Who Drives Economic Reform in Vietnam's Provinces?

Abstract

Vietnam keeps surprising the world with the speed and depth of its economic transformation. This research report suggests that the decentralisation of certain economic powers from central to provincial government has contributed to this success. Allowing provinces to find their own way forward was central to Vietnam's progress in institutional and economic development. Decentralisation brought about a number of inefficiencies, but these are outweighed by the gains resulting from policy experimentation at the provincial level.

The main question of the report is who drives the economic reform process in the provinces, exploring the role of business and government and alliances between the two. This is a difficult undertaking because it involves dipping into sensitive issues of state-business relations and because there are enormous variations between provinces and over time. Key to the feasibility of this project was the collaboration of IDS with the Vietnam Chamber of Commerce and Industry (VCCI). VCCI is an influential organisation with strong connections to business, government and the Communist Party. These connections are essential for access to political and business leaders and for understanding the economic reform process from private and public perspectives.

Provincial government is by necessity involved in the economic reform process, but who is actually driving it? The research shows that in those provinces which are making most progress in economic reform, the private sector played an important role. Not against government but with government. There was no formal public-private coalition but the dynamic was one of proactive government seeking the input from the private sector, and the latter lobbying for and contributing to responsive and effective government. Both national and foreign enterprises played a role but small enterprises tended to be marginalised from the process. Some of the best insights come from comparing provinces and observing how different alignments of interest influenced the reform process.