Hello from Saigon

I am currently working at the Fulbright Economics Teaching Program in Ho Chi Minh City with my MPA/ID classmate from the Kennedy School. It has been a week since we started and I thought it best to collect a few thoughts about this amazing place.

I decided to spend my summer in Vietnam not only to study the country's economics but also expose myself to  one of the most fascinating places on earth. Vietnam is a long S-shaped country in South east Asia bordering Laos and Cambodia to the west and China to the north. The entire eastern part of the country is coastline off the South China sea. The country comprises 63 provinces including Ha noi (the capital) and Ho Chi Minh City (Saigon) - the economic engine of Vietnam. Vietnam is classified as a lower-middle income country by the World Bank. The country has come a long way since the implementation of the Doi Moi (renovation) reforms, which initiated the process to turn Vietnam into a market economy. The authorities recognize the challenges ahead including averting the middle income trap and continue to work to make Vietnam globally competitive industrialized country.

While comparisons are fraught with the usual validity challenges it is useful to benchmark Vietnam vis-a-vis its Asian neighbors. The East Asian countries come to mind as well as Vietnam's South East Asian neighbors. (Much of the commentary here is informed by various readings from the Ash Program at HKS as well as musings from my research on industrialization). 

As a late comer to the industrialization game, Vietnam stands to benefit from the experiences of South Korea and Taiwan. More specifically, a common feature of industrial policy of the East Asian 'tigers' (or what the late Alice Amsden calls 'The Rest') was the principle of reciprocity. This means in their goals of becoming national leaders, companies receiving subsidy support from the state were required to export a certain amount of what they produced. Failure to do so often resulted in loss of state support. What this means for Vietnam, as it plans to industrialize is to continuously enforce this principle, particularly with regard to the state owned enterprises (SOEs). 

An example for Vietnam would be the Thai Board of investment (BOI), whose principle of reciprocity was enforced in what Alice Amsden ('The Rise of the Rest' (2004)) calls the New Control Mechanism. More specifically, the relationship between the BOI and the company receiving support was characterized by clear performance criteria. These not only included quantitative limits but also permeated management of the company. Such monitoring is particularly warranted in the case of Vietnam given that the SOE sector is relatively large.

An important caveat to the above is that the reciprocal control mechanisms applied in the Rest were used during the GATT era and would be less possible today under the WTO regime. But I would argue, as does Amsden (2000), that there still exists room within the WTO regime to carry out industrial policy in a similar manner as did the East Asian tigers. Countries acceding to the WTO have a window period to reduce  barriers to trade within which many of the control mechanisms would work. More importantly a careful analysis of the bulk of the New Control Mechanisms do not violate WTO law and can still be carried out today as countries industrialize. 

Feedback is always welcome

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THE VIEWS EXPRESSED ABOVE ARE MY OWN AND DO NOT REFLECT VIEWS OF THE FULBRIGHT ECONOMICS TEACHING PROGRAM OR  HARVARD UNIVERSITY.