Vietnam in the Global Economy by Thomas Jandl (review)

To the surprise of most contemporary observers, Vietnam’s doi moi reforms succeeded brilliantly. Abandoning a disastrous decade-long experiment with central planning, in 1986 the Hanoi regime opted for “market socialism”, an odd amalgam that allowed domestic entrepreneurs and foreign investors to colonize the spaces not filled by Soviet-style state-owned enterprises (SOEs). Reform began raggedly, but the disintegration of the Soviet bloc left Hanoi with no option but to push forward. Led by labour-intensive export industries, Vietnam averaged around 7 per cent annual growth in GNP between 1990 and 2006. Per-capita dollar incomes rose by eight times.

What’s not so obvious is why the reforms succeeded. Current scholarship, notably David Elliott’s Changing Worlds: Vietnam’s Transition from Cold War to Globalization (2012) as well as Thomas Jandl’s new study, reveals doi moi to have been a desperate leap in the dark. Contemporary analysis did not offer great hope. Dependency theory forecast that the economy would continue to bump along the bottom while dodgy foreign investors and local elites split whatever rents — chiefly timber and minerals — could be easily harvested. Theorists of the East Asian development model regarded Vietnam as insufficiently Confucian — there was no honest and visionary elite able to take on and tame systemic corruption. Liberal economists looked in vain for civil institutions able to call leaders to account and compel a relatively efficient sharing of national wealth. The World Bank and the IMF were persistent, vocal skeptics.

“Success was serendipitous”, Professor Thomas Jandl of American University concludes (p. 265) after a close look at disaggregated data on investment flows, internal migration, per capita income, tax revenues and the like. His Vietnam in the Global Economy is a largely successful effort, drawing on harmony of interest theory, to explain what happened — Vietnamese elites restrained a natural tendency toward predation, reducing rent-seeking to a level that did not frighten off foreign investors and provided “good enough governance” — and to suggest why.

Jandl examines the behaviour of different groups of actors for evidence of cooperation in the pursuit of win-win outcomes. In successive chapters he draws four conclusions. First, political and business elites in cities/provinces with strong economic performance were willing to limit their rent-seeking in order to offer the credible commitment to good governance that foreign investors demanded in return for investing in a jurisdiction (Chapter 4). Second, elites in nearby jurisdictions emulated these reforms, hoping thereby to also attract foreign investment to their own provinces (Chapter 5). Third, Vietnam’s workers were typically young and mobile. If they saw better opportunities elsewhere, they would move on, or maybe move back home, concludes Jandl. Elites in the most successful cities/provinces therefore tended to “support their working classes”, e.g., by prodding factory owners to pay decent wages, build worker dormitories, provide canteens, and by themselves ensuring an ample supply of kindergartens, medical clinics and other social services (Chapters 6 and 7). Fourth, national elites contributed by devolving considerable autonomy in economic matters to the provinces, including, crucially, the authority to approve proposals by foreign investors. At first that often meant ex-post facto ratification of unauthorized but successful initiatives at the province level. Importantly, however, Hanoi retained control of fiscal policy. It collected funds according to each jurisdiction’s ability and reallocated them according to its needs (Chapter 8).

Good qualitative data is hard to come by in Vietnam. To build his argument, Jandl relied on two surveys conducted annually in Vietnam. One, the Provincial Competitiveness Index, collates views of local private businessmen and foreign investors. The PCI has been published since 2005 by VCCI, the Vietnam Chamber of Commerce and Industry, with US Agency for International Development support. A newer survey, the Provincial Governance and Public Administration Performance Index (PAPI) was launched in 2009, the product of collaboration between the UN Development Programme and various regime-linked researchers. It aims to provide “Vietnam’s first publically available dataset providing an objective evaluation of governance from...