For Vietnam, Sustainable Development a Growing Challenge

by Roberto Tofani
World Politics Review

As the 11th National Congress of the Communist Party of Vietnam (CPV) opens in Hanoi on Jan. 12, the country is at a crossroads in terms of its future development trajectory and, possibly, its international posture.

During the nine-day gathering, the congress is to discuss, revise and approve the document that sets the guidelines for Vietnam’s 2011-2020 national socio-economic development strategy as well as the CPV Central Committee’s political report. In addition, the nearly 1,400 delegates, representing more than 3.6 million party members in 54,000 grassroots organizations, will elect the new Central Committee. The 160 full members and 21 candidates who make up the committee will in turn elect the 14-member Politburo and the party’s secretary-general.

The 2011-2020 economic strategy is a key document for Vietnam’s future, as it is meant to shape the next stage in the nation’s development. The major contents were revealed by Premier Nguyen Tan Dung in an article published by the Vietnam News Agency.

The broad guidelines identify sustainable development as a cornerstone of the country’s push for modernization. Vietnam’s path to industrialization is to be aided by stable and consensual politics, with the same goals for its broader society. The socio-cultural development of national human resources, especially in science and technology, is also seen as critically important, although export-oriented manufacturing industries are still seen as the backbone of the country’s productive sector for the foreseeable future.

Vietnam’s existing economic foundations are reasonably strong.

Since 1986, when the Doi Moi strategy (Renovation) was introduced, the country has achieved rapid growth. In 2010, the economy grew about 6.7 percent, despite the global financial crisis. Vietnam has also been successful in reducing its poverty rate and is doing well at working toward the Millennium Development Goals (MDGs). The percentage of people living in poverty in Vietnam has already been cut from 58 percent in 1993 to 18 percent this year, which means Vietnam has met this MDG target five years ahead of schedule. And these results have been achieved while pushing the literacy rate up to 90.3 percent.

But previous achievements do not guarantee another decade of rapid growth. Vietnam’s current challenges are multifaceted.

Dung noted that a big variable is environmental degradation and climate change, particularly sea-level rise, given that Vietnam is seen as one of the most threatened countries in the region. The draft strategy, however, does not specify how Hanoi is preparing to face this.

For Suiwah Dean-Leung, an economics professor at the Australian National University’s College of Asia and the Pacific, a key challenge for Vietnam is to avoid the so-called middle-income trap and develop into a high-income, modern, industrialized economy.

“Vietnam still has very large state-owned enterprises in capital-intensive industries, and their recent extension into real estate and finance contributed to destabilizing the macroeconomy,” she told World Politics Review.

Vietnam’s state-owned enterprises use 40 percent of the total capital invested in the country but produce only 25 percent of the gross domestic product, which was $92.6 billion in 2009.

According to Dean-Leung, there is a need for a more open and equal playing field in order to maximize production and improve competitiveness, “but the CPV perceives this as likely to undermine one-party rule,” she said.

The centralized nature of the CPV is also seen as a potential hurdle to the otherwise well-received objective of developing human resources. This, in fact, would require an opening up of the socio-cultural and political space — something that the current leadership does not seem prepared to pursue.

Decisions are still firmly in the hands of the party and its elite members. There is little participation by the large majority of Vietnam’s 90 million citizens, and the decision-making process remains murky and mired in corruption. The draft did not hint at a change of course.

Freedom of the press, a key indicator of popular participation in a country’s political process, still leaves much to be desired. Freedom House has ranked Vietnam 177th and 178th out of 195 countries in the last three years. Transparency International’s Corruption Perceptions Index ranked Vietnam 116th out of 176 countries in 2010.

Vietnam’s ongoing focus on export-oriented industry could also have a mid- to long-term effect on the country’s relations with China, the main regional manufacturing center. The CPV acknowledged that Vietnam’s economic growth and employment depend greatly on exports, and the country’s recent success is based on a 21-percent average yearly increase in exports between 1991 and 2007.

But the recent ASEAN-China Free Trade Agreement could pose a threat to Vietnam’s regional exports, and may indirectly lead to closer ties with Europe and the U.S., the major Vietnamese exporting partners. Vietnam opened FTA negotiations with Brussels in 2010, and the U.S. is seen locally as offering more in terms of foreign investment and expertise.

Hanoi’s foreign policy, however, is also likely to be influenced by the next party leader, with the current leadership currently divided into reformist and conservative factions.

The reformist contender is current Premier Nguyen Tan Dung, who is also seen as fairly U.S.-friendly. The conservative contender is Nguyen Phu Trong, chairman of the National Assembly, the country’s legislative body, and seen as both the favorite for the post and the most acceptable to Beijing, according to sources.

The feeling is that in the short term, the country’s leadership will not diverge from the present policy of hedging its relations with the U.S. and China. But in the medium and long terms, some burning issues will need to be resolved, including disputes over sovereignty of the Spratly and Paracel Islands, two potentially hydrocarbon-rich archipelagos in the South China Sea that China and four other countries also claim. Beijing would like to solve the dispute through bilateral meetings, while Vietnam hopes to exploit U.S. influence in the region as a counterweight to China.

It is in the context of this shifting regional balance that Vietnam must chart the course of its future development, with its position in the regional and global economic order very much at stake.

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