Journal of Current

Southeast Asian Affairs

Special Section 30 Years Doi Moi
Fforde, Adam (2016),
Vietnam: Economic Strategy and Economic Reality, in: Journal of Current
Southeast Asian Affairs, 35, 2, 330.
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Journal of Current Southeast Asian Affairs 2/2016: 330

Vietnam: Economic Strategy and

Economic Reality
Adam Fforde
Abstract: The paper examines the nature of the growing Vietnamese
economy and its changing structural characteristics and contrasts this
with two core elements of official thinking. The first element is the slogan of industrialisation and modernisation (IM) and how this sits with
the rather fast current growth in the services sectors, given the issues of
transitioning through the recently reached middle income status. The
second is that of a socialist-oriented market economy (SOME) with
reference to its origins, the nature of debates around it and its positive
and negative implications for Vietnams development. Our basic conclusions are that IM is misplaced, as it ignores services and is out-of-date,
and the SOME has largely been a somewhat confused and transparent
fig-leaf for support for essentially private commercial interests associated
with certain state conglomerates. Recent changes around the 2016 XIIth
Congress suggest that lessons are being learned by some elements in the
Party.

Manuscript received 5 July 2016; accepted 24 July 2016

Keywords: Vietnam, economic growth, politics, political economy, industrialisation, development policy
Prof. Adam Fforde is a professorial fellow at Victoria Institute of Strategic Economic Studies, Victoria University, Melbourne, Australia. He
was a full-time teaching member of staff at the SEA Program NUS in
20002001 and has supervised in a range of areas. Prof. Fforde is a
member of the Editorial Board of JCSAA. Personal website: <www.vu.
edu.au/contact-us/adam-fforde>
E-mail: <adam@aduki.com.au>

Adam Fforde

Introduction
Between its VIIth and XIIth Party Congresses (1991 and 2016), Vietnam
clearly experienced some major changes. Whether the country really
changed is the stuff of poetry and a familiar part of the discussions of
any political community about what has happened and so what might
happen. A core part of this, again in a quite familiar way, are arguments
about causality to what or whom can authorship of these changes be
ascribed and which arguments are deemed good and which are not.
This paper1 engages with such deliberations by contrasting an examination of some empirics with how the Communist Party of Vietnam (CPV)
has publicly characterised change, and its role within change as a central
author. The former uses the standard measures of economic growth, as
presented in the National Income Accounts, based on standard methods
that were introduced in the early 1990s as Soviet methods of measuring
levels of economic activity were discarded. The latter uses two core slogans: industrialisation and modernisation, or IM (Cng nghip ha - hin
i ha); and a socialist-oriented market economy, or SOME (Kinh t th
trng nh h ng x h
i ch ngha). I tend to agree with Gainsboroughs
seminal 2007 article, which argued that, by that time, CPV politics had
little to do with policy because discussions posed in those terms were the
clothes of factional rivalries. 2 However, this is an academic study and
whilst Pew surveys suggests that the Vietnamese people greatly like their
market economy, this tells us rather little about what they think has
caused change over the past generation.3 Given the lack of political reform, it is difficult to solve this issue in any effective or efficient way, as
disempowered populations cannot easily show what they really want. My

2
3

This paper draws upon a paper given at the Vietnam Forum 2016, entitled
Vietnam: Thirty Years Of Doi Moi And Beyond, held April 2016 at the
ISEAS-Yusof Ishak Institute, Republic of Singapore, as well as presentations
and discussions subsequently in May 2016 in Hanoi. I am grateful to everyone
who commented on the paper, and to an anonymous referee.
[] politicians in Vietnam generally do not distinguish themselves from each
other on policy lines, although struggles for control over resources are sometimes dressed up in policy terms (Gainsborough 2007: 20).
Goertzel reports, based upon the Pew Global Attitudes Project, that: Brazilians are divided in their opinions about the market economy, with 56% in the
Pew survey agreeing that most people are better off in a free market economy,
even though some people are rich and some are poor. Only 26.7% of the Argentines shared this sentiment in the midst of their economic crisis, as compared to 72.1% in the United States and a remarkable 95.4% in Vietnam, 43.6%
in India, 54.2% in Bolivia and 62.8% in Venezuela (Goertzel 2006: 45).

Vietnam: Economic Strategy and Economic Reality

general conclusion is that the economic evidence presented strongly

suggests that neither of the two core slogans have much credibility.

From the VIIth to the XIIth Congresses

Economic Change
The Data Tells a Story But What Story?
According to standard modern statistical measures, Vietnams economic
performance since the emergence of a market economy has been good.4
Figure 1 shows GDP growth and inflation. From the early 1990s growth
clearly accelerated to just below 10 per cent annually, dipping around the
time of the Asian Financial Crisis, but then recovering. From 2008 it
slipped to a rather lower level. Inflation followed a similar path. The
acceleration of GDP growth around 1992 coincided with a steep fall in
the rate of inflation, and the slowdown around 2008 coincided with an
acceleration of inflation, which was eventually brought back down to
single-digit levels in 2013.
At these rates of change, things approximately double every decade.
In these measures, Vietnam entered so-called middle income status
around 2009. High rates of investment mean that the physical infrastructure usually changes greatly, and so does what people do.

I have not surveyed the existing literature on the Vietnamese economy, partly
due to space limitations, partly because citations can be made to my own work,
and also because much of the literature exhibits strong belief in industrialisation
as an essential driver of growth, a view that the present paper challenges. Clearly, a literature survey is needed, and if this papers core observation is taken seriously, we also need more research on Vietnams economic growth since the
early 1990s. However, we may also be facing a paradigm shift, and experience
suggests that in such limbic states arguments often arise to ignore, in some way,
what appear as anomalies (Fforde 2016a) reports that there is evidence that this
may be occurring. Fforde (2005) reported an analogous rejection, by perhaps
three-quarters of the citations of it, of the conclusions from the application of
robustness- testing techniques that concluded that there are almost no robust
relationships between policy settings and growth performance globally. Similar
trends can likely be found in arguments that, in Vietnam, manufacturing exports have been important; these arguments ignore the lack of rapid growth in
value-added in such sectors, implying that they rely heavily upon imports of
materials that are then inputs to the factories. Fforde (2016c) discusses the issue of confirmation bias in empirical research.

Adam Fforde

Figure 1. GDP Growth and Inflation

Growth and Inflation

Yearly percentage change

70
60
50
40
30
20
10
0
-10

1990

Source:

1996

2002
Years

2008

2014

GSO NGTK various years.

This underpins a historical division of the period that I chose for analytical and expository purposes (another periodisation may offer better alternatives).

From the very early 1990s until around 1997

During this period there was a failed attempt to generate, on the back of
a certain residual political authority at the peak of the Party, a new development ideology and policy suited to a market economy with a socialist
orientation. With the retirement of Vo van Kiet and Do Muoi in 1997,
the rural unrest in Thai Binh which showed the extent of corruption in
the use of development resources, and combined with the Asian Financial Crisis ended this period. During this period, factor markets (land
and labour especially) emerged clearly and there was no clear resolution
of the messy and informal nature of state capital.

From around 1997 until around 2007

This can be described as a period of political laissez-faire. It was a time
of macroeconomic stability, the emergence in significant numbers of
FDI and private (in the legal sense) employment, and a divorce of politics from policy. State workers ceased to have a favoured position and
learned, like those in other sectors, that law had little significance except
as a platform to seek to exert pressure on party and state officials

Vietnam: Economic Strategy and Economic Reality

courts and police had no particular interest or capacity to generate rule

of law (Tran Ngoc Angie 2013).

From around 2007 until the XIIth Congress in 2016

Near the start of this period, Vietnam secured middle-income status.
Around 2007, the State Bank was prevented by politicians close to certain large state owned enterprises (SOE) conglomerates from sterilising
liquidity created by its interventions in the foreign exchange markets to
manage large capital inflows; this led to a period of macroeconomic
instability in which multiple exchange rates and capital costs created
levels of rents that had not been seen since the hyperinflation of the late
1980s. This had pervasive and destructive effects on areas such as credits
to SMEs, levels of budget funding for rural development, funding for
public health and education, waste in public investments, etc., which
greatly reduced the remaining public confidence in the regime. However,
macroeconomic stability was restored by around 20122013 and economic growth recovered, albeit well below earlier levels. The period
ended with the 2016 XIIth Congress, which saw Party power over the
executive restored. This loss of macroeconomic stability led to the question that Leung (2015) asked, stressing concerns over the political will to
continue with reforms:
[] questions are being raised about the political will of the [Vietnamese] government to make the needed structural reforms in
such a way that benefit the economy rather than powerful insiders. [8]

The question that then arises which is the focus of the present paper
is whether the foundational elements of development strategy, as expressed in IM and SOME, make sense.
Tables 1 and 2 show changes in the recorded pattern of employment, which is measured, as the NIA does, in terms of employment that
generates incomes for the three factors of production: land, labour and
capital.

Adam Fforde

Table 1. Structure of Work Force, 1991 (in Thousands)

Sector
Industry
Construction
Agriculture and forestry
Transport and communications
Trade and supply
Other material production
Housing, public services and
tourism
Science, education and culture
Health, social insurance and sport
Finance, etc.
State management
Other non-material
TOTAL

A. Numbers
3,394
820
22,483
526
1,719
30

B. %
11.0
2.6
72.6
1.7
5.5
0.1

296

1.0

899
310
118
240
139
30,974

2.9
1.0
0.4
0.8
0.4
100.0

Note:

The data is based upon Soviet statistical methodology.

Source:

GSO 1993.

The table shows a picture of a Vietnamese economy, as growth started

to accelerate, that is strongly oriented towards agriculture; it has some
industrialisation and a services sectors 5 apparently mainly to do with
trade, supply and communications on one hand, and public services such
as education and health on the other. However, this picture arguably
obscures the real economic picture; for example, by treating rural farming families, with their traditional heavy engagement in trade, as agricultural. As non-Soviet Western statistical methodology is applied, we get
the following picture (in Table 2).6

5
6

In this paper, by services I mean tertiary sectors neither industry and mining, nor agriculture forestry and fisheries.
It appears that the Vietnamese GSO did not manage to sort out its employment data measured on the new basis until the end of the 1990s, later than the
production of NIA.

Vietnam: Economic Strategy and Economic Reality

Table 2. Structure of Employed Work Force, 2000 and 2014 (prelim, in

Thousands)
Sector

2000
Numbers

Agriculture, forestry and

fishing
Mining
Manufacturing
Electricity, gas and water
(*)
Construction
Trade and minor repairs
Hotels and restaurants
(**)
Transport, storage and
communications (***)
Financial intermediation
Science and technology
(#)
Real estate etc.
Public administration and
defence (2000)
Administration and
support services
Education and training
Health and social work
Recreation, culture and
sport
Party, mass organisations
and associations
Party, mass organisations,
defence and security
Community, social and
private household (##)
Other service activities
TOTAL

2014
Numbers

Change
Numbers

24,481

65.1

24,409

46.3

-72

256
3,550

0.7
9.4

253
7,415

0.5
14.1

-3
+3,865

83

0.2

248

0.5

+165

1,040
3,897

2.8
10.4

3,313
6,652

6.3
12.3

+2,273
+2,728

685

1.8

2,301

4.4

+2,755

1,174

3.1

1,953

3.5

+779

75

0.2

352

0.7

+277

19

0.05

251

0.5

+232

64

0.2

158

0.3

+124

376

1.0

n/i

n/i

262

0.5

995
226

2.7
0.6

1,860
493

3.5
0.9

+865
+267

132

0.4

286

0.5

+154

64

0.2

n/i

n/i
493
n/i
37,610

1.3

1,697

3.2

175

0.3

764
52,745

1.4

-318
+15,135

Note:

n/i = not included. (*) includes air conditioning. (**) In 2000, called Hotels
and restaurants; in 2014, the category is Accommodation and food service
activities. (***) In 2014, I have combined Transportation and Storage with Information and communication. (#) For 2014 I have given the entry for Professional, scientific and technical activities. (##) I am not sure how this data is
created. I thank an anonymous reviewer for arguing that many small private
household businesses in Vietnam may be involved in manufacturing; however,
like other arguments (such as those that seek to argue from rapid growth in
manufactures exports to rapid growth in manufactures value-added ignoring
the sectoral GDP data that suggests rapid growth of imports of inputs), this
appears as anomaly-attacking and an attempt to defend existing doctrine in
familiar ways. Table 3 clearly shows how developing countries have, on average, not been industrialising.

Source:

GSO 2008: Tables 17 and 18 and GSO 2015: Tables 53 and 54.

It is clear that this is not a picture of industrialisation. Whilst some 15

million jobs were created between 2000 and 2014, manufacturing and

10

Adam Fforde

mining only generated about 3.9 million jobs. How is meaning given to
such data?

The Economic Gaze

In the NIA system the economy is conceived of as fundamentally divided by different categories of output: primary (agriculture, forestry and
fishing), secondary (industry which includes mining) and tertiary services.
Like the basic economic view that sees economic activity as activities
that generate rewards paid on markets to factors of production (rents,
wages and salaries, profits), this conception largely reflects the economic
development experienced by many now-rich countries up until, say, the
1960s. There are alternatives; for example, dividing an economy by
transaction type,7 and rewards to economic activity as including imputed
payments for non-marketed activities such as home-based childcare. A
host of different imagined realities follow from such decisions.
From the Soviet Union, drawing on Marx, the core vision of how
economic growth happens is through the expanded production of industrial investment (capital) goods (Group A) that drive expanded production of the rest of the economy through increases in the capital stock,
including in the rest of industry (Group B) (Stalin 1951).
Western production function approaches are now somewhat dated
but still taught in basic development economics courses, and I believe
they have a pervasive impact. These approaches see growth also as largely based upon the accumulation of capital through investment (Fforde
2013: chapters 7, 8). Human capital can be included without changing
the basic metaphor greatly.
Both of these visions can be said to have decided to view an economy as something that turns stuff into stuff, and industry as a meaningful category is then constructed accordingly. The factory offers a ready
basis for an aggregate metaphor in which workers and technology embodied in machines combine to produce industrial products, primary
sectors such as agriculture feed them (workers and machines), and services sectors provide certain necessary services, with what is actually
7

Indeed, the Vietnamese for services dich vu may be glossed as those activities that enable or embody transactions (thus giao dich transactions generally, mau
dich trade transactions, phien dich translations). I find the semantics confusing. Comments on this would be welcome, not least because equivalent Chinese terminology appears to be different and stresses the subordinate nature of
services, seeming to prefer the term that in Vietnamese appears as phuc vu. All
of these Vietnamese words are of Chinese origin.

Vietnam: Economic Strategy and Economic Reality

11

supplied determined in the growth process by the logic of industry. One

can then conceive of education, health, transport, insurance, finance (and
tourism) as serving industry.
The languages (both English and Vietnamese) perhaps mark this a
servant is subordinate. Thus, we find Stalin in the early 1950s and the
World Bank in its famous 1993 Miracle study agreeing that industrialisation is and therefore should be the core active driver of economic development (a core label of success, NIE, stands for newly industrialising
economies) (Stalin 1952; World Bank 1993). Indeed, Stalin and the
World Bank agree that the core issue in terms of state action is how this
will be made to happen, though the answers are very different. Both
agree that the author of development is the state: for Stalin, a hyperactive and hyper-intrusive one; for the World Bank, a technocraticguided and market-friendly one that deals with market failure, does not
intervene in ways that create or exacerbate market failures, and provides
a stable political environment (Stalin would have agreed with this). Both
the World Bank and the Soviet Union presented such visions as relatively universal.
There are two core problems with such approaches. The first is that
there are statistically almost no robust relations between policy and economic performance viewed globally; that is, in terms of categories such
as export-oriented industrialisation (Fforde 2005; Levine and Zervos
1993). This means at the least that the data does not support any single
vision of what economic development is, or how it can be done. This
can be taken to imply that economic statistics do not have stable referents globally: GDP is essentially a different thing in different places.
The second problem is that, according to the data, neither Vietnam
(as we have seen) nor indeed most other developing countries have, been
industrialising in the historical period covered here (from the VIIth to
the XIIth Congresses). In fact, these countries have been servicising (see
Table 3 below), and the countries that have grown faster tend to have
been servicising more (Fforde 2016a). A lot more research is needed, but
this pattern does not mean that, with such fast rates of growth people
are moving from poorly paid agricultural jobs to poorly paid service jobs.
With rapid growth in GDP, service jobs must generate enough added
value to allow such large services sectors compared with GDP to be part
of rapid growth outcomes. Table 3 shows the global picture.

Adam Fforde

12

Table 3. Structural Change in Developing Countries Economies, 19912013

Percentages
of countries
Group 1 (less than
100% growth)
Group 2 (100200%
growth)
Group 3 (200300%
growth)
Group 4 (more than
300% growth)
All countries

Change in the measured share of

GDP in the whole economy
A. Services
B. Industry

25%

+2.1%

+0.6%

48%

+6.5%

+1.4%

15%

+7.5%

-0.7%

10%

+10.8%

+0.1%

+6.2%

+0.5%

Note:

Averages are unweighted; data is for individual countries. Growth defined as

change in current PPP US dollars.

Source:

World Bank n.y.

For Vietnam, the service GDP share rose from 38 per cent in 1992 to 43
per cent in 2013. In addition, whilst the share of the broad category
industry over the same period rose from 23 per cent to 29 per cent, this
growth was largely due to increased mining output. In 2013 mining
included in the industry statistical definition was 12 per cent of GDP
yet below 5 per cent in the early 1990s; this means that the non-mining
industry share of GDP fell from around 18 per cent in the early 1990s
to around 17 per cent in 2013 (GSO 1993: Table 18 and GSO 2014:
Tables 66 and 68). If one cares not to believe this data then the point to
bear in mind is that it is the public face of quantified economic change.
If someone makes a speech implying that successful industrialisation
was the core, central driver of change, then that person must either argue
that the fall in agricultures share and the rise of services share were
dependent upon industry, likely avoiding the issue that industry only
grows as a share of GDP if you include mining, or find some other way
to argue the point.
Table 4 shows data on added value (sum of wages, profits and rents)
provided by the GSO for the same classification.8 Further analysis is ongoing, but if we think of this as a snap-shot of a disequilibrium, with
factors of production guided by market and other signals, then this does
not suggest that manufacturing is a low point into which resources will
flood. Rather, it is rather similar to sectors such as trade and minor repairs, construction and hotels, in which large employment gains are
8

I have not yet attempted to match the value-added data with data on average
wages in these various sectors.

13

Vietnam: Economic Strategy and Economic Reality

occurring and where the amount of value added per capita is well above
that of agriculture. The significant low points (leaving aside mining) are
electricity, gas and water (which includes air conditioning), financial
intermediation and real estate. Note that the mass public services (education and health) are poor, but keeping up, and that as labour pours out
of farming per capita, value-added there has kept up quite well to the
national average.
Table 4. Value-Added (Productivity) of Employed Work Force, 2000 and
2014 (prelim) (in million VND ng per person)
Sector
Agriculture, forestry and
fishing
Mining
Manufacturing
Electricity, gas and water (*)
Construction
Trade and minor repairs
Hotels and restaurants (**)
Transport, storage and
communications (***)
Financial intermediation
Science and technology (#)
Real estate, etc.
Public administration and
defence (2000)
Administration and support
services (2014)
Education and training
Health and social work
Recreation, culture and sport
Party, mass organisations
and associations (2000)
Party, mass organisations,
defence and security
Community, social and
private household (##)
Other service activities
TOTAL (whole economy)

2000
VND

2014
VND

Change
A. Ratio

B. Rank

4.4

28.6

x 6.5

166.6
23.1
169.2
22.7
16.1
20.9

1,683.3
70.0
652.2
60.7
58.3
64.2

x 10.1
x 3.0
x 3.8
x 2.7
x 3.6
x 3.1

1
10
6
11
7
9

14.8

75.2

x 5.1

3=

108.4
124.7
300.0

352.1
204.2
1,278.6

x 3.3
x 1.6
x 4.3

8
12
4=

32.1

n/i

n/i

262.1

14.9
26.6
19.4

64.9
134.4
80.7

x 4.3
x 5.1
x 4.2

4=
3=
5

9.6

n/i

n/i

62.5

21.9

32.9

x 1.5

13

n/i
11.7

85.6
74.7

x 6.4

Note:

n/i = not included. (*) includes air conditioning. (**) In 2000, called Hotels
and restaurants; in 2014, category is Accommodation and food service activities. (***) In 2014, I have combined Transportation and storage with Information and communication. (#) For 2014 I have given the entry for Professional, scientific and technical activities. (##) I am not sure how this data was
created.

Source:

GSO 2008: Tables 17 and 23 and GSO 2015: Tables 53, 54 and 62.

14

Adam Fforde

It is striking that the industrialisation story has had a long life. World
Bank teaching texts that are currently valid (that is, on their website),
such as World Bank and Soubbbotina (2000), argue that:
Everything that grows also changes its structure. Just as a growing
tree constantly changes the shape, size, and configuration of its
branches, a growing economy changes the proportions and interrelations among its basic sectorsagriculture, industry, and services and between other sectorsrural and urban, public and private, domestic- and export-oriented. [] Are there common patterns in how growing economies change?
As income per capita rises, agriculture loses its primacy, giving
way first to a rise in the industrial sector, then to a rise in the service sector. These two consecutive shifts are called industrialization and postindustrialization (or deindustrialization). All growing
economies are likely to go through these stages. (5051; emphasis added)

It would be interesting to study such beliefs, which clearly, and without

any real sense of the analytical choices being made, use organic metaphors that apparently have a very long history (Nisbet 1969; Fforde
2016a).
However, recent World Bank World Development Reports from this
decade make little mention of industrialisation per se. Compare the following, from the 2009 WDR:
Industrialization brings with it a rapid process of urbanization
new cities are born, and existing cities expand. As people crowd
into these cities at a faster rate than their boundaries expand, population and economic density increase. Quite early in a countrys
development, this leads to a hierarchy of places. (WDR 2009: 57)

It would seem that the basic production metaphor of economic change

(turning stuff into stuff) does not fit at all comfortably with situations in
which services sectors are not in the main slow-growing low-productivity
areas of the economy, but in fast-growing sectors where per capita valueadded is relatively high, thus attracting resources to them (land, labour
and capital) and having enough value-added to be part of a rapid growth
outcome when they are producing as they often are half or more of
GDP.9 As far as I can ascertain, how this happens has only been very
9

For economists, this metaphor clearly implies a state of continuous dynamic

disequilibrium, in which factor prices vary between sectors, so resources move
away from sectors where factor returns are low, so that the law of one price
does not hold.

Vietnam: Economic Strategy and Economic Reality

15

weakly theorised, although Sheehan (2008) is a good start. In applying a

model originally created to examine industrialisation, Sheehan (2008)
stressed the importance of three factors: fixed costs in services, so that
producers often experience falling unit costs as output increases; pecuniary externalities, so that increased wages and employment in services
stimulate demand for services output; and something of a dual economy, so that wages in the services sector are kept down by lower wages
elsewhere, such as rural areas.

Explanatory Narratives
The economic history of Vietnam since the growth acceleration of the
early 1990s is still to be written. A key issue is the role of policy, as a
number of economic studies have argued that, despite heavy rhetoric
from the CPV asserting the importance of their policy choices, the pattern of change in the Vietnamese economy appears relatively uninfluenced by policy. Pham et al. (2008) concluded:
The result from three national IO tables [give] strong support for
the evolutionary movement of Vietnamese economy, or in our
terminology, a bottom-up process, in which Doi Moi is a critical
point [sic] marks the shift of Vietnamese economy from planned
economy to marker oriented one. Hence, we could say integration
in to [sic] the international market is inevitable and domestic final
demand, through its impact of [sic] consumption, investment and
export, play a vital role not only in the wealth of [sic] nation (gross
output) but also in improvement of welfare (GDP). (Pham et al.
2008: 33; Emphasis as in original)

Giesecke and Tran (2008) studied the period from 1996 to 2003 and
concluded:
In our story, we find rapid growth in GDP to be due to productivity and labour force growth. [] Our results downplay policy
reforms (such as the introduction of the VAT and reductions in
trade taxes) as important explicators of rapid growth in trade and
GDP. (Giesecke and Tran 2008: 2627; emphasis added)

Political scientists looking at the value to businesses of political connections have reached similar conclusions:10
10

As I mentioned, Gainsborough (2007) argued that politics had by the mid

noughties ceased to have much to do with policy differences, and was instead
about factional in-fighting and spoils. It is possible that a characteristic of Vietnams contemporary political economy is that rents are not preserved, and are

16

Adam Fforde

[politically c]onnected firms are actually not very different from

the rest of the private sector. They have very similar investment
and profit levels and on average have seen similar levels of expansion over the past year. Connected firms have slightly larger employment, but not much. (Malesky and Taussig 2009: 15)

Counter-intuitively, the role of the state is not found to be so important

here. Since Vietnam reached middle income status in 2009, however,
experts have flagged various concerns. These include:

Weak development of value-added in higher technology sectors.

The problem of transition from extensive growth, linked often to
the middle income trap, where increased factor productivity is required to maintain growth.
How to continue with rapid growth in the face of poor public
goods production; the Vietnamese press has long been full of stories about corruption and shortcomings in public education and
health care.

These issues require that policy matters; that, contrary to Gainsboroughs analysis, national sovereignty be deployed into the devising and
implementation of policy. Gainsborough remarked that there is always
someone who can potentially stand in your way (2007: 179). If we view
the CPV as a ruling party very much influenced by Soviet thinking, then
it was made quite clear in the USSR during the political reconstruction
after the death of Stalin, as it was before, that national sovereignty lies
with the Party. If there are severe problems with making policy matter,
then, as Hinsley argued, this amounts to a classic instance of a situation
where relations between rulers and ruled will be under pressure to
change. As I have argued elsewhere, the central issue is the Land without a King phenomenon: the Party can rule hegemonically but it cannot
govern, and policy cannot be deployed to the advantage of rulers and
ruled alike (Fforde 2011, 2013). This comes down to a matter of domestic sovereignty, which, as Hinsley (1986) argued some time ago, is better
seen as a political concept rather than one deployed by political scientists:
If we wish to explain why men have thought of power in terms of
sovereignty we have but to explain why they have assumed that
there was a final and absolute authority in their society and why
instead switched, dissipated through various channels. Corrupt state officials
continue to manage organisations that receive state support, SOEs are protected and uncompetitive, public health and education are weak, etc. To make policy matter, political change is needed (as Leung argued).

Vietnam: Economic Strategy and Economic Reality

17

they have not always done so []. (Hinsley 1986: 1, and quoted in
Fforde 2013: 8)
The concept has been formulated when conditions have been
emphasizing the interdependence between the political society and
the more precise phenomenon of its government. It has been the
source of greatest preoccupation and contention when conditions
have been producing rapid changes in the scope of government or
in the nature of society or in both. It has been resisted or reviled
it could not be overlooked when conditions, by producing a
close integration between society and government or else by producing a gap between society and government, have inclined men
to assume that government and community are identical or else to
insist that they ought to be. In a word, the origin and history of
the concept of sovereignty are closely linked with the nature, the
origin and the history of the state. (Hinsley 1986: 2, and quoted in
Fforde 2013: 16)

This raises the question of what can be said usefully about such matters
of preoccupation and contention, when the data suggests that Vietnamese economic change a major part of the countrys development
process is associated with a major contribution from services, and not
that much from manufacturing industry.

Contrasts between Actual Economic Change

and Various Normative Views
They All Thought It Was about Industrialisation (or That
Is What They Said)
In the 1990s there was considerable agreement amongst those providing
advice and doctrinal options to the CPV that economic development
was industrialisation. I think this had been true for the French, the US in
South Vietnam before 1975, the USSR (which was the main source of
economic assistance up until around 1991), and Western aid donors as
they came in to Vietnam in greater numbers in the early 1990s. After all,
the World Banks Economic Miracle study came out in 1993. We see this
reflected in the two slogans of IM and SOME.
The thorny aspect of policy advice in the 1990s is that it helped
push the CPV into something of a political trap in encouraging support
for the state sector, which by 1990 was the key hoped-for site of industrialisation (Fforde 2007).

18

Adam Fforde

The political foundation of the Soviet development model (Fforde

and Paine 1987) was the creation of state industry and SOEs, whose
workers were given high priority and, at least in the early stages, whose
managers very well paid compared to workers. Farmers were controlled
through the cooperatives; as McAuley (1977) pointed out, this meant
that the Partys position vis--vis the two sectors was very different, as
the plans control over SOEs gave SOEs a far closer relationship with
political power than had farmers (McAuley 1977). Much of the history of
the 1980s is to do with how SOEs rather, the changing desires of the
state business interest within the Party/State used this, along with money created by market-based activities, to push the centre of gravity within
the Party towards one that supported SOE commercialisation, marked
by the U-turn of draft Decree 306-BBT in early 1986. Throughout the
1980s, property rights generally moved down from planning organs,
giving SOEs greater freedoms (Fforde 1993, 2007). In the 1990s, however, SOE freedoms declined as property rights moved back up, towards
the cartels (tap doan) and various state structures (Fforde 2007).
Once state business interests had gained such power, maintaining
the Partys position against Anti-Party forces logically required the development of policy to regulate and orient powerful economic actors; in
other words, working through some hierarchy of ideas strategy, tactics,
programmes, etc. that deployed the relative autonomy of the state and,
in so doing, preserved the Partys capacity to act. As mentioned, Gainsborough argued that policy-based political action essentially no longer
existed by the mid-noughties. Indeed, one can treat the first of the three
periods I outline above (ca. 1991 to ca. 1997) as a period in which residual authority flowed like sand between the CPVs fingers and domestic
sovereignty eroded.
Thus, rather than being a period that securing some correct analysis
of the emerging evidence for the relatively low importance of industry in
the countrys growth path, the 1990s can be seen as a period in which
support for the state sector largely based upon investments in industry,
as the Soviet model said stymied strategic re-thinking. The World Bank,
the most powerful of the new donors, did not help much.11

11

The focus of the Banks fundamental interests in lending rather than reform is
shown by the tactical decision, taken in I think 1991, to abandon as its main
counterpart the reformist Central Institute for Economic Management Research (CIEM) in favour of the highly conservative State Planning Commission.
At the time I was working in the Swedish development cooperation programme and key Bank staff were well aware of the politics involved.

Vietnam: Economic Strategy and Economic Reality

19

The Comprehensive Poverty Reduction and Growth Strategy

(CPRGS 200212) supported donor agreement to a large World Bank
lending programme, and public agreement between the Bank and its
owners, and the Party on development strategy. To quote:
The overall objective of Vietnam for the 2001-2010 period is to
bring about a significant improvement in the peoples material,
cultural and spiritual life, lay the foundations for the countrys industrialization and modernization, build a prosperous people,
strong country and a just, equal, democratic and civilized society,
and establish the institutions of a socialist-oriented market economy, protect and preserve the countrys natural resources and national culture for future generations. (GoV 2002: 6)

Also:
Slow industrialization and urbanization cannot attract redundant
work forces. (GoV 2002: 15)

And:
The process of industrialization and urbanization has increased
the inflow of unregistered migrants from rural areas, mainly those
of working age and children. (GoV 2002: 20)

The unthinking belief in industrialisation is epitomised by:

To successfully achieve the [] objectives, the following tasks
need to be well performed:
Improve the system of legal institutions and policies and mechanisms to make them suitable to the countrys industrialization and
modernization. (GoV 2002: 53)

Such thinking committed the Party, and its main donor partners, to a
view of the nature of economic change that did not imply major changes
in sectoral priorities, and thus weakened the Partys ability to maintain
distance from the drivers of change in the 1980s, commercialising
SOEs.13

12
13

Thinking and associated knowledge production started perhaps five years

earlier.
Responsibility for this lies mainly with the World Bank. I was told by a JICA
staff member in the mid noughties that an early draft of the CPRGS included
a footnote that this had been prepared on the request of the Bank (it was certainly in large part funded by it and its supportive bilateral donors), and that the
Bank had told the Vietnamese to take it out.

20

Adam Fforde

Through the 1990s, some limited research suggested that SOEs experienced a reduction in their autonomy compared with the trends of the
1980s (Fforde 2007). However, this change was not expressing any rational policy strategy because, as we know from some detailed reports to
the National Assembly in the late noughties, regulatory authorities actually knew very little, in terms of reliable data, about SOEs. Without reliable data, and the authority that can require it to be provided, the Partys
position appears, as Gainsborough described it, as a site for political
conflicts over the division of spoils, so that policy and its logic cannot be
deployed to deal with political issues.
A National Assembly Study Team reported end of the noughties
on the state of policy towards SOEs (Study Team 2009). To quote
Fforde (2009):
[] the opinion of the Study Team that the exercise of state sovereignty through the states formal ownership rights over these
businesses is essentially incoherent (the language is relatively
diplomatic):
The division of tasks and responsibilities that realise the
rights and duties of the state as owner, regarding Groups and
General Companies are scattered and divided (phan tan, cat
khuc). This leads to a situation where there is no organisation
that bears principal responsibility for the management of capital and assets at [these units ] and no organ that bears principal responsibility to monitor, analyse and evaluate deeply
and in reality on the meeting of targets and responsibilities of
regarding state ownership that are allocated to Groups and
General Companies. Ministries and People Committees pretty
much do not adequately grasp information on the activities of
these units. The Ministry of Finance carries out state financial
management but only participates indirectly in the management of capital and assets via the reports of the Ministries and
Peoples Committees and of the units themselves (Study
Team 2009: 20).
This supports the idea that, in any common-sense use of the term,
these units, despite being nominally state-owned, holding vast assets and being major contributors to the economy, are out of control. (Fforde 2009: 88)

A rather exhaustive study of Vietnams SOEs concluded that SOEs are,

in many ways, best seen as virtual share companies, responsive to the
interests of those who control them in various ways (the virtual share-

Vietnam: Economic Strategy and Economic Reality

21

holders) rather than their formal owners (Fforde 2004, 2007, 2014). The
trap for development policy in Vietnam, then, was that the state sector
poses, and posed, two main problems.
First, as such, the state sector was and is not an example of state
property; rather, it is a form of private property, controlled by interests
(not all interests) within the Party/State. As Greenfield wrote many years
ago:
There can be no doubt that the fiscal crisis of the state is important in this respect. But the reform of state sector enterprises
has intensified rather than resolved this crisis. It is characterized
by the private appropriation of public resources on a massive scale,
where the state acts as the instrument of this appropriation. The
dismantling of the bureaucratic centralism and subsidy system
has concentrated power in the hands of incumbent state enterprise managers and the most powerful segments of the party-state
bureaucracy []. (Greenfield 1994: 206)

Greenfield wrote from a hard Left perspective, but his sources are impeccable and dove-tail well with later studies such as Angie Tran (2013).
Leung (2015), quoted above and with a radically different perspective,
agreed. The central issue here is the political and therefore developmental risks associated with a situation in which such elements of the Vietnamese economy are deemed to have a privileged role.
Second, the state sector and industrialisation was in many ways the
child of both Soviet and World Bank development doctrines that, for
quite different reasons, have lost their authority (the former due to the
collapse of the USSR, the latter due to the evident fact that industrialisation is no longer a dominant part of the aggregate picture of economic
change in developing countries). Therefore, under current doctrinal illumination, industrialisation as the development strategy appears anachronistic.
I now turn to the two slogans: IM and SOME.

Industrialisation and Modernisation (IM)

Some might imagine that a society whose economy is globalising rapidly
and evolving fast towards a range of economic activities, of which services seem to be dominant, would tend to not be well-suited to slogans.
However, we find a continued use of conveyor-belt ideological work

22

Adam Fforde

centred upon the ideological department of the Party.14 It follows from

this that references to IM are structured and specific. For example, in a
statement from the Partys newspaper Nhan Dan on its application to
university education dated 19 August 2015,15 we find (after a statement
about the slogans alleged universal meaning):
In Vietnam, the 7th Plenum of the VIIth Party Central Committee
(7/1994) approved the line (duong loi) of industrialising and modernising the country. Our Party laid down: in the process of development of our country in accordance with a socialist direction,
industrialisation and modernisation are means and formula to attain the goal of a prosperous life that is daily better and better, for
the liberation and allround popular development [] [Section 1].

Following the same line of research, what is clearly an on-line crib for
examinations replies to the question what is the theory (ly luan) of industrialisation and modernisation? as follows:16
The success of industrialisation and modernisation of the national
economy is the definitive factor in the success of the road to socialism that the Party and our people have chosen. Mainly because
of this, industrialisation and modernisation of the national economy is viewed as the central task of the entire period of transition
to socialism in our country [].

14

15
16

Thus the formal job descriptions of the members of the 2016 Politburo includes, at # 8, inh Th Huynh - Trng ban Tuyn gio Trung ng (Head of
the Central Propaganda and Education Department). Details of its responsibilities can be found online: <http://dangcongsan.vn/tu-lieu-van-kien/cac-bandang-tw/doc-492220153253656.html> (9 March 2016). These include examination and approval (tham dinh) of all projects and documents related to the
Partys position (Chu truong) of Party, Mass Organisations, etc. before they are
submitted to the Politburo [Section 2.2]. The same reference, from the VCP
website, provides the Departments internal structure.
See <www.nhandan.com.vn/giaoduc/dien-dan/item/27199202-cong-nghiep-h
oa-hien-dai-hoa-va-yeu-cau-doi-voi-giao-duc-dai-hoc-hien-nay.html> (9 March
2016).
See <www.wattpad.com/2927500-l%C3%BD-lu%E1%BA%ADn-v%E1%B
B%81-c%C3%B4ng-nghi%E1%BB%87p-h%C3%B3a-hi%E1%BB%87n-%C
4%91%E1%BA%A1i-h%C3%B3a-g%E1%BA%AFn-v%E1%BB%9Bi>
(9
March 2016).

Vietnam: Economic Strategy and Economic Reality

23

So what is industrialisation and modernisation?

The 7th plenum of the VIIth Central Committee issued the conception:
Industrialisation and modernisation is a process of fundamental
and all-rounded change of production, business, services and social and economic management from the predominant use of artisanal labour to a predominant use of labour power17 with technology, methods and ways of working that are advanced, modern
and rely upon the development of industry and scientific
technical progress to create high labour productivity.
So from a theoretical and practical view industrialisation and modernisation are a necessary historical process that Vietnam must go
through change our country into an industrial country [] [1].

This strategic slogan appears, historically, to come from 1994, but is

clearly little more than a repetition of earlier ideas. If we look at the 7th
Plenum Resolution itself,18 Resolution # 7 discusses, close to the start,
the concept in classic Marxist-Leninist terms, in Section 1 The state of
industry, technology and the working class. Despite many successes:
Industry, artisanal industry and technology in our country remain
weak. By 1993 the proportion of industry only amounted to 20%
of total national production and 11% of the workforce. Manufacturing and processing are a very small proportion. The capacity of
industry to equip the national economy19 is still insignificant. []
The Vietnamese working class through our vanguard Party has led our
revolution for more than half a century and is now once again taking the lead in the task of reform and industrialisation and modernisation [Section 1]

Of course, the problem with this is that, taken to its logical conclusion, it
would have to be concluded that the apparent economic success has
been a failure, as industrys share of GDP has (as examined above) fallen
when mining is excluded; therefore, the economic growth processes
cannot fairly be called industrialisation. This is.
Nonetheless, what can be made of the concept of modernisation?
Early uses of the term in official documents seem to reflect a simple idea
17
18
19

Sic. The term derives from Marxs view that one hires out ones labour power,
not oneself, and is related to his view of the nature of commodities.
See <http://dangcongsan.vn/tu-lieu-van-kien/van-kien-dang/nghi-quyet-bchtrung-uong/khoa-vii/doc-2925201510081046.html> (9 March 2016).
That is, to produce Group A industrial goods; see above.

24

Adam Fforde

of matching what is found in developed countries, and the abovementioned Plenum Resolution offers no empirical referent beyond this.

A Socialist-Oriented Market Economy (SOME)

Origins
This strategic slogan appears historically to link simply to Soviet development doctrine, often known as MarxismLeninism. In this schema,
progress towards communism via socialism is gauged by the emergence
and dominance of socialist relations of production (Stalin 1951). Since
their progressive nature is shown by their (actual) dominance by the
Party, the Partys leading role is manifest in forms such as SOEs and
collectives (cooperatives). As mentioned, Party leadership of SOEs is, in
this schema, rather different from that of collectives. The former relies
largely upon the state, while the latter relies upon the ability of local
Party Committees and cells to control appointment to collectives managements and to issue them with instructions that, in Leninist fashion,
are to concretise general instructions coming from high levels. Decree
# 10 of 1988 removed hundreds of thousands of cadre positions in rural
areas when it, in effect, accepted a severe shrinkage in the scope and
existence of cooperatives. Nowadays, this part of the socialist economy, which also used to include other cooperatives in areas such as trade
and light industry, still exists but has a very limited scope in the interests
of Party organisations in implementing the Partys leading role. For
SOEs, in stark contrast, there remains a central Party block (khoi) of
large SOE groups, each of which contains Party cells. 20 However, as
argued above, these are the facade of complicated relationships that do
not amount to clear ownership, either in terms of the formal State regulations or the actual powers of those sharing in commercial profits.

20

That is, those directly under the bloc; they each in turn had their own constituent elements, usually SEs. Taken from <http://doanhnghieptrunguong.vn/>
June 2014 the Main Page of the site is entitled The Party Committee of the
Central Business Bloc (
ng y khi doanh nghi p trung ng) (Fforde
2013: 3738).

Vietnam: Economic Strategy and Economic Reality

25

The Notion as Doctrine

The same source cited above, which gives standard answers suitable for
those taking tests on it, states:21
The nature of a socialist-oriented market economy in our
country:
x

It is not an economy managed according in the style of a

centralized bureaucratic subsidised system

It is not a free market capitalist economy

It is not yet entirely a socialist-oriented economy. This is because our country is in the period of transition to socialism,
and there is still a mixture of, and a struggle between, the old
and the new, so there simultaneously are, and are not yet
sufficiently, socialist factors [1].

It is reasonably obvious from this that central tensions are those between
(1) the notion that it is market forces that should drive development, (2)
the goal of such development being industrialisation and modernisation,
and (3) the simple fact that after a generation of rapid and general popular use of a market economy and major economic change, the economy
has not industrialised. The evidence from analysis of the state sector suggests that the kernel of the matter is to be found there, and this is reflected in debates.

Debates around the Concept

To start with, it seems rather obvious that a regime that has not modernised its political foundations faces the fascinating question of how to live
with an apparent economic success that its core developmental slogans,
reasonably interpreted, should deem a failure: Vietnam has not industrialised. The ghost in the argument here would seem to be that Party
rule in fact does not, evidently, rely upon the state sector, that industrialisation and the state sector are clearly not driving development, that economic growth has been fast, and that the state sector is not subject to
coherent political control anyway.

21

See online: <www.wattpad.com/1068814-ch%C6%B0%C6%A1ng-13-kinh-t%

E1%BA%BF-th%E1%BB%8B-tr%C6%B0%E1%BB%9Dng-%C4%91%E1%
BB%8Bnh-h%C6%B0%E1%BB%9Bng-x%C3%A3-h%E1%BB%99i-ch%E
1%BB%A7> (2 August 2016).

26

Adam Fforde

Reports in 2015 of the drafts of the political report to the January

2016 XIIth Congress argued that a new definition of SOME was forthcoming (Viet Ha 2015), and interviewed a leading Vietnamese reformist,
Nguyen Quang A, who argued that there was not real change. However,
in mid-February, after the XIIth Congress, Nguyen Thanh Tuan argued
in the Partys theoretical journal that there had been an easing of the
concepts leaning towards the state sector (Nguyen Thanh Tuan 2016).
This interpretation is supported by the Political Report to the XIIth
Congress, read there by the General Secretary, Nguyen Phu Trong (Nguyen Phu Trong 2016). The report mentions the leading role of the state
sector only once (Section II), whilst the SOME is mentioned eight times.
In an extended passage on the SOME (Section I) the emphasis is upon
use of policy, legality, regulation, etc. and the leading role is not mentioned. However, IM is still seen as a sign of progress and is mentioned
nine times. Production relations (quan h s n xut) are mentioned twice
and not defined as the state and collective sectors.

Conclusions
It is useful to remember that the economic success of Vietnam since the
early 1990s has been a surprise to many. Structural change away from
agriculture but without industrialisation is even more unexpected. Also
unexpected was the transition of the state sector away from the largely
healthy processes of bottom-up commercialisation of the 1980s, which
created the supply capacity that allowed Vietnam to first avoid negative
output shock as Soviet aid was removed and then drive the first stages of
rapid growth in the 1990s.
Accommodation of foreign-invested businesses and an emergent
registered private sector in the noughties, with macroeconomic stability
until around 2007, suggests that the role of the widely unappreciated
Nong Duc Manh (Party general secretary, 20012011) is as contradictory
as that of the also widely unappreciated Le Duan (in office 19601986).
After the fall of Le Kha Phieu in 2001, the next six years under Nong
Duc Manh saw a consolidation of Vietnams service-oriented globalisation, fast growth of employment in manufacturing, and preparation for
transition to middle income status in 2009. Throughout this period the
Party required students and others, if they wanted high marks, to explain
the validity and correctness of SOME and IM, when the reality increasingly showed that poverty was falling quickly, the country was growing
quickly, that industrialisation was not occurring, and it was a misnomer
to call the state sector the state. If we take a step back, this is readily

Vietnam: Economic Strategy and Economic Reality

27

seen as the stuff of a political community in motion, where economic

success is an important part of the story.
The XIIth Congress seems to show that lessons have been learnt.
These are:
1.

2.

It does not seem to matter what you call the animal, so long as it
catches mice. The Vietnamese economy has been part of considerable progress in the 25 years since a market economy clearly emerged.
It is still not really clear why this happened, not least as services, and
the way in which they fitted into the wider economy has not been
studied to a great degree. Puzzlement never killed anybody. Now
what?
To feed, nurture and therefore catch more mice, perhaps at lower
cost, policy needs to be made to matter and must also to be located
within reasonably convincing narratives about what is happening,
why it matters and what might be done about it. IM does not seem
to be part of such narratives, but SOME does, especially if the old
MarxistLeninist references to relations of production and thus
the rather odd justification for the leading role of the state are
prevented from climbing in, making it harder for the CPV to get its
act together and preserve its regime through policies the population
like, such as reform of public health and public education. That
would appear to be a more clever way of staying in power than going after dissidents and pressuring free trade unions.

Finally, there is a clear need for further research into two areas. The first
is to generate plausible explanations of patterns of change in the Vietnamese economy since the early 1990s.The second is the sociology and
politics of what seem to have been strong and likely misplaced beliefs in
industrialisation, both in reality and normatively. For both, a decent
literature survey is sorely needed.

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