Vietnam’s Economic Entities in Transition ed. by Shozo Sakata (review)

This book examines the socioeconomic and institutional transformations that Vietnam’s economic entities have undergone following the initiation of the Doi Moi (renovation) policy in 1986. Vietnam’s Economic Entities in Transition presents eight essays written by a team of Japanese scholars and practitioners. With the exception of the introductory chapter, these essays are divided into two parts. The first part (Chapters 1 and 2) focuses on state-owned enterprises (SOEs), particularly their restructuring processes, such as the adoption of new corporate governance standards. The second part (Chapters 3 to 7) examines the different types of economic entities operating in various sectors of the Vietnamese economy.

The underlying message of the book is that Vietnam’s economic entities — firms, individuals and institutions — have been relatively successful in their integration into the global economy following a series of economic reforms. However, the book scrutinizes the seemingly shaky foundations of this economic success: Vietnam’s SOEs; and the foreign firms that invested in the country following the gradual relaxation of investment rules. It argues that despite some success in corporate restructuring, SOEs (as a group) are still plagued by a considerable number of non-performing ones. Foreign firms have been relatively autonomous in charting their business strategies in Vietnam, however, such autonomy is not desirable for the country’s national industrial development as it exacerbates the technological and expertise gap between Vietnam and other, more developed economies.

The attention to empirical detail is evident throughout the book. For instance, Chapter 1 provides comprehensive information on SOEs and the restructuring processes they have undertaken in order to effectively compete in a more liberal economic environment. Chapter 1’s thesis is supported by a masterful analysis of economic and financial data obtained from relevant government ministries, SOEs, and other business and trade journals. Specifically, the chapter argues that the SOEs have undergone a consolidation phase as smaller and less efficient SOEs have gradually been dissolved, while larger and more efficient ones have been scaled up. The chapter also discusses the corporate reorganization of the PetroVietnam Group (PVN) and the Vietnam Shipbuilding Industry Group (VINASHIN), especially their efforts at diversifying and expanding into new economic activities. SOE restructuring is presently uneven and remains a work-in-progress as the state continues to play a vital, albeit diminishing, role in their decision-making processes. For instance, the appointment of top management personnel, and the setting of management and production targets still require the approval of the Prime Minister.

A similar level of empirical rigour is seen in Chapter 5’s analysis of the Vietnamese motorcycle industry; it traces the industry’s transition from a small and inefficient market to the world’s fourth largest producer of motorcycles. The chapter’s thorough survey of Vietnamese motorcycle assemblers and their key suppliers provides an in-depth perspective of the strategies deployed by Vietnamese assemblers to cope with the challenges posed by the technical superiority of Japanese industry leaders and the changing economic policy environment within Vietnam, which has transited from a nurturing state to one that actively promotes a more liberal marketplace.

This book is especially noteworthy because of its contribution to the literature on global value chains (Chapters 4 and 5). Focusing on the garment and motorcycle manufacturing industries, two of Vietnam’s more successful undertakings, the authors aptly illustrate that their success thus far is largely due to an expansion in volume, without substantial technological advancement within the relevant firms. Thus, Vietnam’s economic development might not be sustainable in the long run as many of the country’s garment and motorcycle manufacturing firms are locked in a “race to the bottom” on the commercial and technological terms set out by lead firms from the developed world. In other words, they are trapped in low value-added activities wherein the possibilities of upgrading and conducting higher value-added activities along other nodes of the value chain are limited. This finding somewhat dampens the euphoria surrounding Vietnam’s anticipated emergence as...