Edmund Malesky and Jonathan London (2014) State-led development in Vietnam

Although we lack counterfactual evidence, it appears likely that SOEs were more often beneficiaries, rather than engines, of growth. Recent analyses of the role of the state sector in Vietnam have demonstrated [...] profound underperformance. As Pincus et al. 2012 demonstrate, SOEs in Vietnam can no longer claim to be the vanguard of the working class, at least in a numerical sense, as they account for only 11% of employment and have actually seen net employment drop by 22% between 2006 and 2010. Growth decompositions show that the state sector accounted for only 19% and 8% of GDP and industrial growth, respectively, between 2000 and 2010. Moreover, given their tremendous advantages, SOE contributions to export have been absurdly small, with most exporting accomplished by small-scale farmers and foreign investors. From textiles (Vinatex) to shipbuilding (Vinashin), Vietnamese SOEs have failed to be competitive on world markets. TFP studies by ownership in Vietnam have not been credible, because they fail to properly account for the contribution of free land and cheap capital to SOEs’ bottom line. For now, London’s (2013) characterization of Vietnam’s poorly performing industrial policy as “chaebol dreaming” remains apt.

With even modest assumptions about these cheap inputs, the state sector seems to have been a net drag on the Vietnamese economy. Three distortions have been documented: First, even though SOEs have not been successful at exporting in their core competencies, they are protected in those core competencies by Group A investment restrictions on private entry and phase-in requirements on WTO tariff-reduction obligations (Auffret 2003). Second, protections in core businesses, cheap land to rent to private producers, and cheap capital have generated tremendous cash flow that SOEs have funneled into subsidiary investment projects in unrelated businesses, as SOE managers seek to maximize their individual revenue. Vinashin, for instance, had 445 subsidiary businesses and 20 joint ventures, which ranged from real estate to hotels and karaoke. These sideline businesses crowd out more dynamic and entrepreneurial businesses (Nguyen & Freeman 2009). Third, Phan & Coxhead (2013) demonstrate adverse effects of these policies on labor markets, showing that state-sector activity has both depressed returns to skills in nonstate sectors and crowded out more skill-intensive forms of private-sector growth. The effect arises directly from the privileged role of the state sector and the lack of oversight to ensure meritocratic hiring. Because SOEs are capital intensive and protected, the returns to skills in SOEs are higher than in the private sector. Therefore, employment in SOEs is highly coveted. Nevertheless, hiring into SOEs is based on nonmarket mechanisms, such as familial connections, relationships, and outright corruption. Those without such connections have less incentive to invest in high-level skills, leading to lower-quality labor available for private-sector producers.

Critical to the debates about a new economic model is the demonstration by fine-grained scholarship that SOEs are remarkably unproductive relative to nonstate competition. Furthermore, scholars have shown that the greatest periods of growth and poverty reduction occurred when the state sector was at its weakest. In Vietnam, the 2001–2006 boom was correlated with robust growth in private investment; the post-2007 decline correlates with the return of SOEs.

Edmund Malesky and Jonathan London (2014) The political economy of development in China and Vietnam

Jacqui Baker & Sarah Milne (2015) Southeast Asian dirty money states

Illicit revenues have not been part of the normative story of state formation. Rather, illegal practices and monies have been framed under the banner of “corruption:” an aberrant, irrelevant and dysfunctional side economy to official narratives of statehood. Yet, as the articles in this thematic issue show, to dismiss corruption and criminal activity as outside of the realms of state activity is to exclude an important dimension of state formation in contemporary Southeast Asia. The sums generated by these illicit economies are considerable, and parts of the state are heavily dependent upon them for everything from everyday state work, to the extension of sovereignty and the shoring up political stability. Little wonder then that these states exert enormous effort in the capture, control, and organization of dirty monies. The empirical evidence therefore challenges conventional narratives about how weak fiscal states are unable to build fiscal power, and instead suggests that Southeast Asian states often degrade their fiscal architecture in pursuit of illicit profits.

The relationship between illegal rentier economies and the state does not necessarily entail chaos or an absence of the rule of law. Rather, illegal economies are systematically established and protected by the state – as seen in the highly organized and visible deployment of the tools and devices of state territorialization. For example, state laws and institutions are used to demarcate areas for illegal logging; public infrastructure and equipment like roads and trucks are used for illicit timber extraction; and specialized drilling machines are deployed openly for the construction of underground mining tunnels that enable so-called informal mining. This level of capitalization and investment indicates how “illegality” can be systematized and normalized at a remarkable scale and how actors involved expect such practices to endure over time. 

Perhaps the most prominent example of this is in To’s article on Vietnam, where the state has recently re-zoned woodland around an upland village as “national forest.” This territorialization has not only changed the legal status of the land, extending state propriety over it, but has ushered in a host of government officials, law enforcers, and park rangers to “protect” the forest and uphold the logging ban. Residents who engage in traditional timber extraction are effectively criminalized and local law enforcers have the authority to confiscate village-logged timber or issue fines. However, the law is rarely enforced as stated on paper. Instead, the law is “taxed” through bribes extracted from villagers, who effectively conduct logging on behalf of local authorities. As timber is subsequently transported through government checkpoints, local middlemen known as lawmakers – who are themselves officials with familial ties to the government-run People’s Committee – skillfully maneuver the illicit timber through and over the formal law. The biggest rents from this illegal logging industry are not kept by the villagers who fell the timber, but are accumulated by state institutions and state officials. In this way, territorialization of upland Vietnam is central to the establishment of an illicit regime of extraction that finances and enriches the state.

Jacqui Baker & Sarah Milne (2015) Dirty Money States: IllicitEconomies and the State in Southeast Asia, Critical Asian Studies, 47:2, 151-176

Martin Gainsborough's (2003) interpretation of big corruption cases in the 1990s

'... big corruption cases are best understood as an attempt by the political centre to discipline the lower levels of the party-state against a backdrop of increased decentralisation under reform. Such an interpretation, it is argued, makes sense both of the increased frequency with which big corruption cases have occurred in the 1990s and also the ferocity with which they have been executed. It also represents a more authentically political account insofar as the centre is no longer seen as simply clamping down on corruption "in the public interest" but rather is seen as representing one side in a struggle for influence between different levels of the state, where the prize is control over economic resources. Moreover, the successful prosecution of Tamexco and other big corruption cases, along with the centre's assertion of its authority in a number of other areas... suggests that the centre is far from a spent force. This is frequently not the dominant view in the academic literature.

The ideas put forward here also shed light on another issue, namely how we understand the "rule of law". Prosecution of big corruption cases through the courts might be read as representing a positive development as the party, once regarded as being "above the law", is now seen as willing to subject the disciplining of its own ranks to just legal process. However... more convincing is the idea that the "rule of law" is being used to pursue the interests of one particular arm of the state, namely the centre. This ties with a distinction in the China literature between "rule of law" and "rule by law". The suggestion is that China is moving in the direction of the latter than the former. Such an observation also appears appropriate in the Vietnamese case.'

Martin Gainsborough (2003) Corruption and the Politics of Economic Decentralisation in Vietnam

CECODES, TOWARDS TRANSPARENCY, TRANSPARENCY INTERNATIONAL (2011) Youth's willingness to engage in corruption

'[I]n... getting into a good school/company and going through an interview for a dream job which could be considered as having a greater impact on the future of the respondent, 38% and 33% of youth respectively are willing to engage in corruption... [T]here seems to be no difference in responses between youth who have previously been victims of corruption, compared to those who have not, perhaps illustrating that corruption has become institutionalised. These results are well in line with the flexible attitude that youth display towards integrity and their willingness to relax its definition when there is a financial cost or family loyalty is at stake. It indicates an attitude of broad pragmatism among both youth and adults, which extends well into opportunism and using nepotistic networks.'

CECODES, TOWARDS TRANSPARENCY, TRANSPARENCY INTERNATIONAL (2011) Youth integrity in Vietnam Link

Martin Gainsborough (2002) The 'new landlord class'

'[I]s it right to see Vietnam as a country devoid of a large landowning class? Despite continued formal restrictions on the maximum permitted landholdings in the countryside, the reform years have been accompanied by the growing incidence of landlessness with its obvious corollary, namely, the re-emergence of large landowners. There is also a confluence of interest between the government's state desire for foreign investment in agro-processing and the need for large landholdings. Foreign investment in agro-processing has been limited to date, but there is some evidence that foreign agro-processors have been able to secure large tracts of land when desired.

One might also argue that while the large landowners of the ancien regime have been toppled, in their place there has emerged a new landlord class, namely Communist Party cadres and government officials. After all, it is very often they, or their family members, who dominate the rural economy. If this analysis is correct, the prospects for a widening of the political space look less good.'

Martin Gainsborough (2002) Political change in Vietnam: In search of the middle-class challenge to the state Link

David Hausman (2009) Persistence of patronage through civil service reform

'True pay reform would threaten the interests of those who distributed and earned large allowances, project funding, or bribes; the government had not attempted it. The salary increases of the past decade had, like Vietnam’s other reforms, attempted to satisfy domestic and international pressure for reform without placing patronage networks at risk... [M]ost of the measures offered ample opportunities to continue old practices from within the framework of new policies.'

David Hausman (2009) Policy Leaps and Implementation Obstacles: Civil Service Reform in Vietnam, 1998-2009 Link

Martin Gainsborough (2010) Continuity in patronage and nepotism

'In relation to so-called 'non-Weberian' features of the state - patronage, personal relations, and centrality of money in politics - there is scarcely any evidence of change in the reform era with such features as entrenched as ever. This is as true for set piece political events, such as the five-year Party Congresses when patronage in the form of public office is circulated, as it is for citizens' everyday dealings with the bureaucracy where connections and the ability to pay are crucial in order to get things done (Gainsborough, 2007, 2009b). Moreover, nepotism rather than meritocracy is the norm in appointments to the government and civil service, which are themselves governed by informal, discretionary rules rather than 'rule of law' (Salomon, 2008). It is, of course, worth considering whether there are some subtle differences between such practices today and in the pre-reform period. For example, some would say that the sums of money involved in paying off office-holders are much larger today and that some practices which might have raised eyebrows a decade or more ago do not today. However, I would argue that we are dealing with questions of scale or extent here and the basic practices are as they have always been (Gainsborough et al., 2009).'

Martin Gainsborough (2010) Present but not Powerful: Neoliberalism, the State, and Development in Vietnam Link