In this webinar, Professor Tuong Vu and Dr Nhu Truong discussed the various factors that have impeded Vietnam’s economic potential, the importance of gaining a better understanding of Vietnam’s developmental path to gain insights into its economic patterns and vulnerabilities, and the Communist Party of Vietnam’s (CPV) firm control of the economy and society. The discussion also examined how historical, institutional, and political elements have contributed to the current challenges facing the country.
VIETNAM STUDIES PROGRAMME WEBINAR
Friday, 24 March 2023 – The ISEAS – Yusof Ishak Institute hosted a webinar on “Capitalism with Vietnamese Characteristics? The Dilemma of Growth and Political Change”, presented by Dr Tuong Vu, Professor and Head of the Political Science Department at the University of Oregon, and Dr Nhu Truong, Assistant Professor in the Department of Politics and Public Affairs at Denison University.
Professor Vu began by discussing the recent political shake-up in Vietnam, which included the removal or resignation of several high-ranking officials, such as Deputy Prime Minister Pham Binh Minh, Deputy Prime Minister Vu Duc Dam, and State President Nguyen Xuan Phuc. These leadership changes were believed to be linked to two grand corruption cases: the government-sponsored rescue flights scheme to repatriate Vietnamese citizens during the Covid-19 pandemic and the Viet A Covid-19 test kits scandal.
Professor Vu then linked the persistence of corruption to Vietnam’s developmental path. He provided an overview of the various factors that have contributed to the country’s economic development. However, while Vietnam has experienced impressive economic growth, the country still lags behind its neighbours in terms of GDP per capita and productivity. Vietnam relies mainly on foreign direct investment, official development aid, and remittances as its main sources of capital inflows. Despite its highly open economy, Vietnam mostly assembles products from South Korea and China for re-export to Europe and the United States, placing it at the lower end of the global value chain. Moreover, Vietnam’s state sector performs significantly worse than foreign and privately-owned firms.
Professor Vu then discussed Vietnam’s economic development strategy and its underlying political motivations. Vietnamese leaders have long sought to bring the country up to the level of South Korea and other advanced nations, yet political considerations have inhibited these aspirations. In particular, the scope of the Doi Moi economic reform in Vietnam was deliberately curtailed in order to prevent any challenge to the CPV’s rule.
According to Professor Vu, Vietnam’s approach to developmentalism differs from South Korea’s in three distinct ways. First, South Korea has a successful and self-sufficient private sector, whereas Vietnam favours state-owned enterprises. Second, South Korea has a bureaucracy based on merit-based selection, whereas Vietnam gives priority to political loyalty. Third, South Korea operates in a capitalist system, while Vietnam still adheres to its socialist principles.
Professor Vu then introduced four concepts developed by different scholars that may best capture the reality of Vietnam’s economic system. The first concept, “red crony capitalism”, refers to the close connections between members of the CPV and business owners. The second, “predatory party-state”, describes a state that extracts resources without providing sufficient benefits to society. Examples of this include two recent scams which preyed on vulnerable citizens. The third concept, “crime syndicate”, compares state-making to organized crime. This perspective suggests that Vietnam’s state formation process operates like a protection racket, where strongmen offer protection in exchange for taxes and rent. Finally, “dependency development” highlights the role of foreign capital in Vietnam’s economic development, facilitated by a partnership between multinational foreign enterprises and the state’s productive sector.
Professor Vu concluded his presentation by suggesting that Vietnam should adopt a developmentalism system similar to that of South Korea. This would involve privatising state-owned enterprises, establishing a competent state bureaucracy, and liberalising the economy, society, and, ultimately, politics.
In her presentation, Dr Nhu Truong explored the complex relationship between economic growth, politics, and society in Vietnam. Drawing on Samuel Huntington’s “gap hypothesis”, she proposed three distinct processes. Firstly, economic growth can lead to social frustration when there is a disparity between social mobilisation and the high level of economic development. Secondly, social frustration without opportunities for social mobility can result in increased political participation. Finally, political instability may ensue when political institutions fail to respond to societal demands and provide adequate channels for political participation.
Dr Truong analysed the three processes in the Vietnamese context. She explained that while the country has experienced economic growth, it has failed to satisfy the aspirations of certain groups, leading to social frustration. For instance, despite the increase in minimum wages, income inequality has risen in Vietnam, leaving many workers struggling to make ends meet.
Social frustration in Vietnam has resulted in a greater level of political participation, with four distinct waves occurring from 1995 to 2015. During the initial stage (mid to late 1990s), expressions were mostly anonymous and sporadic, with minimal coordination. During the second period (2001 to 2003), there was more activism and open dissent, which was facilitated by the emergence of new online channels. The third period (2006) saw an increase in political organization. The fourth period (2006 to 2015) was marked by a surge in politically-oriented blogs and websites, reflecting a lively and vibrant political landscape in Vietnam. Afterwards, there have been some other notable developments, such as the 2016 self-nomination movement and the 2018 protest against the draft Law on Special Economic Zones.
Dr Truong noted that the government’s refusal to respond to calls for greater political involvement has resulted in political unrest. This is demonstrated in the recent arrests of dissidents and activists, as well as the 2020 deadly encounter between Vietnamese authorities and Dong Tam villagers over a land dispute. According to Dr Truong, Vietnam’s political development should not be left behind in the face of its rapid social and economic change. Instead of using coercion or legal means to stifle social frustration and political engagement, Vietnam’s political institutions need to be more responsive to the needs and aspirations of its citizens.
During the Q&A session, the two speakers discussed a wide range of topics, including the differences between Vietnam and China’s development strategies, the CPV’s response to increased political participation and control over the private sector, potential solutions to enhance civil engagement in Vietnam, strategies to prevent Vietnam from falling into the middle-income trap, the prospects of professionalizing Vietnam’s bureaucracy and liberalizing its politics, and the impact of culture on Vietnam’s development.