In early 2008, an atmosphere of satisfaction and optimism prevailed in Vietnam. After over 20 years of Doi Moi reforms resulting in significant economic growth, many people emerged from poverty and entered the middle class. Massive flows of foreign investment flooded into Vietnam, triggering an unprecedented stock market boom. As a sovereign nation, Vietnam gained respect and increasing influence in the international community.
In this context, a group of authors comprising Harvard scholars and Fulbright Economics Teaching Program (FETP) lecturers published a policy analysis titled “The Choice of Success”, causing a stir in the Vietnamese public. The monograph earnestly warned about the increasingly pressing risks of crony capitalism in Vietnam. In other words, the emergence of privileged groups benefitting from maintaining the status quo was hindering policymaking and blunting motivations to continue reforms. By presenting persuasive analysis and data, the authors demonstrated that unless Vietnam could build a “firewall” to isolate economic power from political power, the country would fall in the middle-income trap. The authors hence proposed a socio-economic development policy framework for Vietnam in the period of 2011-2020.
The group of scholars’ assessments and warnings, unsurprisingly, shocked the entire system when published, especially when Vietnam was constantly receiving accolades from aid providers, such as the World Bank and international investment banks, as well as the global press. Many were concerned FETP and the authors involved might be in a difficult situation for their outspoken criticism on a rather sensitive subject. But for insiders Dr. Vu Thanh Tu Anh and specialist Nguyen Xuan Thanh, well-aware of the responsibilities of their school from the very beginning, were not at all afraid or worried. “Fulbright’s mission is to deeply engage in the policy discussion process, to promote beneficial and feasible draft policies. In order to do this, the school must conduct independent and objective policy research, looking directly at Vietnam’s weaknesses and talking face to face with the state, from senior leaders to local officials,” professed specialist Nguyen Xuan Thanh.
“Our credibility arises from criticism. Although criticism itself does not create value, it is truly valuable when done in a constructive manner for the common good. Sincere and science-based criticism gives you power in debate. And we have conscientiously pursued that from the start,” added Dr. Vu Thanh Tu Anh.
Indeed, FETP’s straightforward policy criticism, while it risks offending someone in the system, is acknowledged by leaders who have come to appreciate Fulbright’s direct yet positive and constructive critique.
Mr. Thomas Vallely, Director of the Vietnam Program at Harvard University and founder of FETP defines the distinct formula Fulbright’s policy analysis success: high quality research and practical policy reviews.
“Fulbright’s policy studies are not written to be published in economics journals. If you write for an economics journal, no one in Vietnam would understand what you are talking about because it would be just like a math problem. You must write about the problem and analyze it in a way that makes it approachable to the public. You must understand the problem and write something that is feasible for a government or party official so that they can understand the problem and implement the solution,” Mr. Vallely explained.
Fulbright’s brand of constructive criticism has impacted policymaking positively over the years, such as with the government decision, starting in the mid-1990s, to loosen regulations on telecommunications.
“Today, young people can easily pick up the phone, go to Facebook, and they take it for granted. Actually, they can now access the Internet easily because Vietnam decided to follow our carefully researched recommendation. The proposal consisted of a telecommunications system that remained state-owned, but with judicious space for competition. I remember that research was conceived at a time when FETP was one of the few institutions with internet access, and the government considered whether to universalize Internet in Vietnam.”
The debate raged fiercely within the halls of government before FETP shared its recommendations for consideration. In 1995, Viettel became the second official telecom service provider in Vietnam, competing directly with VNPT. Although both companies were state-owned, their competition forever changed the landscape of the telecommunications market, making the Internet cheaper, more accessible and widely connected across the country. Vietnam is now one of the countries with the highest Internet coverage in Southeast Asia with 58 million users, consistently ranking among the fastest growing telecom markets in the world over the past 10 years.
“We know that our input is not always well received, but at least we have played our role in the policy debate. And the great thing about Vietnam is that they like us doing it,” said Mr. Thomas Vallely.
Strong advocacy for reform
Constructive criticism of policymakers in Vietnam of this caliber was few and far between at the time, contributing to FETP’s unique advantage. Consistently pursuing this style from the beginning set Fulbright’s policy research apart as a well-received staple of policy conversations in the country.
But what followed demonstrated that realizing Vietnam’s potential is never easy. After nearly twenty years of economic renovation, Vietnam and the world has changed drastically. So has FETP – now the Fulbright School of Public Policy and Management (FSPPM), in the way that its faculty is increasingly engaged in addressing major challenges facing Vietnam.
These challenges arose from numerous problems of the political and economic system. As Professor Dwight Perkins once wrote, the measures taken in 1989, including opening borders, forcing state-owned enterprises to compete and curbing subsidies to this sector, seemed to indicate “a total willingness towards rapid and powerful reforms”; however, that was not the case.
Revenue from oil, gas and agricultural products, the rapid growth of textile and footwear exports processed in foreign-invested factories, as well as the sudden abundance of development aid following the normalization of Vietnam-US relations made for a delicate equilibrium which policymakers were hesitant to upset, hampering further renovation. The Asian financial crisis of 1997 caused a major deceleration in economic growth, according to Dr. David Dapice, prompting the state to increase control over the economy. Even so, private enterprises emancipated under the 1999 Enterprise Law thrived, registering an 8% increase in gross domestic product from 2005 to 2007.
In the middle of 2007, with GDP growth peaking, then Prime Minister Nguyen Tan Dung “ordered” Harvard University’s Vietnam Program to critique Vietnam’s development strategy for the next decade, from 2011 to 2020. In other words, to continue the work of “In Search of the Dragon’s Trail” in an era of trade globalization and international supply chains, of China’s phenomenal growth, an era with new requirements for more complex domestic economy management. The Harvard group of scholars and Fulbright lecturers took this opportunity to conduct their most objective assessments of the situation in Vietnam before presenting their findings in the famous policy analysis titled “The Choice of Success”.
The researchers realized that “Vietnam [was] losing a significant part of its resources due to waste and corruption” in public investment, with several notable infrastructure projects behind schedule, exceeding budget and of poor quality. In many cases, the project was chosen without appropriate economic criteria, typically deep-water ports along the central coast. Meanwhile, infrastructures in population hubs such as Ho-Chi-Minh City, Binh Duong, Dong Nai, and Ba Ria-Vung Tau, accounting together for nearly 60% of the country’s population and labor growth, were already severely overloaded. The national economy was severely disrupted by “politically powerful individuals and groups […] converting national assets to private ownership through shady real estate transactions and internal stakes.” Meanwhile, the financial system suffered from a “failure to separate economic power from political power. While the non-state sector creates more than 90% of employment in the industrial sector and nearly 70% of industrial output, the majority of state credit and investments goes to the state sector.”
The study identified specific policymakers, agents and interest groups influencing national financial institutions to support underperforming state-owned enterprises– a strategy that was essentially compared to “a football coach who recruits the worst players to compete in the final match.” To achieve development goals, Vietnamese leaders needed to improve the quality of education, reform public finances, enhance corporate transparency, empower the State Bank, and “let go of unrealistic and illusionary policies.” Comparing Vietnam with other Asian economies, the analysis suggested strongly that the desired results were achievable by making the right choices; but those choices lied not in ideology, and instead revolved around the proper governance of a modern state.
Barely a few months later, the authors’ alarmed predictions were realized. State-owned enterprises, as predicted by Fulbright researchers, exploited their “close relationship” with state banks and party leaders. They took out excessive loans and branched out beyond their core business, plunging into real estate and other speculative activities, contributing to the shocking inflation rate of 23% in 2008. The global financial crisis erupted in the second half of 2008, followed by a recession that dragged Vietnam ‘s growth rate to much lower than the level Asian “dragons” had maintained over the past three decades. The powerhouses once considered the “steel punch” of the economy, including Vinashin and Vinalines, fell into a downward spiral and were on the verge of bankruptcy. Private companies were discouraged because of the unfair competition with state-owned enterprises. Vietnam’s per capita income was only one-third that of China and only equaled to a small fraction of the average income in South Korea or Taiwan. It could not even match less successful East Asian countries like Thailand or Indonesia – places that Vietnamese leaders had visited over twenty years ago with the eagerness and desire to emulate their success.
New standards for public policy discussion in Vietnam
In the past, criticizing public policies was a taboo. Remarks were only made via unofficial channels or without the presence and participation of the press. With Fulbright policy studies, the public, whom the school believes “has a right to know what is happening in their country”, to quote Dr. Vu Thanh Tu Anh, is allowed to access and participate in discussing important issues of the country.
“The Choice of Success”, “Unblocking institutional bottlenecks to restore growth”, “Institutional reform: From vision to practice”, all annual policy studies of FETP, have ignited discussions in many newspapers when published, bringing together intellectuals, experts, and citizens concerned with the prospects of their country’s development. Audacious voices became louder, proclaiming the truth and dissecting weak points of the economy. To quote an economist, the Fulbright School effectively “created a new standard, a new framework for policy discussion in Vietnam.”
After “The Choice of Success,” the Government of Vietnam decided to authorize a more frequent and candid channel for dialogue on thorny reform issues facing the country. As a result, the Vietnam Executive Leadership Program (VELP) was launched in late 2008, with funding from the United Nations Development Program. Since then, VELP has welcomed senior Vietnamese leaders and policymakers, often led by a deputy prime minister or a Politburo Commissioner, to Harvard Kennedy School for a week of discussions with leading experts, addressing globalization and the competitiveness and socio-economic development of Vietnam.
The discussion agenda for each VELP program was jointly developed by FETP faculty and Harvard scholars through consultations with Vietnamese government leaders. VELP, according to specialist Nguyen Xuan Thanh, “has contributed significantly to the policy debate, so that the government can come up with better policies.” With an in-depth understanding of Vietnam’s socio-economic issues and the ever-increasing familiarity of faculty with Vietnam’s challenges and possibilities, such discussions have become highly sought after among Vietnamese policymakers.
While the theme of the early VELPs focused on unblocking “institutional bottlenecks” to stimulate economic growth, in recent years, VELP has shifted its focus to the global technological revolution trends affecting Vietnam. In December 2019, a group of senior Vietnamese leaders, led by Mr. Nguyen Van Binh, Politburo Commissioner and Chairman of the Central Economic Committee, spent a week at Harvard to discuss and learn with top scholars such as Professor Jason Furman, former Chairman of the Economic Advisory Council under President Obama, as well as leaders of major technology corporations including Google and Facebook on ways to attract foreign direct investments in the tech industry, whether through cloud technology, network security, or computerized public service innovation.
“VELP has provided us with new perspectives and a deep understanding of world economic issues, particularly major economies like the United States, China, and the EU, which are extremely important for Vietnam. Direct and open discussions with the world’s leading experts in related fields make us reevaluate our assumptions about Vietnam’s economy, especially relating to prospects for sustained high economic growth”, commented VELP participants.
“Seldom does any public policy school in the world have a deep connection with practical issues and important influences on the national policy-making process like the Fulbright School of Public Policy and Management,” said Professor Terry Buss, US National Academy of Public Administration.