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From: Chung Nguyen <Chung.Nguyen@umb.edu>
Date: Jun 2, 2006 8:49 AM
Subject: Re: [Vsg] New book: Vietnam's Development Strategies
Dear Pietro:
It sounds like a very intersting book, dealing with an issue that I haven't seen anywhere systematically addressed. Though I am certainly a novice in this area, it's some thing I am greatly interested in. I have two questions: what's the easiest and quickest way to get hold of a copy, and secondly, could you kindly and briefly explain what is meant by "post-Washington consensus."
There is a great deal of opposition to the "Washington consensus," but has there been any new consensus as to a way out ?Thank you.
-Nguyen Ba Chung
From: Pietro P. Masina <pietro@ruc.dk>
Date: Jun 2, 2006 11:23 AM
Subject: Re: [Vsg] New book: Vietnam's Development Strategies
Dear Chung,
the book has just been published and it should be available on the normal channels (e.g., directly from Routledge or at online bookstores like Amazon, etc.). Unfortunately the price policy of the publisher is not very friendly: ?65! This is roughly equivalent to €95 and US$ 122.
I don't think there is any generalized consensus about alternative strategies replacing the now unpopular 'Washington Consensus' and its Structural Adjustment Programmes (SAPs). Especially after the East Asian financial crisis many (among which Joseph Stiglitz) have argued in favor of new instruments and policies for poverty reduction. The expression 'Post-Washington Consensus' have been used by many with different meanings. I am using it critically to argue that the new Poverty Reduction Strategies (PRS) replacing the SAPs are in reality not so distant from their predecessors. The new PRS have partially addressed major shortcomings in the previous programmes (e.g., lack of ownership, participation, targeting, etc.); however, they do not really depart from neoliberal principles in terms of economic policies. I argue that the new Post-Washington Consensus - as interpreted by the World Bank and the IMF - is by large extent old wine into new bottles. Other aspects, like the way of conceptualizing governance, are new but not less problematic.
Best wishes
From: Markus Taussig <markustaussig@mac.com>
Date: Jun 2, 2006 2:04 PM
Subject: Re: [Vsg] New book: Vietnam's Development Strategies
Dear Pietro,
To entice those of us who might have a general interest in this area to encourage our university libraries to buy the book, could you maybe describe a bit more how it is that you argue in your book that Vietnam can be used as a case against the way development is done these days? Most development agencies, of course, like to claim Vietnam as one of their great success stories, since most socio-economic indicators have improved so dramatically over the past 15-20 years (and the development agencies spent a lot of money in Vietnam during a parallel period of time). I happen to, like you, not be one of the biggest boosters of the idea that development organizations have much to do with the country's success, but am also fairly cynical about how anything but less development spending would improve on the current approach. There are so many different ways of framing this issue. When he visited the country, Stiglitz, who you mention for his criticisms of Bank policy, for example, seemed to be of the opinion that current government policy was pretty much right on track. So could you briefly outline for us your recommendations or at least give us a little more detail to wet our appetites?
From: Pietro P. Masina <pietro@ruc.dk>
Date: Jun 4, 2006 5:56 AM
Subject: Re: [Vsg] New book: Vietnam's Development Strategies
Dear Markus and all,
it is quite interesting to see how much Vietnam has been constructed as a success story, with the international organization claiming credit for this success. Only few years ago the same agencies were expressing very critical views about the country performance. For example, immediately after the regional economic crisis, the World Bank claimed that Vietnam risked missing the train of recovery in the region. Vietnam was suggested to take bold steps in economic reform, pointing out that the country had lost attractiveness for foreign investors already before the crisis due to internal reasons. In reality, the drop in FDI flows ahead of the crisis was largely a myth and the contraction after the crisis was soon reversed in line with recovery in the rest of the region. Vietnam became an outstanding performer in East Asia partially because implemented some of the reforms promoted by the World Bank but even more substantially because it did not follow those advices.
It is useful to remember that the relationship between Vietnam and the two Washington-based 'sister' organizations has been quite controversial. Probably for geopolitical reasons (i.e., a US attempt to play Vietnam to contain China), Vietnam became a very large recipient of development aid since the early 1990s. However, when Vietnam made clear its commitment to a very balanced foreign policy and its intention to proceed with a gradualist approach in economic reforms the 'honey moon' with the World Bank and IMF was over. From the mid-1990s the World Bank started to express serious concerns about the viability of the Vietnamese economic policy, asking for a 'doi moi 2'. In the ten years since mid 1990s, the IMF managed to put on halt lending to Vietnam twice.
The model of economic reform followed by the Vietnamese government is by large extent different and opposite to the development strategies promoted through the years - with important revisions but significant continuity - by the international financial institutions. Vietnam started to make 'price matter' (as Fforde and de Vylder wrote) through reforms in the 1980s, which anticipated and made sustainable the kind of 'big bang' of 1989–91. I see in the reform path followed by the country as an attempt to create an internal market through transformations in agriculture. The step-by-step approach in promoting market institutions was and still is a success story, which explains the country achievements not only in terms of economic growth but also of poverty reduction.
Vietnam has always been wary of expressing bold propositions about its economic strategies (for various reasons). I think that the country leadership combined - not always in a coherent way, but after all in a successful one - at least three different inspirations. The first was neo-liberalism, which was promoted in the country by the World Bank with intelligence and often with a soft repackaging of the orthodoxy. The second was the 'developmental state' model, supported directly by Japan (the largest donor to the country), Korea and indirectly by the economic success of many East Asian countries. The third, was an attempt to maintain a socialist orientation (although it was not always clear what it was meant with that label) which involved both economic sovereignty and a mitigation of the economic disparity produced by market-oriented reforms. I think this special mix revealed successful although big questions are open for the future. This mix is not exactly something that the international organizations can claim to be their own child.
For many reasons Vietnam is and will remain a special case. It is difficult to see how its experience can contribute to the development of other poor countries: by now we should know that a 'one size fit all' approach does not work. The point I try to make with my book is that still there is a great need of an open debate on the Vietnamese experience, beyond the simplifications produced by unilateral mainstream interpretations.
Best regards
From: Markus Taussig <markustaussig@mac.com>
Date: Jun 4, 2006 9:32 AM
Subject: Re: [Vsg] New book: Vietnam's Development Strategies
Dear Pietro,
Thanks for your detailed response! Probably the best next step for me will be to read the book. But jumping ahead a bit, there are a couple of issues that jump to mind as I read your response, which I raise below:
On Jun 4, 2006, at 8:56 AM, Pietro P. Masina wrote:
For example, immediately after the regional economic crisis, the World Bank claimed that Vietnam risked missing the train of recovery in the region. Vietnam was suggested to take bold steps in economic reform, pointing out that the country had lost attractiveness for foreign investors already before the crisis due to internal reasons. In reality, the drop in FDI flows ahead of the crisis was largely a myth and the contraction after the crisis was soon reversed in line with recovery in the rest of the region.
I do think it's hard to downplay the significance of the regulatory reform that Vietnam undertook in the late 1990s. Domestic private company registrations plateau-ed in the mid-90s and were actually starting to drop. The regulatory reform -- spearheaded by local institutions like CIEM and VCCI -- is highlighted, of course, by the Enterprise Law and the rather dramatic impact it had in promoting formal forms of domestic entrepreneurship. Also highly significant was the abolishment of export licenses for private companies. The results have been pretty remarkable. I would argue that the most important issue around that time was not Vietnam responding to pressure from outsiders or "sticking to its guns", but instead, the leadership realizing the great potential of local entrepreneurship (as exhibited primarily in parts of the South in the 1990s) and determining to spread these lessons around the country by demanding that local governments loosen up control over the private sector. A "sticking to its guns" argument would have to show some direct positive relationship between the stagnant state sector reform and Vietnam's success.
Vietnam became an outstanding performer in East Asia partially because implemented some of the reforms promoted by the World Bank but even more substantially because it did not follow those advices.
I think this is certainly an area of broad agreement. The World Bank and donors, in general, have little -- if any -- power vis a vis the Vietnamese government. Vietnam, I'd say, is the ultimate counter-example to popular arguments painting the Bank as a bully. An interesting question, actually (raised by a good friend of mine), is why Vietnam is in the PRSP system at all. My understanding was that this was aimed at highly indebted countries (HIPCs). Perhaps Vietnam fit in because people just felt so optimistic about it and felt it would reflect well on the program.
From the mid-1990s the World Bank started to express serious concerns about the viability of the Vietnamese economic policy, asking for a 'doi moi 2'. In the ten years since mid 1990s, the IMF managed to put on halt lending to Vietnam twice.
I think the IMF is a pretty interesting issue for discussion. Who really decided to end IMF lending? I'd argue it was not the IMF, but it was Vietnam. Vietnam didn't need the IMF and therefore had no reason to relent to its demands for greater transparency. Therefore Vietnam made the very rational decision to forgo loans. It'd be great if your book delves deeper into particulars of this situation.
From: Markus Taussig <markustaussig@mac.com>
Date: Jun 4, 2006 2:19 PM
Subject: Re: [Vsg] New book: Vietnam's Development Strategies
Hey Michael and Pietro,
The statistics showing the continued strength of the state sector are somewhat misleading. In its study on informality in 2002, IFC did a back of the envelope calculation of how real output is probably increasing based on use of electricity and estimated that calculations of GDP growth between 1993 and 2000, I think, were underestimated by a good 50%. Highly inexact science, but one of numerous indicators that the private sector (and production in the state sector that dissipates into the hands of those with access) is under-represented in official statistics.
A careful study of the results thus far and the likely further results of state sector privatization would be really interesting. I remember an early IFC study indicated that there has been fairly significant workforce growth of privatized SOEs, but these, of course, did not consist of a representative sample. The criticisms of SOE reform, however, often indicate that some of the most viable companies are not being privatized, so it is not clear that the bias of the sample would necessarily be in favor of more profitable firms. My personal take is that, while there would surely be a shake-out and some pain in the transition, a much more comprehensive privatization effort would probably have a positive overall impact on employment. Has the ILO or UNDP ever done a study on what they would expect to happen, labor-wise, with a massive privatization program? It does seem like something that could be studied in a fairly systematic way. As I understand it, the donors have offered to set up a large fund to provide support to workers who lost their jobs under privatization. I'm not sure whether or not that offer has come with requirements deemed unacceptable by the government.
A not-so-successful "third way" that Vietnam has experimented with is the attempt to recreate the chaebel and keiretsu underneath state ownership via the general corporations. I think this experiment has largely been declared unsuccessful. Here and with state sector reform, in general, the most real and vexing problem seems to be how to minimize the appearance of unfairness in the privatization process. The current situation, where unfair access to resources by SOE managers is kept to the informal sector and limited by social norms, probably does indeed have a less unsettling effect on politics than would a Russian-style fire sale that formalized the situation and brought disparities more into the open. But hiding the problem doesn't mean it's not there.
Markus
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