Viet Nam: Transition as a Socialist Project in East Asia

In analyzing Viet Nam's recent economic adjustments, this paper attempts to distinguish events and policies that are properly assigned to the transition effort (defined as the process of increasing the market determination of economic outcomes) and those more properly associated with economic development (the relatively permanent increase in the average productivity of the economy). This distinction and the specific characteristics of Viet Nam's path are used to understand (1) why and how perhaps a transformational recession can be avoided, (2) why privatization is not absolutely necessary for the emergence of markets, (3) the role of state (and in Viet Nam's case party control) in implementing a hard budget constraint, (4) the importance of a dominant state role in protecting state capacity and revenue generation, and (5) a specific and so far successful path of labor market creation and adjustment. The transition experience has also conditioned the future path of economic evolution and spawned a number of issues that need to be addressed in the future. The paper identifies the most critical of these as macroeconomic instability and the evolution of privatization and industrial policy. The paper also discusses the applicability of the East Asian public-private sector relationship to Viet Nam's subsequent development efforts.