offers an insightful analysis of Viet Nam’s strengths, weaknesses, opportunities and threats.

The data and analysis herein provide strong new evidence confirming that not all investments of equal financial value are equally good for Viet Nam. Paradoxically, as this paper cogently points out, the country’s resources appear to have been shifting increasingly towards inefficient high cost, low return investments rather than, as one would hope for the good of Viet Nam, towards more efficient low cost and high return investments — hence the “weird dualism”.

The evidence in this paper shows that the small number of provinces that have implemented effective public administration reforms for a more business friendly local environment, created “one stop shops” for local investors, and effectively implemented the Enterprise Law are experiencing higher rates of domestic private investment and enterprise creation, and more rapid rates of job creation and poverty reduction. Therefore, much greater efforts and support to effectively implementing such high return reforms are needed in the majority of other provinces.

This paper also points to an urgent need for a much greater shift in public investment towards improving the quality and choice of education in Viet Nam so that the country’s human resources and businesses can graduate to and compete in increasingly higher value-added global markets. Improved competitiveness will also require greater coherence between industrial policy and trade policy, and much more effective use of information technology (IT). Business costs in Viet Nam have come down significantly in recent years, but everything is relative, and Viet Nam needs to benchmark itself against its main competitors. Most notable, China continues to move more quickly.

Finally, as this paper also highlights, Viet Nam has many strengths and is facing an abundance of opportunities. In this context, the paper points out that “Viet Nam does better when it wants to”. Hopefully the analysis and findings of this paper will help inform the policy debate in Viet Nam, and ensure that Viet Nam’s impressive record is sustained and built upon so that Viet Nam’s future will be even more impressive than its past.

The analysis leads to the clear conclusion that there is an urgent need for a much more deliberate policy shift to free up resources for lower capital intensive, higher job creating industries like garments, shoes, light manufacturing and processing, not more cement, steel, fertilizers and sugar which can be imported much more cheaply than Viet Nam is currently producing. Similarly, the real value of some large show case public sector projects appears to need more careful review in terms of their contribution to the sustainable well being of Viet Nam and the Vietnamese people.