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Wednesday, February 21, 2024

East Asian success models: Vietnam

Current day Vietnam is composed of geographical kingdoms with different histories.

What is now the northern part of current Vietnam had its political identity formed around 200 CE. The kingdom of Au Lac was established around 210 CE. Three years later, it was conquered by the Chinese Quin Empire general Chao Tuo. The Chinese Empire annexed it in around 111 CE. A rebellion by the Trung sisters that took place about 50 years later was crushed and the Chinese Empire ruled until the year 939 when the Chinese Empire armies were driven out of the North. The kingdom remained independent until around 1407 when Chinese armies once again entered, but this time the occupation did not last long and another rebellion helped free the kingdom in 1428.

While the North portion of current Vietnam faced Chinese occupation, its central part had a different history. From the 2nd to the 17th century, this portion had an Indonesian backed kingdom called Champa. This region was heavily influenced by Hindu and Buddhist Dharma. As mentioned previously, many East Asian kingdoms including those in Thailand and Indonesia had imbibed Hindu and Buddhist culture through interaction that is said to date back to 2000 years ago. Rulers of many of these kingdoms patronized Hindu priests and Buddhist monks and even converted to Hinduism or Buddhism. Large temples dedicated to Shiva and Vishnu were built in the Khmer empire. Angkor Wat located in what is currently called Cambodia was originally a Vishnu temple but was soon converted to a Buddhist temple.

What constitutes the southern part of current Vietnam had the Funan Empire from the 1st to the 6th century after which it was occupied by the Khmers until the 18th century when the Vietnamese were able to drive out the Khmers. Several Chinese immigrants were part of this effort to reclaim the region. In the 19th century, the Cambodians and Vietnamese were in a dispute to claim this region.

The French occupation in a sense united these different regions. In 1859, the French conquered Saigon (now called Ho Chi Minh city) in South Vietnam. In 1867, they gained control of North Vietnam. A war between the French and the Qing Empire of China between 1884 and 1885 helped the French conquer what is now the central part of Vietnam. In 1887, the regions were combined to form French Indo-China. In 1893, France annexed the area that is now Laos to French Indo-China.

The urban elite had adopted Chinese culture such as Confucianism and the Cantonese language along with administrative systems while the rural people had remained outside these influences and had instead been influenced by Hindu and Buddhist culture. France’s occupation added Catholicism to this cultural mix.

France’s control lasted until the Japanese occupation of the region in 1940. The Viet Minh fought against Japan with the help of Allied forces. In 1945, they proclaimed themselves independent and established the Democratic Republic of Vietnam. When France tried to regain control in 1946, it led to the Anti-French resistance war also called the First Indochina War which helped to keep the French out when the Viet Minh guerrilla forces defeated the French and reclaimed the region in 1954.

In 1954, the country was partitioned into North and South Vietnam. The economy of the South was more prosperous while that of the North was Stalinist and therefore less developed. On the other hand, the North had better military power. The two parts carried out a two-decade long war called the Second Indochina war or the Vietnam War. USA was heavily invested in the war and supported South Vietnam as several of the countries in the region were embracing communism with China’s influence. The Tet Offensive of 1968 was a military failure of the North but because it was portrayed as a victory for the North, the US began to withdraw its troops. The North Vietnamese Army then conquered the South with a full-scale military invasion. In 1975, they seized Saigon which led to the complete withdrawal of US from the war.

Current Leaders

Nguyen Xuan Phuc became President in April 2021, taking over from Nguyen Phu Trong.

He was previously the Prime Minister since April 2016 until Parliament nominated him President this year. It is however said that the actual power is with the General Secretary of the VCP, a post that has been held by Nguyen Phu Trong, the previous President since 2011.


Probably due to the Communist Regime, about 86% of the people in the country classify themselves as not having any religion or following folk religion, around 7% are Christians most being Catholic and few being Protestant, and less than 5% are Buddhists. However, Vietnam is traditionally considered a Buddhist country.

Economic History

North had imposed its Stalinist communism on the integrated Vietnam. The system led to stagnation of the economy and by the mid 1980s within a decade of becoming an integrated nation, the economy was in shambles. Not enough rice was cultivated to feed the citizen and it had to import 1.5 million tons of rice among starvation conditions.

The famine led to a rethink on the policies and the Vietnamese Communist Party (VCP) abandoned Stalinist central planning and collective agriculture and adopted market socialism called Doi Moi or restructuring. This led to the country becoming world’s third largest rice exporter. In 1995, Vietnam recorded a growth rate of 9.5%. The VCP initiated reform and renovation through the Doi Moi a term coined in 1986 which means change and newness.

The policy was used for transitioning from a centrally planned command economy to a market economy with a socialist direction or ‘market socialism.’ Vis-a-vis Eastern European economic reforms, the Doi Moi favoured a more gradual approach and political stability over radical change. The step by step approach meant that economic restructuring would precede privatization.

The process involved announcing many changes such as returning many businesses that had been nationalized in 1975 to original owners or their heirs, dismantling central planning, de-collectivization of agriculture, reducing controls on private enterprise, and state monopoly on foreign trade being eliminated. However, not all these changes were necessarily implemented or applied to all state enterprises.

In the nineties, there were certain other problems in implementing the policies. The state was reluctant to give up political control leading to foreign investors and domestic businesses being at the mercy of party workers rather than strict rule of law being applied. This induced corruption as well.

Another problem was that since the state was considered the owner of all land in the country, acquiring the use of the same for business sites was difficult and uncertain. These problems are being addressed in recent times.

Between 1995 and 2004, the average yearly growth rate was 7% and the private sector in 2003 accounted for over a quarter of industrial output. But, the World Economic Forum (WEF) still downgraded Vietnam’s rank in the Global Competitiveness Report from 60th in 2003 to 81st in 2005 and in business competitiveness from 50th in 2003 to 80th in 2005, the new ranks being far behind Vietnam’s role model, China. The downgrading was due to poor perception about its government institutions as corruption was endemic. The country also is far below China in market regulation, property rights, labour reforms, and market reforms. State-owned banks suffer from non-performing asset issues and are incompetently managed.

However, the country had a spectacular GDP growth rate of 8.4% in 2005 which was the second largest in Asia only second to China’s. Its growth rate the following year was 8.17% and in 2007 it was 8.5%. Despite very fast growth, it must be noted that the economy is growing from a low base caused by the crippling effect of the 20-year Vietnam War. The country became a WTO member in 2007.

The latest trends according to the World Bank are promising. Despite the Corona pandemic, it did much better than most economies and grew by 2.9% in 2020. The pandemic did affect household income and 45% of households reported lower incomes in January 2021 when compared to January 2020. Its economy is predicted to grow at 6.6% this year owing to effective handling of Corona infections and strong performance by export-oriented manufacturing.

Human Development Indicators

It has a sufficiently good human capital index (HCI) of 0.69 implying a child born today would be 69% as productive if given complete education and full health. HCI rose from 0.66 to 0.69 between 2010 and 2020. The HCI however has disparities with ethnic minorities not doing as well.

Infant mortality rate also decreased from nearly 33 per 1000 births in 1993 to 17 per 1000 births in 2017. Life expectancy rose to 76.3 years in 2016 from 70.5 in 1990. The country has a universal health coverage index of 73, much higher than regional and global averages. Widening sex ratio at birth is a problem that persists though.

Provision of basic services such as electricity and clean water in rural areas has also improved significantly. Capital invested for improving infrastructure is however lowest among the ASEAN region and will take a toll on providing adequate physical infrastructure in the coming years.

Another problem is depleting natural assets and detrimental effects on the environment due to rapid industrialization in terms of greenhouse gas emissions. Transition to clean energy is an urgent requirement.

Lessons for Bharat

Many of the challenges that Vietnam faces are similar to Bharat. The environmental impact of industrialization and income disparities are common problems. Inadequate infrastructure is another challenge both countries face, but due to its smaller size, Vietnam can tackle this issue with greater ease. Vietnam too has a relatively high population density of close to 315 persons per square km while that of Bharat is 464 persons per square km. Vietnam has however managed to show a post-war resilience in terms of maintaining a steady growth, more so since 1986. Since the 1990s, it has managed to improve several human development indices considerably.

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