Vietnam News

The Myth of Doi Moi in Vietnam

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The country’s people have flourished not because of the Communist Party of Vietnam, but in spite of it.

The conventional way of telling the story of Vietnam’s economic miracle since the ’80s goes something like this: Post-war Vietnam was one of Asia’s poorest countries and its patron, the Soviet Union, was declining. So the ruling Communist Party mandated a series of free-market reforms in 1986 known as Doi Moi (or “renovation”) that resulted in GDP per capita growing from $422 in that year to nearly $3,700 today. When simplified or propagandized, this becomes a narrative of a top-down process, of communist intelligence and valor. It was the Communist Party of Vietnam (CPV) that lifted the people out of poverty; it was the communists who took the initiative.

The real credit, though, goes to the Vietnamese people, who through their own effort pushed the communist authorities belatedly to accept these market changes. It was the Vietnamese who lifted themselves out of poverty, mostly in spite of communist policy. Farmers and workers in state enterprises began engaging in market activities well before 1986, even as early as the 1960s in North Vietnam, meaning market reform was a bottom-up development, not a top-down transformation imposed by the CPV in 1986.

Indeed, in August 1979 the party conceded that state-owned enterprises (SOEs), which dominated the economy, could keep any surplus production. All still had to meet the quotas that were set by economic planners in Hanoi, but what this seemingly minor reform meant was that they could now legally sell their remaining products. Farmers, too, would be allowed to sell any of their products that were left over after they delivered their quotas to the state. “Between the late 1970s and 1980s, the Communist Party government incrementally adjusted its collectivization policy to accommodate aspects of those unauthorized practices instead of trying to expunge them,” the academic Benedict Kerkvliet put it in “The Power of Everyday Politics: How Vietnamese Peasants Transformed National Policy.”

In reality, Doi Moi was a political veneer over bottom-up practices that the CPV knew it couldn’t stop. “The idea that economic success stems from a strategic shift in Party thinking at the [1986 National Congress] is actually a myth: success instead drew upon systematic violations of Party ideology dating from the late 1970s, if not earlier,” wrote the economist Adam Forde.

Moreover, many of the important economic reforms were only introduced in the years after 1986. The first Foreign Investment Law of Vietnam was promulgated in December 1987, for instance. And arguably the real breakthrough in the market economy was only to come in 1999, with the passage of the Enterprise Law. This significantly cut back the red tape that had stopped many companies from legally registering themselves as privately-owned firms. In 2000, there were less than 50,000 small and medium-sized enterprises in Vietnam. Within three years of the Enterprise Law’s enactment, the number of small firms tripled. By 2005, they employed 44 percent of all employees in Vietnam. Privately-owned firms went from contributing (officially) next to nothing to the economy in 1986 to producing 50 percent of total industrial output in 1996, 66 percent in 2000, and roughly 73 percent in 2004.

None of this is to say the CPV deserves no credit. It pushed globalization, including Vietnam’s accession to the World Trade Organization, and the signing of key free trade deals with foreign countries. It has invested (sometimes wisely) in infrastructure. And unlike its Chinese communist counterpart, it typically butts out of the private sector. In more recent times, it has been arguably the biggest beneficiary of the global decoupling from China.

Nonetheless, narratives do matter. If it was mainly the Vietnamese people who pulled themselves out of poverty, oftentimes in spite of communist policy, what does that tell us about the future? Writing earlier this month, following the surprise “resignation” by President Nguyen Xuan Phuc, the analyst Zachery Abuza wrote: “decision-making and political certainty that have made Vietnam appealing to foreign investors are coming under question…Hanoi should be conscious that the investors who have been critical to the country’s economic outperformance have many alternative destinations ready to roll out the red carpet for them.”

I tend to agree. The CPV does appear far more unstable and unsure of itself than at any time in recent memory. The rot from the government’s handling of the COVID-19 pandemic (and the alleged corruption that accompanied it) seems to be heading toward the top, although one-party accountability isn’t really accountability. Much of the political intrigue in Vietnam has to do with the ideological fixation of Nguyen Phu Trong, the communist party boss who has unleashed a massive anti-corruption and “morality” drive since 2016.

Writing in this column last year, I argued that the anti-corruption and morality campaigns were attempts to form a new “ethical legitimacy” for the Party, one that isn’t based solely on economic performances. Unlike the Chinese Communist Party, the CPV cannot pretend to be the arbitrator of nationalism, since that’s very much in the hands of the people and stirring it might force the Party into conflict with China. Trong’s attempts to resuscitate socialism haven’t had much success. So making the party appear squeaky clean and its cadre most upstanding seems to represent the best chance of shoring up its legitimacy.

However, there is the risk that the campaign veers towards a Xi Jinping-style attack on the private sector. October saw a run on the Saigon Joint Stock Commercial Bank after rumors circulated about its connections to recent arrests. Truong My Lan, a property tycoon, was detained around the same time. As Nikkei Asia put it: “There is concern that big players will hold off on raising large amounts of money for the foreseeable future to avoid painting a target on their backs. Government agencies are also delaying decisions regarding new investments as a way to minimize the impact of the anti-corruption campaign.”

Vietnam attracted less foreign investment in 2022 than 2021. Foreign investment this January was down 19.8 percent year on year. The narrative that the CPV was the architect of the country’s economic miracle suggests that as long as things remain top-down, then all is well. But the alternative narrative, the one I laid out earlier, suggests we ought to be worried. A party that intervenes more in the private sector should be a matter of concern.

By David Hutt – The Diplomat – January 31, 2023

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