Has Nguyen Phu Trong's Leadership Curbed Economic Reform? Economic Reform Trends in Vietnam

• Published date: 01 July 2020
• DOI: http://doi.org/10.1111/aepr.12301
• Date: 01 July 2020
• Author: Shozo Sakata

Has Nguyen Phu Trong’s Leadership Curbed

Economic Reform? Economic Reform Trends

in Vietnam

Shozo SAKATA†

Institute of Developing Economies-Japan External Trade Organization (IDE-JETRO)

This paper argues how the features of Vietnam’s political-administrative system and their recent

changes have affected economic reform, particularly reform of state-owned enterprises. After the

12th Party Congress in 2016, the Party Secretary General Nguyen Phu Trong’s administration

has seemed to exaggerate its conservative and totalitarian-looking rule in the political arena. In

contrast, the economic reform policies introduced by Trong’s administration seem more trans-

formative and progressive. This paper suggests that this contradiction must indicate changes in

the policies relating to the state management of economic entities and/or a disguised form of

reform to retain state influence over economic management, both of which tend to end up with

pervasive rent-seeking practices.

Key words: national champion, reform, rent-seeking, state-owned enterprises, Vietnam

JEL codes: P31, P48, D72, D73, O14, O43

Accepted: 11 December 2019

1. Introduction

It is generally agreed that the introduction of the reform orientation called Doi Moi, pro-

posed in the 6th Party Congress in 1986, put Vietnam on the right track for economic

development. However, Vietnam neither initiated many drastic reform policies at one

time nor achieved rapid economic growth immediately after it declared the onset of this

reform. Vietnam has gradually transformed its economy from a planned to a market-

oriented type, undertaking various restructurings, reorganizations, and amendments over

the last 30 years or more. Once facing a severely stagnant economy with a gross domestic

product (GDP) per capita of less than $US 100 at the end of the planning era, Vietnam

became a so-called middle-income country in 2010. Doi Moi has been an ongoing pro-

cess, and at least according to the Communist Party of Vietnam (CPV), Vietnam is still

engaging in continuous reform efforts. Nonetheless, Vietnam has actively advanced eco-

nomic reform, particularly in participating in the global economy since the middle of the

1990s. It has concluded many bilateral and multilateral free trade agreements (FTAs).

†Correspondence: Shozo Sakata, Institute of Developing Economies-Japan External Trade Orga-

nization (IDE-JETRO), 3-2-2 Wakaba, Mihama-ku, Chiba-shi, Chiba 261-8545, Japan.

Email: shozo_sakata@ide.go.jp

© 2020 Japan Center for Economic Research 305

doi: 10.1111/aepr.12301 Asian Economic Policy Review (2020) 15, 305–322

The remaining challenge for reform relates to state-owned enterprises (SOEs). Whereas

many SOEs have been privatized or equitized (the term used by Vietnamese political

leaders), the government still announces its target numbers for equitized and listed SOEs

at the beginning of each year, but is disappointed at the end of each year.

Vietnam’s political and administrative reforms have occurred at a much slower

pace. One-party rule has been maintained, national elections are still under the screen-

ing and the supervision of the Vietnam Fatherland Front (the aligned organization of

the CPV), and the successive constitutions since Vietnam gained its independence as

the Democratic Republic of Vietnam have conferred a special status to the CPV

(or the Labor Party of Vietnam from 1951 to 1976) as the leading political institution

of the state. Furthermore, recent events in the political arena, including a harsh anti-

corruption campaign, the concentration of power in the CPV’s Secretary General

Nguyen Phu Trong, and the increasing repression of press freedom, represent the Par-

ty’s efforts to work against political-administrative reforms, strengthening (or even

reviving) the Leninist-style central state control.

Political scientist Jonathan London (2009, 2017) depicts Vietnam as a country

under “market-Leninism.”

1

London claims that in Vietnam, a “specific combination of

market economic institutions and Leninist power relations”exists, and contrary to

conventional assumptions, “market-based growth is not intrinsically incompatible with

Leninism”(2017, p. 389). However, this sophisticated terminology does not reveal the

CPV’s motivation or rationale for adopting economic reforms, which inevitably lessen

state control over the economy. The open question is whether the CPV’s recent exces-

sively authoritarian rules signal its intention to curb economic reform.

In an attempt to answer this question, the present paper provides a discussion of

the progression of economic reforms in Vietnam under the recent political-

administrative changes through a presentation of various views on Vietnam’s reform.

In Section 2 recent political-administrative statuses and their underlying reform policy

issues under the new leadership since 2016 are introduced, followed by the review of

Vietnam’s recent economic performance in Section 3. These sections represent the

situation as the progressive reform taking place under the increasingly authoritarian-

looking polity. In Section 4, an analysis of the mechanism that has caused such a situa-

tion is presented. The present paper concludes that the CPV’s seemingly intensifying

state control has not devastated much of the reform policy formulation. However, the

CPV’s strengthened authoritarian surveillance over society has not curbed much perva-

sive rent-seeking practices either, which disables real reform.

2. Political-Economic Changes after 2016

Vietnam’s political-administrative systems have been governed by the CPV’s Leninist

elites who enjoy monopolistic power to “subordinate powerful bureaucracy, control

civil society through repression, and prioritize state economic interests over non-state

interests”(London, 2017, p. 417). This section provides an overview of the recent situ-

ation, particularly after 2016, in which the CPV has seemingly intensified its control

Economic Reform Trends in Vietnam Shozo Sakata

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