This paper analyses the feasibility and prospects of “second-round reform” in Vietnam. From the perspective of neoclassical economics, Vietnam can definitely maintain an economic growth rate of 7-8% in the next two decades, thereby achieving the goal of becoming a high-income country by 2019. However, from a political economy perspective, this goal is much more challenging. The Vietnamese party-state’s overarching goal is to achieve high rates of economic growth in order to maintain its performance legitimacy, while keeping intact its absolute political power. This fundamental political economy dilemma explains why Vietnam has adopted market-oriented reforms, compromised private ownership, allowed the functioning of markets to a certain extent, and actively integrated into the world economy. But, at the same time, the Vietnamese party-state has always tried to maintain a large SOE sector despite its indisputable inefficiency, and found various ways to subsidize and shield this sector from international competition even after Vietnam had become a member of the WTO and joined CP-TPP.
This dualistic nature of Vietnam’s socialist-oriented market economy explains why the domestic private sector – the most significant contributor to Vietnam’s GDP growth, government budget, and new job creation – has been divided into two distinct groups. A small group of oligarchs with close ties to the party-state system has increasingly dominated economic activities, even in some areas considered to be of strategic importance, such as aviation and resource exploitation. The remaining 98% of private firms, including small and medium-sized enterprises, face discrimination and difficulties in accessing land, credit, and business opportunities. When the state economic sector is still considered the backbone of the economy, when a minority of oligarchs continuously expand through rent-seeking mainly in the real estate and financial sectors, and when the domestic private sector – despite its significant contribution to the economy – is rhetorically promoted but discriminated against in reality, there are many reasons to doubt the future of “second-round reform” in Vietnam.
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Speaker and Chair Biographies:
Professor Vũ-Thành Tự-Anh is the Dean of the Fulbright School of Public Policy and Management (FSPPM) and a research fellow at the Harvard Kennedy School. He led the transformation of Fulbright Economics Teaching Program (FETP) into FSPPM, the first public policy school in Southeast Asia accredited by NASPAA. His research interests include political economy of development, public finance, industrial policy, and institutional economics. He was a Global Leaders Fellow at the Blavatnik School of Government (University of Oxford) and Woodrow Wilson School (Princeton University). He was a member of the Economic Advisory Group of Prime Minister Nguyễn Xuân Phúc (2017-2021).
Prof. John Sidel is Director of the Saw Swee Hock Southeast Asia Centre, and the Sir Patrick Gillam Professor of International and Comparative Politics at the London School of Economics and Political Science (LSE). Professor Sidel received his BA and MA from Yale University and his PhD from Cornell University. He is the author of Capital, Coercion, and Crime: Bossism in the Philippines (1999), Philippine Politics and Society in the Twentieth Century: Colonial Legacies, Postcolonial Trajectories (2000), Riots, Pogroms, Jihad: Religious Violence in Indonesia (2006), The Islamist Threat in Southeast Asia: A Reassessment (2007), Thinking and Working Politically in Development: Coalitions for Change in the Philippines (2020, with Jaime Faustino) and Republicanism, Communism, Islam: Cosmopolitan Origins of Revolution in Southeast Asia (2021).
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