Is the World Bank compatible with the "Socialist-oriented market economy"?
A political economy approach applied to the case of Vietnam
Jean-Pierre Cling1, Mireille Razafindrakoto2 and François Roubaud3
1
Paris Nord University (CEPN-CNRS), Villetaneuse, chercheur associé à DIAL, Paris.
cling@univ-paris13.fr
Paris Nord University, 99 Avenue Jean-Baptiste Clément, 93430 Villetaneuse.
2
Institut de Recherche pour le Développement (DIAL), Paris.
razafindrakoto@dial.prd.fr
IRD-DIAL, 4 rue d’Enghien 75010 Paris.
3
Institut de Recherche pour le Développement (DIAL), Paris.
roubaud@dial.prd.fr
IRD-DIAL, 4 rue d’Enghien 75010 Paris.
1
Is the World Bank compatible with the "Socialist-oriented market economy"?
A political economy approach applied to the case of Vietnam
Abstract:
Thanks to a remarkable economic performance, Vietnam has achieved huge poverty reduction
and has become a middle income country. Although Vietnam considers itself as a ‘socialistoriented market economy’, the World Bank presents it as a model student of liberalism and
market-oriented reforms. The relationship of mutual interest between the World Bank and
Vietnam explains this apparent paradox: in its constant search for legitimacy, the former is
desperately looking for development models and new clients; the latter accepts this
misrepresentation because it needs foreign funding and international credibility. The paper
details the example of poverty reduction strategies, which gave the World Bank the
opportunity to ‘plant its flag’ in Vietnam.
Key words: World Bank; Vietnam; post-Washington consensus; Development model; Poverty
reduction; Socialist-oriented market economy.
JEL Codes: O11; O19; P26; P36.
Résumé :
Les performances économiques remarquables du Vietnam se sont traduites par une réduction
sans précédent de la pauvreté et par l'obtention du statut de pays à revenu intermédiaire.
Bien que le Vietnam se considère lui-même comme une "économie de marché à orientation
socialiste", la Banque mondiale le présente comme un élève modèle en matière de
libéralisation et de réformes de marché. La relation d'intérêt mutuel réciproque entre la
Banque mondiale et le Vietnam permet d'expliquer ce paradoxe apparent. La première, en
quête permanente de légitimité, satisfait ainsi sa recherche désespérée de modèles de
développement et de nouveaux clients ; le second accepte ce faux-semblant qui lui permet de
renforcer sa crédibilité internationale et facilite son accès aux capitaux étrangers. Cet article
analyse en détail les modalités de ce modus vivendi et l'illustre à partir du cas emblématique
des stratégies de réduction de la pauvreté, une occasion rêvée pour la Banque mondiale de
"planter son drapeau" au Vietnam.
Mots-clefs : Banque mondiale ; Vietnam ; consensus post-Washington ; modèle de
développement ; réduction de la pauvreté ; économie de marché à orientation socialiste.
2
The World Bank has been working in Vietnam since 1993, when it returned after a hiatus of
nearly two decades. In a twist of fate, the same Robert McNamara who led the Vietnam War
as US Secretary of Defense in the 1960s was the man who then, as President of the Bank,
decided under American pressure to halt funds to the country (Gwin, 1997).
Vietnam is an extremely important country for the World Bank. It tops the list of concessional
funds granted by the International Development Association (IDA) in the form of project aid
and budget support. At the same time, the Bank has become Vietnam’s number two donor
after Japan and plays a prominent role among the country’s donors. But the importance of
Vietnam for the World Bank lies beyond this financial weight. It has gone as far as presenting
Vietnam as a model student of its policies and of market-oriented reforms. A. Chibber,1 then
the Bank’s Country Director for Vietnam, even called Vietnam a ‘poster child’ of the World
Bank. It is not a coincidence if R. Zoellick, right after being appointed President of the World
Bank in 2009, chose Vietnam for his first trip abroad. Yet herein lies a double paradox, which
this article seeks to analyse. On the one hand, how can the Bank actively support a country
governed by the Communist Party which still applies economic planning and follows mixed
economy rules, even to the extent of holding it up as a model, when the liberal model the
Bank promotes in all the developing countries continues to be broadly based on the ‘postWashington consensus’, defined as a set of policy recommendations, combining macroeconomic stabilization, (internal and external) liberalization with an additional recent focus on
the improvement of the institutions (Fine et al., 2001; North et al., 2009; Acemoglu and
Robinson, 2012)? On the other hand, why do the Vietnamese authorities accept this support
and this misrepresentation, without any ostensible criticism?
1
The Economist, Special Report on Vietnam, 24th April 2008.
3
In this paper, we analyse this paradox using some concepts of international political
economy.2 Following Wade (2002) and Engel (2010), we consider the World Bank as an
institution which serves the interests of the US hegemony, by promoting its dominating
ideology, which is ‘neo-liberalism’. In this context, the World Bank cannot accept
‘heterodox’ models, which would contradict the development model it is promoting (Cling et
al., 2011).
This is the reason why the existence of a specific model which explains the success of the first
wave of Asian emerging countries has been hardly acknowledged by the World Bank in its
well-known East-Asian Miracle report (World Bank, 1993). This report puts forward the
major contribution of liberal policies to the economic performance of East-Asian countries
and neglects the impact of industrial and other state policies. According to Wade (1996), ‘the
result is heavily weighted towards the Bank’s established position, and legitimizes the Bank’s
continuing advice to low-income countries to follow the “market-friendly” policies apparently
vindicated by East Asia’s success’. For the same reason, the model followed by Vietnam has
to be normalized in order to be formally integrated into the dominant model. There is no
alternative, as the World Bank has been confronted with a persistent crisis of legitimacy since
the 1990s (Bresser Pereira, 1995; Cling et al., 2003; Engel, 2010) and is desperately looking
for model countries in order to legitimize its policy recommendations, as the countries taken
as an example have all successively failed after a while and consequently have all become
‘black sheep’. Indonesia, which has been number one in the list for several decades until the
Asian crisis in 1997, is one of the best examples in this respect (Engel, 2010). The World
Bank cannot therefore allow itself not to include countries such as Vietnam, which are
2
The authors thank Martin Rama and two anonymous referees for very relevant comments on a previous version
of this paper. Usual caveats apply. A shorter and adapted version of this paper, entitled “The World Bank and
Development Policies in Vietnam”, has been published in a collective book by the Korea Institute for
International Economic Policy, Seoul.
4
emerging from under-development and are successfully eradicating extreme poverty. Indeed,
refusing this would threaten the legitimacy of its neo-liberal model.
Our analysis shows how the World Bank takes over ownership of economic policies followed
by Vietnam and of their results, which it has to adapt and to present in a biased way in order
to make them fit into its policy model, and how this is accepted by Vietnam because it brings
the country economic and political benefits. This ‘marriage of convenience’ between donors
on the whole and Vietnam, taking advantage of its ‘success story’ status and of the
‘disbursment culture’ of development aid agencies, has already been analysed by
Gainsborough (2010). We apply this concept to the relationship between the World Bank and
Vietnam, adding the ideological dimension presented here above. The analysis is based
primarily on various studies and reports concerning the activities of the World Bank in this
country and the history of economic policy and reform in Vietnam. Three reports prepared by
this international organization to relate the history of its interventions in this country (World
Bank, 2012a; 2012b and 2012c) have been especially mobilized, as well as a parallel report
prepared by the State Bank of Vietnam (2012), which is entitled significantly Vietnam-World
Bank: Long Term Companions in Development. It also draws on numerous interviews held
with staff of the World Bank, other international institutions working in this country and
government officials.
The first part analyses the main characteristics of the development model followed by
Vietnam since Doi Moi (‘Renewal’) and derives from the analysis that the claims made by the
World Bank are a fallacy: presenting Vietnam as a success story of liberalism and claiming
that the World Bank has played a decisive role in reform and therefore in Vietnam’s economic
performance is unfounded. The second part seeks to understand the actors’ rationality and the
‘role play’ in which the World Bank and Vietnam are engaged: why does this country accept
this biased presentation made by the World Bank to the international community, and what
5
does it gain from it? Conversely, what does the World Bank have to give Vietnam to make it
accept this message? In order to answer these questions, we analyse the relationship between
the World Bank and Vietnam adopting an international political economy approach and show
that the usual unequal power relationship maintained with poor countries gives way to a more
balanced relationship. The World Bank has had to adapt its way of doing business in order to
be accepted, while the Vietnamese authorities have accepted to be taken as a model and have
benefitted from this situation. The third part is a case study of this very specific relationship,
which describes how the World Bank eventually managed to ‘plant its flag’ in Vietnam
through poverty reduction policies. Since the adoption of the Millenium Development Goals
(MDGs) in 2000, poverty reduction has been put at the core of development policies
worldwide (Cling et al., 2003). As Vietnam’s performance in this area over the last few
decades is among the best in the world, the World Bank has presented Vietnam as a model
and has included Vietnam in the new poverty reduction strategies it promotes. By doing so, it
has legitimized these strategies while increasing its hegemony among donors. The conclusion
looks at the World Bank’s prospects in Vietnam now that it has become a middle-income
country, and wonders how this could change its modus operandi.
Imposing the « Washington Consensus » in Vietnam: an impossible challenge for the
World Bank
Vietnam has posted remarkable macroeconomic performances since the launch of Doi Moi.
Despite arriving in this country nearly a decade after the launch of reforms and economic
take-off, the World Bank did not hesitate to rapidly take over ownership of policies and of
economic results. Indeed, it claimed that it had a decisive intellectual influence on the design
of policy reform and constantly reaffirmed that Vietnam was following a liberal economic
model corresponding to its recommendations. We show in this first part that this is a fallacy:
6
not only has the Vietnamese development model numerous specificities which make it
essentially different from the ‘post-Washington consensus’, but reform has been mostly
‘endogenous’ in Vietnam and not imposed from outside.
Vietnam: a success story of liberalism?
After decades of war followed by years of economic depression and penury, Doi Moi (1986)
marked Vietnam’s transition to ‘market socialism’. The economic take-off observed since
then is quite exceptional among developing countries. Since the mid-1980s, GDP growth has
been close on 8% per year (a performance similar to China whose annual growth rate has
hovered around 9% over the same period) and export growth has been even higher than in
China over the last decade. These performances prompted the weekly The Economist to hail
Vietnam as ‘Asia’s other miracle’ (the first being China) in a special report on the country.3
Vietnam shares indeed many common characteristics with China in terms of economic
policies and performances, in spite of the huge size difference. These two countries are the
only ones worldwide which combine a market economy with a one-party State led by the
Communist Party. Some authors go as far as considering that they follow the same economic
model, called ‘socialist market economy’ in China and ‘socialist-oriented market economy’ in
Vietnam (Le Huu Tang and Liu Han Yue, 2006).
Doi Moi set the stage for the emergence of a vibrant private sector alongside a huge sustained
public sector, with state-owned enterprises continuing to control whole swathes of the
economy (energy, industry, banks, etc.). The government has, by and large, continued to
conduct highly active public policies in all areas (agricultural, industrial and planning
policies), to regulate basic commodity prices, and so on (Beresford, 2008). This distinctive
3
The Economist, Special Report on Vietnam, ibid..
7
economic model, of a market economy combined with strong government intervention, has
been called ‘developmental state’, ‘state capitalism’ or ‘alliance capitalism’ and has been
applied in equivalent forms by most of the emerging Asian countries (World Bank, 1993). As
pointed out by Masina (2006), there is a debate concerning the classification of Vietnam,
some researchers consider that it is applying ‘state capitalism’ (like other emerging ‘capitalist’
countries) and some others rather ‘state socialism’ (such as China). Apart from political
considerations and the existence of economic five-year planning, the fact that Vietnam
accessed WTO as a ‘non-market economy’ (like China) acknowledges this latter specificity.
However, for reasons detailed in the second part of this paper, there is an implicit agreement
to present Vietnam as a regular market economy: neither the above mentioned reports
prepared by the World Bank on the history of its interventions in Vietnam mention that it is a
‘socialist-oriented market economy’ (or at least not a usual market economy), nor the
companion report prepared by the Vietnamese authorities.4
All in all, as shown by Masina (2006) and Thoburn (2009), comparisons made with China and
other Asian emerging countries should not lead to underestimate the specificities of the
Vietnamese development model.
First and from a broad perspective, Vietnam shares many characteristics with other Asian
emerging countries and can be qualified as a developmental state. Its economic boom over the
last quarter of a century is due to an original combination of mutually supporting (political
and economic) institutions and agents. The key role played by public authorities with
considerable administrative, managerial and implementation capacities, the permanence and
long term planning of growth policies (fixing long term national goals) implemented shape
the main common characteristics of this original “political settlement”, using the terminology
4
The Vietnamese report prepared by the State Bank only mentions this concept once and almost at the end
(p.43), concerning the institutions of a socialist-oriented market economy.
8
proposed by Khan and Blankenburg (2009). From this perspective, emerging Asia neither
adhere to the models followed by other developing countries nor to the normative framework
of liberal market economies.
Second, Vietnam and China are undoubtedly different within this region, because of their
political regime and the balance of power which derives from this regime. The one-party
system gives the Communist party and its affiliated organs (mass organizations) very strong
control over the transmission of decisions from the national to the local level. However, this
« democratic centralism » is counterbalanced by a high level of decentralization (see for
example Albrecht et al., 2010, for the case of Vietnam ; andAglietta and Bai, 2012, for that of
China). Decentralisation allows the pressure imposed by the one-party system to be
alleviated, by regulating top-down and bottom-up initiatives. In this respect, the situation of
Vietnam and China contrasts with the highly centralized systems that characterized such
economies as South Korea and Taïwan.
Third, Vietnam differentiates from China in many respects, and especially in the degree of
decentralization which is even higher in the former than in the latter country. Not only local
(provincial) authorities have more extended powers, but wide income redistribution between
provinces gives even the poorest some financial means necessary to conduct public policies.
This balance has led Vietnam to achieve much better results than China in terms of economic
inequalities or social cohesion. The degree of freedom allowed to local authorities has also
shaped significant differences in the way reform has been implemented in both countries.
Although both have adopted a flexible and gradualist approach, 5, Vietnamese “operational
pragmatism” has been quite different from Chinese “theoretic pragmatism”. In Vietnam, the
The pros and cons of the “gradualist” vs “big bang” approach have been strongly debated in academic studies
in the second half of the 1990s, especially concerning China (Sachs and Woo, 2000). It seems that there is now a
consensus on the advantages of gradualism. The World Bank (2011) does not hesitate to underline that
Vietnam’s success is partly the result of "pursuing a gradual and bottom-up reform process" (p.10).
5
9
central authorities authorized a substantial leeway for experimenting, before scaling up when
successful. In China, new innovative policies had to get the green light from central
authorities prior to being tested (Le Huu Tang and Liu Han Yue, 2006)
As in other South-East Asian emerging countries and because of their size, there is a heavy
reliance on exports which also implies high vulnerability to the international economy.
Indeed, like most of the emerging Asian countries, Vietnam has applied an export-driven
growth model supported by massive foreign direct investment, which contributes to the
majority of its exports. This has prompted swift international integration despite the American
embargo on the country remaining in place until 1994. This international integration is the
result of a combination of economic liberalism, improvement of market access to
industrialized countries and pro-active public policies: fixed exchange rate, contrary to
flexible exchange rate policies promoted by the Bretton Woods Institutions (BWIs), the Dong
exchange rate following a ‘crawling peg’ to the US dollar; import substitution policies, which
have mixed selective import protection with strategies to develop new export sectors. Starting
from scratch at the beginning of the 2000s, Vietnam has become over a decade the second
largest exporter of garments to the American market (after China) and manufactured products
now represent half of its exports. Export surge has been supported by export subsidies, tax
exemptions in export processing zones, etc. Trade liberalization has been very gradual, and
the effective protection rate was still at a very high level until the mid-2000s. The same goes
with financial liberalization: the national currency is still not convertible and foreign
investment in financial services was prohibited until WTO accession (2007). Agricultural
performances have been astounding, particularly regarding previous food shortages. Starting
also almost from scratch in the 1990s, Vietnam has now become the world number two
exporter of rice and a leading exporter for several cash products. Liberalization (production
and trade) has certainly contributed to agricultural production growth; but land reform is
10
another key factor, insomuch as the collectivization-decollectivization process has distributed
land to small farmers who have later been the main engine of the boom registered since the
1980s. This complex mix of factors is acknowledged by The World Bank report on Pro-poor
growth in the 1990s, which underlines that ‘trade liberalization and land reforms promoted the
rapid emergence of Vietnam as a major world exporter of rice and coffee’ (OPPG, 2005). But
it forgets to mention the decisive role played by ‘pioneer front’ policies (in the case of coffee)
and does not delve on land reform in Vietnam, beyond creating land markets and granting
land property rights to smallholders. The same happened with the Vietnam Development
Report (VDR) 2012 entitled Market Economy for a Middle-Income Vietnam, which only
refers to trade liberalization, decollectivization and land rights as the major drivers of export
growth (World Bank, 2011).
A World Bank’s limited impact on Vietnam’s development policy and economic performance
The Bank re-engaged with Vietnam in 1993 following the American administration’s change
of stance after Clinton came to power.6 Coming, as it did, one year before America lifted its
embargo against Vietnam, the Bank’s return marked the end of the country’s isolation and the
resumption of activities by other donors. Only the UNDP (United Nations Development
Programme) and the Swedish International Development Cooperation Agency (SIDA) had
remained in Vietnam for nigh-on two decades of isolation that followed the country’s
reunification in 1975. The historical circumstances surrounding the Bank’s arrival in Vietnam
played (and continue to play) a decisive role. Facing acute economic difficulties and food
shortages, the country decided to launch Doi Moi on its own initiative without foreign advice
before the international institutions turned up in the country (Rama, 2008). At a time when
6
This change of stance also led to the discharge of the debts contracted with the BWIs by the South Vietnamese
regime, which was a condition for the BWIs to resume funding to Vietnam.
11
Vietnam was under the American embargo and isolated internationally, the authorities
urgently needed technical assistance to carry through the reform process. Yet their ‘brother
countries’ were in no position to provide this assistance: either because they had their own
problems (Russia and other Eastern European countries) or because relations had been cut off
with China, which had embarked upon its own reform in 1978.
Even before the World Bank’s official return to Vietnam, it was providing this assistance on
an informal basis. The Prime Minister’s aides at the time have fond memories of the days
when, with just one ‘Dollar’ (David Dollar, today the Bank’s Country Director for China), the
Bank played a role in making the country open to international experiences. The exchanges
concerned macro-economic stabilization, trade liberalization, foreign investment, etc. Two
decades later, this dissemination of foreign experiences is still one of the Bank’s most
welcome contributions to Vietnam.
Towards the end of the 1990s, the World Bank started presenting Vietnam as a success story
of development aid reforms (in this case less for financial than for intellectual reasons). A
famous report co-authored by D. Dollar (one of the coordinators of the first dialogue with
Vietnam) and L. Pritchett formulates this thesis, while recalling the first ‘informal’ World
Bank interventions before it officially returned to this country (World Bank, 1998).
The above mentioned report emphasizes with modesty that ‘It is impossible to measure the
exact effect of these donor activities’, but later on, nonetheless, boasts that ‘Intensive staff
time [implying “of the World Bank”] required little money and made a big contribution to the
country’s reform and development’. This conclusion is very excessive, as it is confirmed by
the chronology of reform in Vietnam and of the progressive come-back of the World Bank, as
it is recalled by the World Bank itself in a report on the historical process of reform in
Vietnam, prepared for the Growth Commission by the then chief economist of the World
Bank in Vietnam (Rama, 2008). As this latter report rightly confirms, reform in Vietnam has
12
been more ‘endogenous’ than ‘exogenous’, without neglecting the usefulness of outside
advice such as the one brought about by the World Bank and other foreign agencies.
Another proof of this limited influence of the World Bank in policy decisions lies in the fact
that on several occasions over the last two decades, the Vietnamese government refused to go
ahead with reforms that the World Bank (and more generally the BWIs) tried to impose. At
the end of the 1990s, Vietnam refused to launch a structural adjustment programme, in spite
of the significant and badly needed funding offered by the World Bank and the IMF (Hayton,
2010). The government signed in 1996 a joint Policy Framework Paper, which defined the
global design of this programme. It was then too reluctant to go any further. In 1997, it
refused a structural adjustment credit which would have meant going ahead with the
programme; on several other occasions, the government refused conditional funding subject
to structural reform: privatization of State-Owned Enterprises (SOEs); restructuration of the
banking sector; trade reform. The Minister of Planning and Investment (MPI) declared: ‘You
cannot buy reforms with money…no one is going to bombard Vietnam into acting’ (quoted
by Hayton, 2010). Vietnam’s retrospective view on this conflict is put diplomatically: ‘the
World Bank has drawn the lesson that the ownership of each country in development
formulation is extremely important for the sustainability of reforms’ (State Bank of Vietnam,
2012). Ironically, this is precisely what of the main lesson drawn later by the World Bank
from the failure of structural adjustment policies in developing countries on the whole, which
inspired the new rules of aid ownership (World Bank, 2002; OECD, 2005).
Another example of this endogenous character of reform and of this reluctance to accept
outside pressure concerns trade liberalization. Vietnam eventually signed the bilateral free
trade agreement with the United States (USBTA), which the USA pushed for very actively.
But Vietnam later on refused to speed up the negotiations for WTO accession (in spite of the
World Bank’s and foreign encouragements), which had been started in 1995. It is only when
13
the trade gains obtained through the USBTA became obvious that the government decided to
go ahead with multilateral trade liberalization and with WTO accession which became
effective at the beginning of 2007.
How much of a role has the World Bank played in the growth path of the Vietnamese
economy? It is hard to give an accurate answer to this question, knowing that M. Rama (2010)
admits that ‘the World Bank has had a limited impact on the trajectory of the Vietnamese
economy’. In a similar vein, the historical report on Vietnam and the World Bank is rather
modest about its contribution: ‘The Bank’s role in providing access to knowledge on
development is consistently raised by officials as its most important contribution’ (World
Bank (2012a). Contrary to its practice in many developing countries, the Bank, like the other
donors, cannot really claim to have influenced the economic policy choices in Vietnam, much
less the pace of reform implementation. Nevertheless, the Bank has provided advisory
services, economic analyses and capacity building (Cling et al., 2009). The part played by the
Bank on the policy research front especially meets a real demand from the Vietnamese
authorities who want to draw on international experience, not to apply as are the models
presented as benchmarks (best practices), but to fuel internal discussions on the directions to
take. Reform implementation decisions are made only when they have enough analytical
elements to prove their relevance to Vietnam. So the Vietnamese authorities mobilize the
resources and research in order to steer and implement reforms with their own homegrown
agenda. Vietnamese authorities summarize this relationship this way: ‘support from donors on
policy development should be based on the roadmap for reform of the Government with
strong incentives for implementing policies rather than a plan to impose these policies’ (State
Bank of Vietnam, 2012). But at the same time, the Vietnamese authorities seem to
overestimate the contribution of the World Bank, emphasizing that ‘it [the World Bank] has
14
huge and effective contributions for economic development, social progress and poverty
reduction in Vietnam’ (State Bank of Vietnam, ibidem).
The question is therefore to know why the Vietnamese authorities have let the World Bank
present the country as the most accomplished example of success of its development policy
recommendations, and what has been the price of this arrangement? If the motivations of the
World Bank are relatively obvious, given its crisis of legitimacy, it is somehow a paradox that
the Vietnamese authorities accept this situation, insomuch as ideological inclinations seem to
be antagonistic.
The political economy of the relationship between the World Bank and the Vietnamese
authorities: mutual interest but different objectives
As shown in the previous part, the Vietnamese context is characterized by great pragmatism
of the authorities and by a limited influence of the World Bank in spite of its claims. At the
same time, and in spite of a few clashes as seen here above (especially at the turn of the
century with the World Bank concerning structural adjustment policies and with the IMF
concerning privatizations and exchange rate policy), the authorities are well aware that they
need the World Bank and development aid in order to finance the country’s development and
acquire international credibility. This is the main reason why, according to Masina (2006),
‘The Vietnamese authorities have chosen to avoid confronting the international financial
institutions with strong policy declarations … Their line of resistance could only be detected
by looking at how the various measures were implemented’. At the same time, the World
Bank has shown some flexibility in order to maintain its activities in the country and to keep
its privileged relationship with the authorities. Vietnam acknowledges this relationship of
mutual interest and goes as far as to suggest that ‘the relationship between Vietnam and the
World Bank developed from a “normal” relationship between the World Bank and a member
15
country to a mutual partnership’ (State Bank of Vietnam, 2012). In this part, we analyse this
‘marriage of convenience’ and how it has been working in the 2000s.
The World Bank has adopted a more flexible way of doing business in Vietnam
In Vietnam as in other developing countries, the Bank aims through its funding to influence
development (macro-economic and sector) policies. Because there is no IMF programme in
Vietnam, the capacity of the Bank to influence policies is increased. But Vietnam above all
follows its own development path, even if it also borrows from the experience of other
(especially Asian) countries. Because of this, the influence of the Bank in Vietnam can only
be based on a non-doctrinary approach taking into account these specificities.
The Bank’s ability to adapt to the Vietnamese environment is to its credit. Firstly, as it rather
inspired misgivings over the structural reforms, it focused its actions mainly on developing
infrastructures and poverty reduction. Secondly, instead of trying to win the Vietnamese over
by means of direct negotiations, it prioritized working with key institutions that provide
analyses and advisory services to the decision-makers (Rama, 2008).
Lastly, rather than define conditionalities for the granting of loans, the Bank for once adopted
a more flexible stance. The emphasis is on guidelines that define a certain number of strategic
reforms negotiated with the authorities and intermediate goals to be met. Disbursement hence
depends on an overarching assessment of the state of progress with the recommended reforms
rather than the satisfaction of precise criteria. So the Bank has learnt to be less demanding
about the speed of reform implementation. More generally, this flexibility stems from the fact
that the institution’s actions today are no longer presented as assistance activities but as
partnership activities, hence the title of the report: Vietnam and the World Bank a strong and
enduring partnership (World Bank, 2012a).
16
The institution’s more flexible position has to do with the large volume of credit granted to
the country and the ambition to make it an example of success on an international scale. As it
is a financial institution, the World Bank cannot afford to lose a client which has huge
financing needs, knowing that its growth path and financial solvability induce low risks of
default unlike many of other clients in the past. Moreover, the funding granted to the country
must be proven to be well spent and for successful projects.
More importantly, however, Vietnam has the particularity of an indomitable will and capacity
to design and steer its nationwide reforms in total sovereignty. Yet the process takes time, and
this does not meet with the recommended reform pace to the great despair of the international
institutions’ experts. The question could therefore be raised as to whether the Bank’s atypical
relationship with the Vietnamese authorities, which has in some ways been imposed by the
circumstances, should be held up as a model in the other countries in which the institution
works.
In this context, the World Bank interventions in Vietnam differ slightly to the liberal doxa, as
implemented in its most radical version within structural adjustment programs, especially in
Africa (with many intrusive conditionalities). In this respect, we nuance here Engel (2010),
who argues on the contrary that World Bank policies in Vietnam are similar to the ones
promoted in other developing countries.7 Although they don’t question the main objectives, of
the ‘Post-Washington Consensus’, principles guiding the interventions of the World Bank in
Vietnam take into account some critiques from within the organization (World Bank, 2005).
They especially accept the need to find a balance between market mechanisms and public
policies, the mix between each of them having to be defined on a case basis. For example, the
World Bank supports ongoing privatizations in Vietnam, but also promotes the gradual and
7
Engel (2010) focuses on the 1990s until the very beginning of the 2000s, whereas our analysis covers the whole
2000s. This time difference could explain the slightly different view.
17
partial approach adopted by the government, and recognizes the contribution of SOEs to the
Vietnamese economy. In various areas and considering empirical data, the behavior and
performances of SOEs compare well to the private sector. The Vietnam Development Report
2009 emphasizes that ‘postulating the inefficiency of public enterprises is too simplistic to be
useful’.
Of course the huge scandal of Vinashin dockyards bankruptcy at the end of 2010 also
confirms the management and corruption problems encountered with some SOEs, which
allowed the Bank to be less cautious about this issue as the dysfunctioning of SOEs became
so obvious publicly. Overall, the question of capital ownership (private or public), which is
potentially the most contentious between the World Bank and Vietnamese authorities, is
emblematic of the gentleman’s agreement behind the double paradox which this paper aims to
study. On the one hand, the formidable expansion of the private sector, first with regards to
agriculture following the de-collectivisation process, then industry and services, is put
forward by the World Bank in order to explain the Vietnamese success story. On the other
hand, the authorities do not put in question this partial and biased presentation, as far as it
neglects the hidden side of the story, which is the determining weight of SOEs and StateOwned Commercial Banks (SOCBs) in the economy. The government wishes to keep this
weight intact for strategic reasons. The share of public employment (State+SOEs) in total
employment even increased between during the 2000s (from 9.3 % to 10.5 %). However, due
to the dynamism of the private sector, SOEs’ share of employment in the enterprise sector
steadily diminished during the last decade (from 59% of the jobs in the formal enterprise
sector to 19% in 2009). In spite of this declining share, the State not only keeps control of all
the critical sectors, but also still has considerable presence in various commercial activities
(World Bank, 2011).
18
Contrary to the standard recommendation for a flexible exchange rate as an ultimate objective
to absorb short-run shocks and free up leeway for monetary and tax policies, the
disadvantages of a flexible exchange rate are clearly condemned. Greater vulnerability to
external shocks leads the Bank to conclude, ‘Whether the ultimate objective of the
government is a fully flexible exchange rate is unclear at this point. And even if it were, there
are understandable reasons why the transition may take some time.’ (World Bank, 2009) The
same observation holds for the liberalisation of the capital account.8
The motivations of such a less doctrinary approach in this country are mainly constrained:
because of the nature of the Vietnamese regime and of its undeniable economic success, the
World Bank is not in a position to impose liberal shock therapies, as it has been able to do in
other countries with a weaker government and where economic results are not so bright.
Furthermore, because of decentralization, the power and relative autonomy of local authorities
limits the potential influence of World Bank policies, which deals with central government.
Therefore, decentralization makes the decision process and policy implementation more
complex.
The IMF, on the other hand, did try to stick to a ‘hard’ line and came away with a bad taste in
its mouth, stopping its disbursements in 2002 and winding up its last programme in 2004. The
official reason given was the rejection of the IMF’s request to conduct an independent audit of
the central bank. Yet beneath the surface was Vietnam’s decision to dispense with the IMF’s
services due to a growing disagreement over privatizations (state-owned enterprises and
banks), with the Vietnamese authorities resisting attempts to speed up the process underway.
The IMF’s handling of the 1997 Asian crisis, widely criticized by many governments in the
region, also came into play since it had left a dent in the IMF’s credibility (Rama, 2008).
8
It will take 15 years after the Asian Crisis for the IMF to recognize the potential benefits of capital controls
(IMF, 2012).
19
In the first place, the Bank has always scrupulously respected the basic principle of non
intervention in the political arena, as laid down in its charter. Without going so far as to
defend the concept of ‘Asian values’ promoted by the leaders of Singapore, the Bank remains
oblivious to the political regime as long as the principles it defends are respected (ownership,
empowerment, etc.). Like other donors the Bank has also avoided to formulate direct critiques
on certain matters of governance and corruption (unlike what it did in Cambodia), just as it
was making good governance a core element of its policies in the other developing countries.
It preferred to adopt a practical approach on governance issues (reform of the custom and
financial system) rather than a doctrinary one. At the same time, it tried to encourage the
government’s effort to launch reform on this subject, while recognizing the complexity of
their implementation. The VDR 2010 dedicated to corruption and institutions is a good
illustration of this gradual approach. This attitude strengthens the Vietnamese authorities’
relationship of trust with the Bank, as it is not threatening their power and is not interfering
with domestic policies. This is consistent with the World Bank presenting Vietnam as a model
of liberalism but only to the outside world, without trying to promote it openly inside the
country.
Vietnam’s authorities interest in this relationship
Obviously, as elsewhere, the policies promoted by the Bank could change the domestic
balances and eventually lead to political protest. For example, building up the non-state
entities (private sector and local authorities) will necessarily make it harder and more
complicated to maintain the current mode of political rule; not to mention the more general
theory that economic development itself automatically puts pressure on for political
liberalisation (Inglehart & Wentzel, 2005; Acemoglu & Robinson, 2012, for the case of
China).
20
However, insofar as the authorities consider that the Bank’s purposes correspond to their own
aims, these (potential) induced effects are a risk to be taken and it is their own responsibility
to keep the lid on them. In some ways, by supporting the massive budget transfers between
provinces and categories of population, the Bank is effectively an objective ally of the
Vietnamese government in that it avoids a source of social unrest. This relationship of mutual
interest is criticized by other donors who consider that the Bank is an unconditional supporter
of Vietnam (its cheerleader) and serves as a guarantor for the country (for example, the
signing of the Poverty Reduction Strategy Credit triggers other funds), when the international
community’s duty should be to insist that certain principles are respected (human rights,
governance, state-owned enterprise reform, etc.).
In some way, one could say that the Bank managed to use to its own advantage the
Vietnamese authorities’ extremely pragmatic approach to the reforms, rejecting a too sharply
ideological attitude. This uncommon course of influence (from the country of intervention to
the Bank) is obviously an accomplishment for Vietnam. Yet it is also to the Bank’s credit for
taking more of a back seat and not always dictating. Although some convictions might explain
part of this choice, tactical considerations and the powerful position of Vietnam have
contributed mostly. The Vietnamese economy’s outstanding performance obviously went a
long way to making the Bank more receptive and swinging the internal pendulum away from
the proponents of a more radical attitude and towards the ‘moderates’.
Although the Vietnamese authorities are very attentive to their relationship with the Bank
(which is far from the case with China, for example), they only apply (or reject) its
recommended policies after assessing them in detail. This ensures total policy effectiveness
and justifies the application of ownership principles at the same time. It is because Vietnam is
in good enough shape to take its future in its own hands and because it tries to define its own
21
vision of its development that the Bank can play the role it plays. A cheeky assertion at this
point would be, ‘It is the Bank that buys into Vietnam’s policies rather than vice versa.’
Vietnam gains from this relationship through different channels. The country needs foreign
funding: although it gets a lot of private (especially FDI) and public capital inflows
(development aid from other sources), the World Bank funding has a signaling and leveraging
effect. The credibility granted by the World Bank is all the more important as Vietnam has
been isolated internationally for many decades, refuses IMF funding, and is still stigmatized
in certain circles as a Communist and ‘non market’ economy (especially at the WTO).
Because this status makes Vietnam’s access to the world’s leading markets shaky and more
vulnerable to anti-dumping procedures, the Vietnamese authorities are fighting to get a
‘market economy status’. In this context, it is better for them to hide the specificities of the
economy and to blend in among other developing countries.
To sum it up, there is a win-win relationship between the World Bank and Vietnam. Rather
than following the same policies and objectives, each of them has their own interests which
appear to be compatible. Vietnam benefits from the World Bank’s support, in terms of (direct
and indirect) funding, advice and increased credibility. The World Bank gains by claiming
wrongly Vietnam’s success as its own, which reinforces its credibility among the international
community, while it keeps conducting the same neo-liberal policies in other developing
countries. But isn’t this balanced and fruitful relationship preferable to the asymmetric and
domineering relationship conducted by the World Bank with most other developing
countries?
Poverty reduction strategies: an emblematic example
Poverty reduction is a long-standing priority in Vietnam. It predates the international
community’s adoption of the poverty reduction strategies and Millennium Development
22
Goals (MDGs). We look here at how these international initiatives may have influenced the
content, directions and outcomes of the poverty reduction strategies conducted in Vietnam,
and especially on the Bank’s role in this process. The main message drawn from our analysis
is that Poverty Reduction Strategies Papers (PRSPs) have provided the World Bank with a
golden opportunity on both levels: first it has allowed this institution to ‘plant its flag’ in
Vietnam and to increase its funding to this country, which is especially important as the
World Bank is constantly looking for new clients; second, by including Vietnam in these
strategies while hailing Vietnam as ‘one of the most impressive histories of poverty reduction
in modern times’ (World Bank, 2012b), the World Bank has managed to legitimize these
strategies through claiming ownership of Vietnamese poverty reduction policies, even if these
were conducted long before the launch of PRSPs.
Massive poverty reduction in Vietnam
At the beginning of the 1990s, poverty remained endemic in Vietnam despite the end of the
previous decade’s penury. The first household survey conducted in 1993 estimated that 58%
of the population was poor. By 2008, this percentage had plunged to less than 15% and
extreme (food) poverty had plummeted to 5% of the population (from 25% in 1993).
The massive national drop in monetary poverty is due primarily to the Vietnamese economy’s
rapid growth. Unlike many developing countries, this growth has been largely inclusive,
avoiding the marginalization of a large proportion of the population and a sharp rise in
inequalities. The Gini Index, the most widely used gauge of inequalities, posted an increase
from 0.34 in 1993 to 0.37 in 2008. This is relatively low (especially compared to China’s
increase), bearing in mind that the level of overall inequalities itself remains modest.
Public policies have also played a role with ambitious budget transfers between rich and poor
provinces and the targeting of poor populations:
23
- the size of the budget transfer between rich and poor provinces is remarkable, which makes
Vietnam’s transfer policy very specific among developing countries; through the equalization
mechanism, the richest provinces (Ho-Chi-Minh City) transfer as much as three quarter of
their budget resources to the poorest provinces; for the latter, financial transfers represent as
much as half of their provincial GDP; these resources make political decentralization work as
provinces have the financial means to conduct their own social and development policy since
the Budget law of 2002, which came into effect in 2004 (World Bank, 2008);
- two poverty reduction programmes have also played a less important part in this: the
National Targeted Programme for Poverty Reduction (NTP-PR) and the P135 programme to
assist people living in mountain areas. The first programme grants financial transfers to the
poor (for health in particular), while the second has primarily helped village communities to
build infrastructures (roads, schools, etc.). This second programme receives Bank funding.
The immediate upshot of these massive infrastructure investments has been a sharp rise in
access to public services and an extremely positive shift in the human development indicators.
For several of these indicators (life expectancy, school enrollment, etc.), Vietnam is far ahead
of all the countries with a comparable development level. All in all, Vietnam is ahead with
most of the Millenium Development Goals (MDGs) from the point of view of the 2015
deadline, a fact of which few developing countries can boast (World Bank, 2008).
Vietnam has formally adopted a poverty reduction strategy
In 2002, at the donors’ request, Vietnam prepared and adopted a Poverty Reduction Strategy
Paper (PRSP) entitled the Comprehensive Poverty Reduction and Growth Strategy (CPRGS).
Vietnam, like all the low-income countries, had to observe the PRSP initiative if it wanted to
continue receiving funds from the Bank and the other aid agencies.
24
Around one hundred million dollars in annual financing (150 million dollars assigned for
2012) has been allocated to the poverty reduction and growth strategy in the form of budget
support every year since 2001. The Poverty Reduction Support Credit (PRSC) is the financial
instrument designed by the World Bank to channel budget aid aimed at fighting poverty in
Vietnam as in other developing countries following poverty reduction strategies.
Even if the CPRGS was not drafted by the Bank’s office in Vietnam (Ohno quoted by World
Bank, 2012a), contrarily to what happened in many African countries (Cling et al., 2003), it
was written by the authorities in close coordination with the Bank. With the adoption of this
strategy, the Bank granted a first PRSC in 2001-2002 (the tenth and last tranche of which was
launched for 2012). Vietnam was the first developing country, alongside Uganda, to have a
PRSP. Several donors followed the Bank’s lead and also granted budget support credits.
Yet the CPRGS failed to really find its place in government policy, since the Vietnamese
government continues to apply five-year planning. Once the CPRGS had been adopted, the
government no longer referred to it and it was quickly forgotten. The Bank consequently
decided that the five-year plan would be deemed Vietnam’s PRSP, and this decision was put
into practice for the Socio-Economic Development Plan 2006-2010 (which makes no
reference whatsoever to the CPRGS). The SEDP’s content is however largely different to a
classic PRSP and very similar to the previous five-year plans. It prioritises macroeconomic
policies and infrastructure projects, in keeping with the usual purposes of these plans.
Surprisingly, reference to the MDGs is only found in the appendix and the poverty reduction
goal is barely mentioned. Policy budgeting is presented for the projects only. And, despite the
fact that the SEDP echoes the five-year Soviet plans by setting a number of highly specific
targets for the level and annual growth rates of the main economic aggregates as well as for
the period-end social and human development indicators, no policy monitoring and evaluation
25
system is associated with these goals (whose inclusion is nonetheless one of the innovations
introduced by the PRSPs).
However, the SEDP does have the fundamental advantage of being drawn up by the
government (whose ownership principle is respected) through some public consultation (see
below), and of corresponding to its priorities which was not true of the CPRGS. Seeing as the
SEDP is perceived as the benchmark document for the development and poverty reduction
strategies, it makes sense to assess it using the analytic grid applied to the PRSP. We find that
the macroeconomic policy does not link up with poverty reduction and there are no explicit
trade-offs concerning the growth model chosen. Moreover, the SEDP mentions the economy’s
international integration and sets trade growth and export upgrading targets without taking
into account either the obstacles encountered or the impact of the international integration
model chosen, especially from a social standpoint (what impact do FDI flows have on
regional inequalities, for example?).
All in all, the SEDP’s policies remain extremely broad-based (despite their sector and
regional focuses) and interventionist. The document’s presentation tends to underpin the
impression that the government determines all economic and social outcomes, which is not so
true anymore in Vietnam where the government’s role is dwindling in an up-and-coming
market economy. From the institutional point of view, in particular, the SEDP sidesteps the
problems raised by the breakneck economic and social restructuring process underway in
Vietnam.
The Bank is aware of these shortcomings and addresses them in part in the Vietnam
Development Reports (VDRs) prepared for the annual Consultative Group meetings between
the government and donors. The VDRs take the government’s strategy such as it is presented
in the SEDP and define economic policy guidelines (which are mainly the Bank’s) to
implement it and achieve the goals set. These recommendations link the SEDP to the PRSC
26
and incorporate the conditionalities associated with this programme. The VDRs hence also
form a guide to measure progress made, in the absence of a specific monitoring and
evaluation system for the SEDP.
The PRSC, which is a budget-aid programme negotiated by the Bank with the government,
plays a key role in the coordination between donors. It has become a tool for many donors to
engage in dialogue on the policies they wish to promote. In this way, the PRSC helps smooth
the way for multi-donor credits. A dozen countries (with the United Kingdom top of the list)
hence co-finance the PRSC along with the European Commission and the Asian Development
Bank, generating a total sum of nearly 1 billion dollars in 2006-2010, approximately doubling
the amount offered by the World Bank. Even more donors have taken part in the discussions
held in connection with this programme. The Bank’s programme has therefore gradually
gained greater leverage and the PRSC’s total funds ultimately come to more than double the
sum granted directly by the institution.
The World Bank’s financial weight in Vietnam, combined with its capacities based on its
locally available human resources (the staff comprises around 100 people), makes the
institution the natural candidate for international community co-ordinator. This role has
earned it praise, but also criticism from the other donors. The Vietnamese government
appreciates the Bank’s co-ordination role since it means it can externalize among donors the
transaction costs that are payable by the national authorities in most of the developing
countries. The Bank therefore finds itself acting as a go-between for the other donors, if not
deciding between their positions on behalf of the government.
Co-ordinating all the donors’ actions while promoting its own aims and criteria inevitably
gives the Bank a certain amount of power. So it is hard for it to escape gripes about its
domination, especially since behind the statements on the harmonization of international
development assistance lies the obvious fact: the World Bank’s main aim, just like the
27
national and international development agencies, is to conduct its missions and step up its
activity, influence and profile. This prompts competition among donors, although it does not
rule out the possibility of mutually beneficial co-operation where fitting.
The short lived implementation of a participatory process
Vietnam, unlike most of the other developing countries, does not have a civil society legally
independent of the ruling political party in Vietnam. All the associations have to join the so
called 'mass organizations' like the Vietnam Fatherland Front. However, these associations are
allowed in practice some leeway, which is not precisely defined and which evolves
permanently. Furthermore, there is no clear indication that the different functions promoted
by the Bank via the participatory processes (participation, empowerment, ownership and
accountability) are less well fulfilled than in many other developing countries with more
liberal political systems. Also, Abrami, Maleski and Zheng (2008) argue that Vietnam’s
political system empowers a larger group of citizens and accepts more accountability than
China’s.
Firstly and as previously stressed, despite the official principle of ‘democratic centralism’, the
highly decentralized system affords real decision-making power to the local political levels in
the form of people’s committees and councils working at the different levels (province,
district and commune) of the administrative structure. Underpinned by a still weighty
historical legitimacy derived from the war period (proliferation of grass-roots initiatives),
these committees and councils enjoy a great deal of independence and the central authorities
find it hard to impose their views and co-ordinate policies (public investment, taxation, etc.).
Secondly, Vietnam is singular among countries with comparable development levels for its
consultation of the people by these local authorities. Although an iron hand still looms, the
people have many opportunities to voice their opinions. For example, over half of the
28
households on the P135 poverty reduction programme for people in mountain areas and ethnic
minorities say they were consulted about this programme and two-thirds were satisfied with
the outcomes (Le Dang et al., 2008). In many other LDCs, the level of participation is far
lower, in spite of being considered as formal democracies (Cling et al., 2004).
More generally, the participatory process associated with the CPRGS co-ordinated by the
Bank and a number of international NGOs comes across as a model of its kind (Shanks and
Turk, 2002) in blatant contrast with the bogus exercises organized in most of the developing
countries. Last but not least, the system’s decentralization and the success of the participatory
processes sustain the Bank in its indifference to Vietnam’s political organization, which is
anyway out of its mandate).
The consultations held to define the CPRGS set the stage for a participatory process to
develop the SEDP in 2005 in keeping with PRSP preparation principles. The National
Assembly discussed and passed the Plan. Several foreign NGOs and donors helped organize
consultations in the provinces. The Bank believes that these consultations gave the SEDP an
even sharper poverty reduction focus by influencing it in at least three areas: scaling up the
section on agricultural development and farmers’ organizations; prioritizing basic services to
ethnic minorities (in particular, a commitment to waive tuition fees for these populations); and
sharpening the focus on involving the people in the decision-making process, with the aim of
introducing more participation, transparency and accountability into the poverty reduction
programmes (World Bank, 2007).
All in all, the PRSPs’ advocated principles have improved the way in which the SEDP is
prepared and its content into the bargain, without imposing a development policy from the
outside. But will this advance be lasting? One can doubt about it, judging by the way the
SEDP 2011-2015 has been prepared. The principles advocated by the World Bank, which
were followed by the previous SEDP, have already been dropped: this new SEDP hardly
29
refers to poverty and even less to concrete poverty reduction policies; no reference is made to
the Millenium Development Goals and to the question of monitoring; last of all, the SEDP has
not been prepared – and this is a major difference with the previous SEDP – within a
participatory process extended beyond government, provincial officials and Parliament circles
(World Bank, 2012b). The changes of staff within the economic department of the World
Bank office in Vietnam can explain partly less emphasis on the PRSP principles on behalf of
the Bank, which is also consistent with the same trend implying less emphasis on
participatory process in the new generation of PRSPs. But one can assume that Vietnam
having become a middle income country since 2010 makes it even less dependent than before
on World Bank funding.
Conclusion
The Bank fulfils its three-pronged mission in Vietnam: its financial role (granting loans), its
development agency role (assistance to poverty reduction policies, to implement reforms and
infrastructure projects), and its knowledge production role (providing analyses in liaison with
research bodies).
As we have seen, the Bank may well play a prominent role among the donors in terms of both
funds and economic policy advice. And it has piled on the economic policy advice at key
moments (WTO accession and 2008 crisis). Yet its influence over Vietnam’s overall growth
path is limited. Firstly, the sum of public and private funds from other sources, especially
Japan (ODA, commercial loans and FDI), is infinitely higher. Secondly and more importantly,
Vietnam does not have an exclusive tête-à-tête relationship with the Bank on the economic
policy front, unlike many other developing countries. For historical, political and economic
reasons, the Chinese model is inordinately more important to Vietnam than the Bank’s advice,
often drawn from the experience of third countries.
30
Vietnam has adopted many market economy principles at its own initiative in a fast-track
international integration strategy. At the same time, it has held on to a dwindling number of
particularities (see, especially, the role of the state-owned enterprises). So the Bank would
find it hard to lay rightful claim to Vietnam’s economic successes, along with its poverty
reduction achievements, even if it is sorely tempting to do so.
It almost looks as if Vietnam were more important to the Bank than vice versa, on at least two
counts: first, because the case of Vietnam is packed with development policy lessons; and
second, because the Bank gains a political advantage image-wise from what it can hold up as
the accomplishments of its work in the country. This singular situation has positive
repercussions in that it makes the Bank more open and more receptive than in other
developing countries. On their part, the Vietnamese authorities accept to be taken as a model
because it suits them, especially in terms of funding and credibility which is all the more
important as they refuse any IMF intervention. The result is a mutually beneficial win win
relationship.
The Bank’s approach in Vietnam, which consists of avoiding giving lessons, reinforces it
relationship with the government and increases the effectiveness of its interventions. This
approach allowed to establish a balanced partnership between equals, and increases the
openness of the government to analysis and advice given by the Bank when it is needed. If the
Bank only plays a marginal flanking role in Vietnam’s development process, rather than
steering operations as it too often seeks to impose elsewhere, it is because the Vietnamese
institutions are strong enough to be able to form an alter ego. The Bank’s flexible attitude to
Vietnam is therefore a necessary, but insufficient condition for it to play a positive role in the
country’s development.
To conclude, we could look into the Bank’s prospects for action in Vietnam now that it has
become a middle-income country. As we have seen, the form of financing will change and
31
IDA’s no-interest loans will be replaced by IBRD loans at market rates. Vietnam’s
development progress has also given it the ability to diversify its foreign financing sources.
However, it would be jumping the gun to say that Vietnam will now be able to do without the
Bank and the international institutions in general. In fact, at least three factors actually point
to increased dependence on the Bank and the international institutions.
Firstly, international integration has brought greater constraints on the economic policy as
seen, for example, from WTO membership. The guarantee provided by the Bank and other
international institutions will be needed for the WTO to grant Vietnam market economy status
and for the country to secure the private capital market finances to which it can now aspire.
Secondly, there is a risk that the international crisis could make the Vietnamese economy
more vulnerable, at least in the short run. Even before the international crisis came into full
fledge, the economy has been meeting serious difficulties since 2008. This could increase the
need for more active intervention by international aid, especially the Bank (see, in particular,
the granting of an international loan in 2009 to finance the fiscal slippage).
Thirdly, and this factor was starting to raise its head even before the onset of the crisis,
Vietnam has made it through the ‘easiest’ stages of the development process and is now
arriving at a juncture where strategies become more complicated and mistakes probably also
more costly. This is the well known ‘middle income trap’. Many emerging Asian countries
have encountered this obstacle before Vietnam (often without managing to overcome it), and
there is no denying that the Bank’s international experience in this area could prove
invaluable. Indeed, it is not by chance that the latest World Bank publications on Vietnam
started adopting a more nuanced stance in their policy recommendations. The World Bank
clearly fears the potential risks of failure of the second generation of reforms that Vietnam has
to launch in order to achieve the official objective aiming at becoming a developed country by
2020. It takes advantage to promote the market reform agenda stronger, and especially
32
privatizations (World Bank, 2011). Still, these recommendations are put forward prudently, in
order to avoid conflict with sensitive Vietnamese authorities.
For all these reasons, if Vietnam stays on its development path in the next few years, and in
spite of the lack of democracy and creeping corruption, it is most probable that it will keep
being cherished by the World Bank, which will still be desperately looking for development
models, so hard to find worldwide.
References
Abrami, R., Malevski, E. and Zheng, Y. (2008) Accountability and Inequality in Single-Party
Regimes: A Comparative Analysis of Vietnam and China. Harvard Business School
Working Paper 08-099.
Acemoglu, D. and Robinson, J.A. (2012) Why Nations Fail. The Origins of Power, Prosperity
and Poverty (London: Profile Books).
Aglietta, M. and Bai, G. (2012) China Development. Capitalism and Empire, (London & New
York: Routledge).
Albrecht, D., Hocquart, H. and Papin, P. (2010) Urban Development in Vietnam: the Rise of
Local Authorities. Resources, limits
and evolution of local governance (Paris: AFD
Editions).
Beresford, M. (2008) Doi Moi In Review; The Challenges of Building Market Socialism in
Vietnam. Journal of Contemporary Asia Vol. 38, N°2: 221-243.
Bresser-Pereira, L. C. (1995) Development Economics and the World Bank’s Identity Crisis.
Review of International Political Economy 2 (2), Spring: 211-47
Cling, J.-P., Razafindrakoto, M. and Roubaud, F. (eds.) (2003) New International Poverty
Reduction Strategies, (London & New York: Routledge).
_______________________________________
(2004),
New
International
Poverty
Reduction Strategies: Old Wine in New Bottles? in Tungodden, B., Stern, N., Kolstad, I.
(eds), Toward Pro-Poor Policies - Aid Institutions and Globalisation (New York: World
Bank and Oxford University Press), pp.111-131.
_____________________________________ (2009), Ngân hàng thế giới: Đi tìm một mô
hình phát triển và trường hợp Việt Nam, Nhà xuất bản Tri thức, Hà Nội. (The World Bank:
33
Looking for a Development Model and the Case of Vietnam, Hanoi: Knowledge Publishing
House).
_________________________________________ (2011), La Banque mondiale, entre
transformations et résilience, Critique internationale, No. 53, octobre-décembre, pp. 43-65.
Engel, S. (2010) The World Bank and the post-Washington Consensus in Vietnam and
Indonesia, (London & New York: Routledge).
Fine, B., Lapavitsas, C. and Pincus, J. (eds.) (2001) Development Policy in the Twentieth First
Century; beyond the post-Washington consensus, (London & New York: Routledge).
Gainsborough, M. (2010) Vietnam: Rethinking the State, (London: Zed Books and Chiang
Mai: Silkworm Books).
Gwin, C. (1997) US Relations with the World Bank, 1945-1992, in D. Kapur, J. P. Lewis, and
R. Webb (eds.) The World Bank; Its First Half Century, Vol. 2, (Washington D.C.: The
Brookings Institution), pp. 195-274.
Hayton, B. (2010) Vietnam Rising Dragon (New Haven and London: Yale University Press).
IMF (2012) The Liberalization and Management of Capital Flows An Institutional View,
Washington D.C., November.
Inglehart, R. and Welzel, C. (2005) Modernization, Cultural Change and Democracy: The
Human Development Sequence, (New York and Cambridge: Cambridge University Press).
Khan, M. and Blankenburg, S. (2009) The Political Economy of Industrial Policy in Asia and
Latin America. in: Dosi, G., Cimoli, M. and Stiglitz, J.E., (eds.), Industrial Policy and
Development: The Political Economy of Capabilities Accumulation. (Oxford: Oxford
University Press), pp. 336-377.
Le Dang T., Pham H., Razafindrakoto M. and Roubaud F. (2008) Impact evaluation of the
Program P135 Phase 2: Analysis of the baseline survey 2007. Hanoi: CEMA and UNDP,
October, processed.
Lê Hữu Tầng and Liu Han Yue (eds.) (2006) Economic Reform in Vietnam and in China: A
Comparative Study, (Hanoi: The Gio Publisher).
Masina, P. (2006) Vietnam’s Development Strategies, (London: Routledge).
North, D.C., J. Wallis, and Weingast, B (2009) Violence and Social Orders. A Conceptual
Framework for Interpreting Recorded Human History (Cambridge: Cambridge University
Press).
OECD (2005) The Paris Declaration on Aid Effectiveness, (Paris: OECD).
34
OPPG (2005) Pro-Poor Growth in the 1990s; Lessons and Insights from 14 Countries,
Operationalizing Pro-Poor Growth Research Programme, (Washington D.C.: The World
Bank).
Rama, M. (2008) Making Difficult Choices: Vietnam in Transition, Commission on Growth
and Development. Working Paper No.40, Washington D.C., The World Bank.
Rama, M. (2010) Réduction de la pauvreté et protection sociale, in S. Lagrée, J.-P. Cling, M.
Razafindrakoto and F. Roubaud (eds) Stratégies de réduction de la pauvreté: approches
méthodologiques et transversales, (Hanoi: Tri Thuc Publishers), pp. 25-39.
Sachs, J.D. and Woo, W.T. (2000) Understanding China's Economic Performance", Journal
of Policy Reform 4(1), 1-50.
Shanks, E. and Turk, C. (2002) Refining Policy with the Poor, Vietnam Local Consultations
on the Draft Comprehensive Poverty Reduction and Growth Strategy, 3 volumes, (Hanoi:
World Bank).
Socialist Republic of Vietnam (2003) The Comprehensive Poverty Reduction and Growth
Strategy (CPRGS), Hanoi.
Socialist Republic of Vietnam (2006) Socio-Economic Development Plan 2006-2010, Hanoi.
_______________________ (2011) Socio-Economic Development Plan 2011-2015, Hanoi.
State Bank of Vietnam (2012) Vietnam - World Bank: Long-Term Companions in
Development, (Hanoi: The World Bank).
Thoburn, J. (2009) Vietnam as a Role Model for Development. UNU-WIDER Research Paper
N°2009/30, Helsinki, WIDER.
Wade, R. H. (1996) Japan, the World Bank, and the Art of Paradigm Maintenance: The East
Asian Miracle in Political Perspective. New Left Review, I/217, May-June: 3-37.
Wade, R. H. (2002) US Hegemony and the World Bank: the fight over people and ideas.
Review of International Political Economy, Volume 9, Issue 2 May: 215-243.
World Bank (1993) The East Asian Miracle, Economic Growth and Public Policy, (New
York: Oxford University Press).
__________(1998) Assessing Aid; What Works, What Doesn’t and Why. World Bank Policy
Research Report, (Washington D.C.: The World Bank).
_________(2002) The Role and Effectiveness of Development Assistance; Lessons from
World Bank Experience. A Research Paper from the Development Economics Vice
Presidency of the World Bank, Washington D.C., The World Bank.
35
_________ (2003-2011) Vietnam Development Report, (Hanoi: The World Bank). One
Report published each year.
__________ (2005) Economic Growth in the 1990s. Learning from a Decade of Reform,
World Bank Policy Research Report, (Washington D.C.: The World Bank).
__________ (2007) Viet Nam: Country Partnership Strategy 2007-2011. Hanoi, The World
Bank.
__________ (2011) IDA Program Document; Tenth Poverty Reduction Support Operation to
Vietnam. Poverty Reduction and Economic Management Unit and East Asia and Pacific
Region, November 14, Washington D.C., The World Bank.
___________(2012a) Vietnam and the World Bank: A Strong and Enduring Partnership,
(Hanoi: The World Bank).
___________(2012b) Soft Rain Penetrates the Earth Better than a Storm; Vietnam – World
Bank Partnerships on Poverty Reduction, (Hanoi: The World Bank).
___________(2012c) Vietnam and the World Bank: The Infrastructure Partnership, (Hanoi:
The World Bank).
36