post cold war vietnam: economic and foreign policy
TRANSCRIPT
Post-Cold War Vietnam Economic Policy
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Major economic-related events: A timeline
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1986: Start of Doi Moi reform policy
1992: New
constitution
adopted with
certain economic freedoms
1994: removal
of US trade
embargo after 30 years
1995: Full member of ASEAN
2001: Application of the US-VN trade
agreement
2007: 150th
member of the
WTO after 12 years of talks
Aug 2013: 19th
negotiation round of
the TPP (12
countries)
March 2014: 7th negotiation round of the EU-VN
FTA
Commonly-known strengths3
◻ An important domestic market of 90 millions of habitants
◻ Young and increasingly well-trained population (70% of the population age between 15 and 64) having potential for high value added jobs
◻ Perfect location as a hub for South East Asia
◻ One of the most dynamic economies among the Emerging Asia nations
A synthesis of overall performance4
◻ Vietnam has been recognized as one of Asia’s great success stories in terms of economic and social development over the last 20 years ⬜Vietnam economy has a robust and steady growth
since 1990 (average growth rate of 6.41% since 2000). China is the only Asian country that performed better
⬜ The growth is relatively balanced, with industry and services sectors contributing about 40% each to GDP
⬜ Trade openness and integration with the region and world has substantially increased (163.67% of GDP)
⬜Vietnam is among the most attractive countries in terms of external financing (FDI and portfolio equity)
⬜ There is a certain level of resilience as extreme shocks (recent crises have not caused serious effects on economic and investment activity (good management of economic and financial openness)
◆ Stable socio-political environment◆ Ongoing structural economic reforms◆ Abundant labor force with enhanced skills◆ Higher ability to meet debt obligations◆ Towards more price stability
Key success factors
Stable socio-political environment6
◻ Since the “Doi Moi” reform policy, the social, political and economic context has rapidly changed. It is mainly characterized by
⬜ A higher openness of the economy and a gradual move towards regional global integration through a number of bilateral and multilateral trade agreements
⬜ A multi-dimensional and multi-partner model that enables the country to develop the export-based economy
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⬜A higher participation of most socio-economic agents/institutions (governmental vs. non-governmental) in the planning, implementation and monitoring of economic policies⬜An encouragement of foreign investment as part of
the country’s development strategy
Stable socio-political environment8
◻ Country credit ratings (as of January 2015)
⬜ Standard & Poors: BB-
⬜Moodys rating for Vietnam sovereign debt: B2
⬜ Fitchs credit rating: B+
⬜ Same group of speculative investment grade as Russia (BB+), and one grade lower than Brazil and India (BBB-)
Ongoing structural reforms9
◻ Since 1986, Vietnam has embarked a vast program of structural reforms with objectives of turning a centralized economy into a market-based economy with socialist orientation⬜Abolishing agricultural collectives ⬜Removing price controls on almost all traded goods
and services⬜Encouraging the establishment of private businesses
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⬜Opening up the domestic market to foreign investment, including foreign-owned enterprises ⬜Liberalizing gradually the banking sector so that
interest rates are determined according to market conditions⬜Developing and improving the efficiency of the
domestic markets for goods/services and for capital (stock/bond markets)
Ongoing structural reforms11
◻ Numerous regulatory reforms to enhance international economic cooperation and to attract external financing
⬜ Focus on foreign investors: return, risks, legal barriers, Investor protection
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⬜Prior to joining the WTO, Vietnam has substantially reformed its legal system through revising a number of Laws and Codes:
■Labor Code, Land Law, Civil Code, Law on Securities, Law on Competition, Enterprise Law, and Investment Law
■Objective: making the investment environment more stable and transparent as well as to strengthen the enforcement of Laws
⬜The presence of foreign investors also helped the Vietnam’s legal environment more conform to international standards
Ongoing structural reforms13
◻ The Socio-Economic Development Strategy 2011-2020
⬜Continues the previous structural reforms, while paying more attention to environmental sustainability, social equity, and emerging issues of macroeconomic stability.
⬜ It defines three “breakthrough areas”: ■ i) promoting human resources/skills development
(particularly skills for modern industry and innovation), ■ ii) improving market institutions, and ■ iii) infrastructure development
◆ Weak labor productivity growth and skills◆ Slow pace of economic sector
transformations◆ Unbalanced financing means◆ Low quality of FDI inflows◆ Economic integration is not without risk
Main challenges for the coming years
Economic integration is not without risk
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◻ Advantages⬜A greater market for goods and services⬜Companies will have better access to international
capital markets for external financing⬜Reduced cost of capital and international risk sharing⬜ Technology transfer (cleaner technology for a
sustainable development)
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◻Risks⬜Vietnam companies may not be ready for dealing
with challenges■Vietnam has a low competitiveness level (labor-intensive
economy), while main trading partners are productivity-driven economy (Chile, Mexico), or innovation-based economy (US, Canada, Japan, Singapore, Malaysia, Australia, New Zealand)
■Exports of low value added products
◆ Strategic partnership: purposes ◆ Roles of strategic partnerships for
Vietnam economy◆ How to make it work?
Roles of strategic partnerships
Strategic partnership: purposes18
◻ Commitments between two nations⬜ to build a strong and mutual trust to develop
cooperation in various aspects ⬜ to promote a stable and reliable environment for
international and regional cooperation⬜ ensuring trade balance, and enhancing the
international profile of involved countries
Roles of strategic partnerships for Vietnam economy
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◻ Strategic partnerships for sustainable economic development⬜ Larger market for capital, goods and services (3.5 billion
of habitants, and close to 33.5 trillion USD of GDP)⬜ Attractiveness for FDI from 13 countries⬜ Source of ODA financing for infrastructure, urban
development, and other priority sectors (agricultural equipment, food processing, medical healthcare, railways, green energy and technology, oil and gas)
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◻Strategic partnerships to create favorable business environment and opportunities for solving current challenges
⬜Weak labor productivity growth and skills; Slow pace of economic sector transformations; Unbalanced financing means, Low quality of FDI inflows, Vulnerability due to economic integration
Post-Cold War Vietnam Foreign Policy
Vietnam’s foreign policy into three periods
1975-91 - Vietnam went from being a member of the socialist camp to a member of the international community)
1991-2006 - Vietnam sought to multilateralize and diversity it foreign relations by developing economic links and political relations with major powers in Asia, America, Europe and Southeast Asia, as well as join regional multilateral institutions)
2006-2015 - Vietnam consolidated its international role by forging strategic partnerships with major world powers and major Asian powers and pursued a policy of proactive international integratration.
Pre-1986
Antagonistic contradictions between socialism and capitalism
Two types of countries - friends and enemies (dich va ta)
International relations between these two worlds was a struggle of ‘who will triumph over whom’ (ai thang ai)
Throughout the period 1965-85 Vietnam viewed itself as the outpost of socialism on the front line in the struggle between socialism and imperialism.
Unification
In mid-1978 following unification, Vietnam joined the Council for Mutual Economic Assistance (CMEA/COMECON)
Became a member of the socialist community headed by the Soviet Union
In November 1978, the Soviet Union and Vietnam signed a twenty-five year Treaty of Friendship and Cooperation.
At this time Vietnam considered the Soviet Union as the cornerstone of its defence and national security policies.
Mid-1980s
In the early to mid-1980s Vietnam began to adopt significant changes in its national security policy.
At least two major factors influenced these developments.
1. The first was the grave socio-economic domestic crisis that confronted Vietnam.
2. The second factor was external and arose from the ‘new political thinking’ emanating from the Soviet Union under the leadership of Mikhail Gorbachev
New Foreign Policy Considerations
Foreign policy structured by ideological considerations was transformed to a foreign policy framework that placed greater emphasis on national interest and pragmatic diplomacy.
Vietnamese analysts now stressed global economic forces and the impact of the revolution in science and technology as key determinants of global order
Fears of dependency and assimilation (hoa nhap) gave way to a positive view of economic integration (hoi nhap)
Two Key Turning Points
Politburo Resolution No. 32 (July 1986)Politburo Resolution No. 13 (May 1988).
Politburo Resolution No. 32
Resolution #32 identified ‘peace and development’ as the highest priority
Laid the basis for ‘new thinking’ in the conceptualization of Vietnam’s national security policy.
Clearly set out guidelines and revised diplomatic policies, and moved toward a solution in Cambodia.
The Resolution clearly stated: “the external mission of Vietnam is to have good coordination between the strength of the people and the strength of the era, to...proactively create a condition for stability and economic construction...to move proactively to a new stage of development, and peaceful coexistence with China, ASEAN, and the United States, and build Southeast Asia into a region of peace, stability and cooperation”
Doi Moi (6th Congress -1986)
Overcoming the domestic socio-economic crisis
Expansion and heightening of the effectiveness of external economic relations as one of the means of addressing the domestic economic crisis
Open itself to foreign investment from non-socialist countries
Liquidate the Cambodian problem by withdrawing its military forces
Politburo Resolution No. 13 (1988)
Foreign policy objectives gave priority to economic development
Used the term national interest (loi ich dan toc) for the first time
New emphasis was ‘to maintain peace, take advantage of favorable world conditions’ in order to stabilize the domestic situation and set the base for economic development over the next ten to fifteen years
Called for a ‘multi-directional foreign policy’ orientation that had the goal of making ‘more friends, fewer enemies’ (them ban bot thu)
Politburo Resolution No. 13 (1988) (continued)
Resolution No. 13 not only called for a resolution of the Cambodian conflict but the normalization of relations with China3 and developing relations with ASEAN, Japan, European countries and “step-by-step” normalizing relations with the United States
Signaled the abandonment of the ‘two worlds’ view in favour of the concept of an interdependent world
Vietnam and Cambodia
End of 1989 Vietnam unilaterally withdrew the last of its armed forces from Cambodia
Vietnam was no longer an international pariah state subject to an aid and trade boycott
Vietnam succeeded in diversifying its foreign relations by moving from dependency on the Soviet Union to a more diverse and balanced set of external relations.
In 1989, Vietnam had diplomatic relations with only twenty-three noncommunist states; by 1995 this number had expanded to 163.
During this period Vietnam normalized it relations all members of ASEAN, acceded to the 1976 ASEAN Treaty of Amity and Cooperation, and in November 1991 normalized it relations with China
Seventh National Party Congress (1991)
The Seventh Congress adopted an important modification to Politburo Resolution No. 13
‘diversify and multilateralize economic relations with all countries and economic organizations...’
1993-94 - The United States ended its long-standing objections to the provision of developmental assistance to Vietnam by the World Bank and International Monetary Fund
Mid-Term Party Conference (1994)
January 1994, the VCP convened its first Mid-Term Party Conference
After the conference the official Vietnamese media highlighted what it termed the challenges of ‘four dangers’ facing Vietnam:
1. Being left behind (tut hau) economically by regional countries
2. Peaceful evolution against socialism
3. Corruption
4. Breakdown of social order and security
July 1995
Normalised relations with the United States
Became ASEAN’s seventh member
Signed a framework cooperation agreement with the European Union
For the first time, Vietnam had diplomatic relations with all five permanent members of the United Nations Security Council and, equally importantly, with the world’s three major economic centres - Europe, North America and East Asia
Vietnam and Russia
In March 2001 Vietnam consolidated its ties with the Russian Federation, a ‘traditional friendly state,’ by signing its first strategic partnership agreement during the course of a visit by President Vladimir Putin to Hanoi
Russian arms sales to Vietnam are the largest and most significant component of the strategic partnership. The Russian Federation is Vietnam’s largest provider of military equipment and technology.
Ninth National Congress (2001)
Stepped up the rate of economic growth
Encouraged more foreign investment
Continued regional and global integration
Integrated Vietnam’s economy with the global economy
In 2001 the United States granted Vietnam temporary normal trade relations status on a year-by-year basis
2003
Two new ideological concepts ‘partners of cooperation’ (doi tac) and ‘objects of struggle’ (doi tuong) in foreign relations
‘any force that plans and acts against the objectives we hold in the course of national construction and defense is the object of struggle’.
‘anyone who respects our independence and sovereignty, establishes and expands friendly, equal, and mutually beneficial relations with Vietnam is our partner.’
Tenth National Congress (2006)
Full transformation from a Marxist-Leninist framework of a globe divided into two hostile camps into a view of one global economy
Rejected the zero-sum view of the world divided into ‘friends and enemies’ and sought to become friends with all countries
Developed a comprehensive view of national security that depreciates the relative importance of military power and elevates the salience of economic and other factors.
‘must strive to unswervingly carry out a foreign policy of… multilateral and diversified relationships while staying proactive in integrating into the world economic community and expanding international cooperation in other fields.’