Taking the Road Not Taken
Vietnamese Delegation Explores Alternative Paths for Future Growth in Vietnam
By Kate Hoagland - CommuniquĂ©: Spring 2012, Volume 10
In mid-February, the Ash Centerâ€™s Vietnam Program convened a delegation of 20 senior Vietnamese policymakers led by Deputy Prime Minister Vu Van Ninh for a week of intensive policy discussions and analysis on Vietnamâ€™s economy as part of its third annual Vietnam Executive Leadership Program (VELP). Held at Harvard Kennedy School, world-class experts on both the Vietnamese and the broader global economy led candid discussion and presented original analysis on the short- and long-term challenges facing Vietnam. While the countryâ€™s leaders regularly hold similar policy discussions in Hanoi, the VELP program is specifically designed to take leaders out of their day-to-day environments, providing an outside, impartial venue for participants and presenters to share fresh, candid perspectives on the salient issues that can slow Vietnamâ€™s future economic growth. This annual policy dialogue is a result of a collaboration among the United Nations Development Programme (UNDP), the Vietnamese government, and the Ash Centerâ€™s Vietnam Program.
This yearâ€™s Vietnam Executive Leadership Program comes on the heels of what many experts believe is a period of macroeconomic instability for Vietnam. The country runs the risk of a banking-currency crisis as a result of high price inflation (currently at 17 percent), widespread bank undercapitalization, underperforming loans, and a broader lack of faith in its Dong currency, causing many to convert it to more stable currencies or even physical assets. Experts argue that the country has made many missteps in its selection and implementation of public investments, resulting in widening income inequality and an increased dependence on foreign savings and exchange reserves, and thus creating an unsustainable growth model in the long term. Moreover, the countryâ€™s dependence on agriculture, natural resource extraction, and low value-added manufacturing industries offer little promise for sustaining the high rates of growth Vietnam targets in its often-stated goal of building a â€śprosperous people and a strong nation.â€ť
However, reaching this goal is possible, and VELP experts presented many promising alternative perspectives on reforms that could lead to the productivity growth, international competitiveness, job creation, and higher living standards the country seeks. The week of policy discussions was crafted to respond to policy priorities established by the Vietnamese government in 2011.
The weekâ€™s discussion centered on the broad goal of improving Vietnamâ€™s economy; each day focused on a different subtheme drawing upon real-world cases of success in Vietnam, as well as the United States, China, and other neighboring Asian countries.
During first day, Nicholas Rosellini, UNDP, Dwight Perkins, Harvard University, and Jonathan Pincus, HKS, along with other policy experts addressed the current state of the global economy touching on the global labor supply shift, the economic prospects for Vietnamâ€™s most important trading partners, and different macroeconomic policy directions Vietnam could pursue.
Expanding upon the macroeconomic discussion of the first day, second day presenters including Fulbright Economics Teaching Program MPP Director Vu Thanh Tu Anh addressed the impact of financial imbalances on achieving growth and stability, covering both the European crisis and home-grown challenges confronting Vietnamâ€™s banking sector. A discussion of the ecosystem of entrepreneurship stimulated an interesting exchange on aspects of Vietnamâ€™s policy environment that could be reformed to better support the countryâ€™s growth objectives, while a presentation on the broader Asia-Pacific geopolitical landscape explored the implications of shifts in military and political balance on Vietnamâ€™s economic growth.
Presenters including Harvard Professor Benjamin M. Friedman presented arguments for necessary structural changes to revive the countryâ€™s economy on the third day. Discussion included how China successfully transformed its state-owned enterprises into global firms and how fiscal policy and the effective supervision of financial institutions can aid in macroeconomic balance. During the latter portion of the day, participants visited the Boston branch of the Federal Reserve Bank and gained insights into how the Bank regulates financial institutions by emphasizing both full employment and price stability. By comparison, Vietnamâ€™s central bank is more politically directed.
On the fourth day of the session, discussion focused on alternative economic growth models Vietnam could adopt. Presenters including Vu Thanh Tu Anh, director of research at the Fulbright Economics Teaching Program, proposed reforming the tripartite relationships among the central government, local municipalities, and state-owned enterprises to take greater account of market forces in selecting, designing, and implementing investment projects.
The final day of the session explored the importance of social policies that address rural development and poverty alleviation. During this session, Ash Center Director Anthony Saich discussed Chinaâ€™s own policies to narrow the income gap between rural and urban areas through infrastructure development and improved access to education and healthcare. Other discussions were led by UNDPâ€™s Dr. Yannick Glemarec and Bakhodir Burkhanov, along with Harvard Professor Ezra Vogel who explored the role political leadership played in the â€śEast Asian economic miracleâ€ťâ€”a term popularized by the World Bank to describe the economic successes in the region.
Throughout the week of discussion, presenters emphasized that to truly achieve long-term stability in Vietnam, leaders must not only implement a list of policy reforms and restructuring changes, but also explore a more expansive philosophical shift towards economic and governance practices. â€śIt will mean, first and foremost, imposing discipline on both public and private sector entities through greater transparency and accountability,â€ť stated a policy paper written for VELP. â€śVietnam must move towards international standards of economic governance, including a clear separation between regulators and market participants, an unswerving commitment to a judicial system that is independent of politics, and public finance and fiscal policy reforms based on clearly enunciated rules and complete transparency.â€ť