Journal Vietnam social sciences – No 6/2019

Journal Vietnam social sciences – No 6/2019 present the content thought of Vietnamese nationalist party on national issues; Vietnam’s economy overview and assessments of prospects; America’s indo-pacific strategy and its impact on cooperation and development in ASIA; characteristics of population ageing process in Vietnam and issue of caring for the elderly...

Editorial Board

Nguyen Quang Thuan, Vietnam Academy of Social Sciences (VASS), Chairman Ngo Van Vu, Vietnam Social Sciences Review, VASS, Acting Editor-in-chief, Vice Chairman

Tran Thi An, Vietnam National University, Hanoi

Dang Nguyen Anh, Vietnam Academy of Social Sciences

Vu Thanh Tu Anh, Fulbright University Vietnam

Salvatore Babones, University of Sydney, Australia

Nguyen Thi Phuong Cham, Institute of Cultural Studies, VASS

Horim Choi, Pukyong National University, Korea

Tran Tho Dat, National Economics University

Nguyen Dang Diep, Institute of Literature, VASS

Tran Van Doan, National Taiwan University, Chinese Taipei

Pham Van Duc, Vietnam Academy of Social Sciences

Nguyen Ngoc Ha, Institute of Philosophy, VASS

Dinh Quang Hai, Institute of History, VASS

Nguyen Thi Hien, Vietnam National Institute of Culture and Arts Studies

Nguyen Van Hiep, Institute of Linguistics, VASS

Luong Van Hy, University of Toronto, Canada

Vu Minh Khuong, National University of Singapore, Singapore

Bui Van Liem, Institute of Archaeology, VASS

William Leon McBride, Purdue University, USA

Mary Byrne McDonnell, Social Science Research Council, USA

Nguyen Duc Minh, Institute of State and Law, VASS

Nguyen Van Minh, Institute of Anthropology, VASS

Pham Quang Minh, University of Social Sciences and Humanities, Vietnam National University, Hanoi

Kenichi Ohno, National Graduate Institute for Policy Studies, Japan

Hiroshi Onishi, Keio University, Japan

Peter Cho Phan, Georgetown University, USA

Bui Nhat Quang, Vietnam Academy of Social Sciences

Oscar Salemink, University of Copenhagen, Denmark

Luca Maria Scarantino, IULM University, Italy

Katsumi Shimane, Senshu University, Japan

Iwan Gardono Sujatmiko, University of Indonesia, Indonesia

William Sweet, St Francis Xavier University, Canada

Pawel B Sztabinski, Institute of Philosophy and Sociology, Polish Academy of Sciences, Poland

Keith Taylor, Cornell University, USA

Nguyen Xuan Thang, Ho Chi Minh National Academy of Politics

Tran Van Tho, Waseda University, Japan

La Thi Thu Thuy, Institute of Psychology, VASS

Bui Quang Tuan, Vietnam Institute of Economics, VASS

Tu Weiming, Peking University, China

CONTENTS

Thought of Vietnamese Nationalist Party on National Issues

Nguyen Van Khanh

3

Vietnam’s Economy: Overview and Assessments of Prospects

Tran Dinh Thien

Characteristics of Population Ageing Process in Vietnam and Issue of

Caring for the Elderly

Nguyen Huu Minh

52

A Decade Review of Divorce in Vietnam

Tran Thi Minh Thi

69

Thought of Vietnamese Nationalist Party on

National Issues Nguyen Van Khanh1

1 University of Social Sciences and Humanities, Vietnam National University, Hanoi

Email: khanhnv@vnu.edu.vn

Received on 1 August 2019 Revised on 13 August 2019 Accepted on 20 October 2019

Abstract: Based on the Political Platform and Regulation of the Vietnamese Nationalist Party

(VNP), this research paper analyses and clarifies the basic tenets of its political thought in order to answer the question of whether nationalism2 and national consciousness were the basis and the key element in the political thought of this party in the period prior to 1930 or not It also brings to light the differences between the nationalism of the VNP and that of Sun Yat-sen, the founder and supreme leader of the Kuomintang in China

Keywords: Vietnamese Nationalist Party, nationalism, national consciousness

Subject classification: History

1 Introduction

The Vietnamese Nationalist Party was a

patriotic and revolutionary organisation,

which was founded in Hanoi in 1927

Although, in terms of the social class,

most of its members belonged to the petty

bourgeoisie, the party represented the

interests and ideology of the bourgeoisie

How was its view on nationalism? What

were the similarities and differences

between its nationalism and the patriotism

and nationalism of other contemporary

political organisations in Vietnam? These

are the issues worth studying to clarify

their role and contributions to the

country's history

2 Opinions on defining and assessment

of political ideology of Vietnamese Nationalist Party

First of all, it is necessary to take note of some different opinions and views regarding the assessment of the political ideology of VNP, which was one of three major political parties in Vietnam in the 1920s Until now, research on VNP has dealt with various aspects and at different levels of the party‟s policy to achieve national salvation, and its political ideology However, apart from some commonly shared opinions, there are still differences and points of contention in assessing the political views of this party Generally, there exist three types of opinion:

Vietnam Social Sciences, No 6 (194) - 2019

The first type contends that the VNP

was not a purely nationalist party, but an

organisation with socialist leanings Tran

Huy Lieu and Bui Cong Trung represented

this type Based on the party‟s first

Political Platform and Statutes, which

highlighted “First to carry out the national

revolution and then carry out the world

revolution,” Tran Huy Lieu in his book

History of 80 years of Resistance against

France wrote that “As for the VNP, the

key sentence of the above-mentioned

platform showed that it was not a pure

nationalist party as many people believed

Instead, from moral perspectives, it

advocated a world revolution to fight

imperialism In the second Political

Platform and Statutes drafted in late 1928,

the party‟s doctrine was spelled out as

democratic socialism accompanied by a

footnote „Not the same as German

democratic socialism.‟ The motto was „to

promote national revolution, to build direct

democracy and to support oppressed

peoples So it could be said that VNP was

not a purely nationalist party but also had

socialist tendency” [8, pp.282-283]

From the starting point that VNP had

adopted the San-min doctrine since its

inception, Bui Cong Trung in his book A

Vietnamese Modern Revolution, affirmed

that “When the Vietnamese Nationalist

Party was established, it immediately

adopted Sun Yat-sen‟s San-min doctrine

that was the revolutionary way of the weak

bourgeois class of a colonised state which

was being profoundly affected by the

Russian October Revolution Therefore, the

character of national revolution was no

longer in the area of democracy, but it covered the domain of the people‟s livelihood, and thus unwittingly became a part of the world‟s proletarian revolution” [12, p.83]

The second type of opinion about the

VNP deliberately tried to erase class consciousness by contending that the party‟s ideology before 1930 contained elements that were anti-French, anti-feudalist and anti-communist This was the opinion of some researchers in the south of Vietnam before 1975 such as Hoang Van

Dao In the book Vietnamese Nationalist

Party - History of Struggle of Period of 1927-1954, he wrote: “In the political arena

to fight colonialism, feudalism, communism and dictatorship, the VNP was the largest pioneering force and also the last stronghold of the struggle for freedom and democracy” [2, p.23]

The third type of opinions about the

VNP was not totally homogenous, but shared similarities in their examining and assessing the core political ideology of VNP Typical of these opinions is the book

Modern History of Vietnam’s Revolution,

Vol 4 (on the period of 1919-1930) by Tran Van Giau, Dinh Xuan Lam and Kieu Xuan Ba, published in 1963 The authors wrote: “The VNP was a revolutionary organisation most representative of the national revolutionary tendency.” Following this line, the authors of

Vietnam’s History, Vol 2, also affirmed:

“The VNP which was founded by Nguyen Thai Hoc and Pham Tuan Tai was the organisation representative of the tendency

of bourgeois democratic revolution in Vietnam” [4, p.174] With the same type of

view are a number of other books, e.g

Development of Ideology in Vietnam from

1974 by Tran Van Giau, in which he

explained further that “the nationalist

tendency was essentially bourgeois

revolution”, on page 583; or Modern History

of Vietnam (1917 - 1965) written in Russian

by C.A.Mkhitarian as the chief author, on

page 59; and Indochine, la colonisation

ambiguë (1858 - 1954), by P.Brocheux and

D.Hémery (1995), written in French, on

page 299 In their book History of Vietnam,

part 2, published in 1995 in Russian by the

Lomonosov Moscow State University

Publishers in Russia‟s capital, the authors,

O V Novakova and P Iu Tsvetov, wrote

that the precursor of the VNP is a party of

the same name founded by Phan Boi Chau in

1924 in Guangzhou (China), and the

Programme of the VNP was the same as that

of the precursor party which was based on

the three principles of the San-min doctrine

(p.80) This opinion is not convincing due to

lack of supporting documents

Recently, there emerged some opinions

to the effect that VNP was a patriotic

organisation of the intelligentsia [6, p.491]

From these divergent opinions, some

questions have arisen: In terms of political

ideology, was the VNP an organisation with

revolutionary tendency or was it an

organisation that represented nationalist

revolution tendency? What was the nature

of the party‟s nationalism and what were

the differences between this party and other

political organisations inside and outside

the country during this period? In order to

elucidate these questions, we have to

examine and analyse the platform, the

political views and activities of the VNP in order to obtain a fair and more objective overall picture

3 Changes in Political Policies and Views

of Vietnamese Nationalist Party

Because of its weak social base and since it was born at a time when Marxism-Leninism had begun to take roots in various strata of the population, the VNP was not able to offer a consistent and clear platform during the two years of its existence

According to the party‟s leading figures Tran Huy Lieu and Pham Tuan Tai, the primary objectives of the VNP adopted at the party‟s inaugural conference on 25 December 1927 was “first to carry out a national revolution, then a world revolution” [7, p.31] The concepts of

“political platform”, “party principles”, or

“ideology” were absent in the draft outlines

of the party‟s Political Platform and

Statutes Moreover, the concept of “world

revolution” of the VNP members was not enunciated in clear terms

Their view on world revolution was simplistic: after carrying the national revolution, they would join the other small and weak countries in making a world revolution [7, pp.32-33]

About its objectives, the VNP clearly stressed the need to overthrow dictatorial democracy and to set up a nationalist republic of Vietnam; the people would be given the freedoms of expression, of movement, of gathering, and of religion

In order to achieve these goals, the VNP proposed to carry out the revolutionary

Vietnam Social Sciences, No 6 (194) - 2019

process in three stages The first stage was

the nascent or secret stage; the second one

was the preparatory or semi-open stage; the

third stage was ripe for uprising or the open

stage In the last stage, relying on well-

prepared manpower, the VNP would form

suicide squads and cooperate with

Vietnamese soldiers serving in the colonial

French army to stage uprisings in urban

areas, led by military officers previously

trained abroad [7, p.49]

In late 1928, the party realised that the

first version of the Political Platform and

Statutes was too vague and at the

suggestion of Nguyen Khac Nhu, the VNP

drafted the second version which was

longer and more detailed than the first In

the new Political Platform and Statutes, the

party declared its ideology was social

democratic; its objective was to unite all

forces regardless of gender [7, p.93] in

order to: a/ promote national revolution; b/

develop direct democracy; and c/ support

the oppressed peoples

In concrete terms the VNP wanted to use

force to fight foreign aggression, to achieve

national independence and to build a

republican state; then it would lend support

to other colonised countries to rise up and

make a revolution for national liberation

However, the VNP did not stop there; in

early 1929, it continued to adjust and

change its Political Platform and Statutes,

re-affirming its goals to: a/ promote

national revolution; b/ develop direct

democracy; c/ support the oppressed

nations [7, p.113]

The last version of the VNP‟s

Programme was drafted before the Yen Bai

mutiny broke out, clearly upholding the

principles of Liberty-Equality-Fraternity and its goals of national revolution, political revolution and social revolution [7, pp.121-122] In order to achieve these goals, the VNP advocated a revolutionary process in four stages: nascent (secret), preparation (semi-secret), open activity, and reconstruction (seizing power)

Up to the time of the armed uprising, the leaders of the VNP still wanted to re-adjust the political platform but since time was running out, they trimmed down Sun Yat-sen‟s San-min doctrine to make it the party‟s own guiding principles In the part entitled “Applying the San-min doctrine”

on the VNP, the author of Reference

Vietnam’s Revolution, Vol 5, wrote: “At

this time, while preparing for a battle fraught with risks and uncertainties, VNP leaders certainly had no time to discuss about ideology or to adjust their political platform, they only could simply “co-opted” the entire San-min doctrine, making it their own Since then San-min doctrine became the official ideology of the party” [7, p.55]

After the Yen Bai mutiny was suppressed, a number of VNP members were jailed; many times they engaged in heated discussions on the ideology of their party Those members who were arrested before February 1929 only knew the first version of the party‟s platform and charter Those who were arrested immediately before and after the Yen Bai mutiny only recognised the San-min Doctrine In 1926, two key figures of Nam Dong Publishing House, Pham Tuan Lam and Pham Hoang Tran compiled and published the book

“Biography and Doctrine of Sun Yat-sen”

[11, p.270] In the introduction, the authors

wrote: “We compiled this book only to pay

homage to our hero The hero‟s spirit has

not died, his accomplishments live on, and

introducing the hero to everyone is a way to

say to those who have not known him that:

there was such a hero” [11, p.270] These

authors also added that they wanted to

translate Sun Yat-sen‟s works into

Vietnamese However, their wish was never

fulfilled since the publishing house was

forced to close down by order of the French

colonial authorities

The documents above show that the

ideology of VNP was based on the three

principles: Liberty-Equality-Fraternity, but

actually the content of these principles was

the same as the three basic tenets of the

San-min doctrine Sun Yat-sen himself

affirmed this in his speech of 16 March

1924: “In the French revolution, the motto

was Liberty-Equality-Fraternity just as the

motto of Chinese revolution today being

Nationalism (Min Ts'u), Democracy (Min

Ch'uan) and Livelihood (Min Sheng) [13,

pp.50-51]

However, there are some considerable

differences between San-min doctrine and

the principles of the VNP Sun Yat-sen

advocated a revolution carried out in three

stages: 1/military unification by using

military power to eradicate obstacles to

build the nation‟s foundation; 2/ political

tutelage by using dissemination,

encouraging the people to get rid of

feudalism, establish self-ruled local

councils (parliamentary representation

style); 3/ constitutional democracy by

instituting a Five-Power Constitution

(executive, legislative, judicial, control and examination) [10, pp.341-367] In order to reach the goals of nationalism, Sun Yat-sen proposed three missions including: 1/ to mobilise the Chinese population against the Manchu dynasty; 2/ to initiate a revolutionary movement that can be achieved through violence; 3/ to conduct a revolutionary movement to overthrow the Manchu regime

This was different from the revolutionary approach of the VNP whose aims were to make a national revolution, to establish a constitutional republic and to help oppressed peoples to rise up with their own revolutions

4 National revolution doctrine - core element of VNP’s political ideology

Under the influence of Sun Yat-sen‟s min doctrine, the VNP sided with the position of the nation‟s bourgeoisie class

San-to deal with national issues In all of its political platforms and charters, the VNP concentrated on national issues, considering the fight against national oppression and national liberation as its primary responsibility The foremost responsibility in its first charter (1928) was

“to promote national revolution” and in its amended Statutes and Programme (1929) was “to promote national revolution, to build directly a republic, to support oppressed nations” (the party‟s platform in 1929) Then it is clear that its ultimate aim was to use violence to overthrow the colonial rule of the French empire in order

to gain national independence, establish a

Vietnam Social Sciences, No 6 (194) - 2019

republican government and institute

people‟s rights and democracy and pave

the way for capitalism to develop in

Vietnam Although the party‟s political

platform did refer to the reconstruction

period, this was done in a vague manner,

mentioning such tasks as “propagating

knowledge, educating the people by public

talks, granting freedom of speech.” In this

regard, the colonial newspaper La Revue

Française annammite issued on 4 August

1929 wrote: “If all the big words of the

Chinese revolutionary party are removed

from the Vietnam Nationalist Party‟s

platform, there is nothing left except one

sentence: you Frenchmen, go away! The

people of the party do not know what to do

after finishing their job, there is no social

programme, no political programme” [1]

The reason of this shortcoming was the

weak social base of the bourgeoisie

nationalist movement, or, in other words, it

was because that Vietnamese bourgeoisie

had to reckon with a feeble economy and a

weak political base Relying on a

bourgeois class in such a weak position,

the VNP adopted the San-min doctrine and

applied it in a specific way First of all, the

party‟s view about national issues and

nationalism was not similar to Sun

Yat-sen‟s nationalism at the early stage Sun

Yat-sen had said: “Considering the

situation of social customs in Chinese

history…, nationalism is the doctrine of

the people of the nation” (implying the

Han Chinese) He had also emphasised:

“To talk about nationalism is to talk about

the doctrine of the people of the nation

This is only true for China, not true for

other countries” [13, p.189] In contrast,

the goal of the party‟s nationalism was to fight against national oppression and slavery by a foreign colonial empire Of course, Sun Yat-sen‟s view of nationalism was later re-adjusted, amended and developed into The Three Great Policies: alliance with Russia and tolerance of the communists, support for the worker and peasant classes, equalising land ownership and restraining capitalism

The party‟s nationalist standpoint was not only expressed in its guiding principles, but also in the way it assessed potential revolutionary forces in both its guiding principles and actual deeds

In both its political platform and its actual revolutionary deeds, the VNP had no intention to engage in class struggle It always took the bourgeois nationalist standpoint in assessing and coordinating revolutionary forces The basic guidelines

of the two platforms and statutes written in

1928 and 1929 highlighted the party‟s basic motto of national solidarity uniting all forces regardless of gender, social class, belief and age in order to carry out the party‟s objectives However, there was a gap between the party‟s pronounced objectives and what happened on the ground since in reality the party attached more attention to the role of some social classes while downplaying the roles of others This could be seen in the party‟s development process It gave top priority to recruiting Vietnamese soldiers serving in the French colonial army, followed by members of the bourgeoisie and petty bourgeoisie, intellectuals living in urban areas; then notables, local officials and wealthy people in rural areas As for the

worker and peasant classes, the VNP

merely wanted to organise them into groups

of party‟s sympathisers It is worth noting

that the way revolutionary forces were

organised and built up by the VNP was

different from that of the Vietnamese

Revolutionary Youth Association founded

by its leader Nguyen Ai Quoc The

Vietnamese Revolutionary Youth Association,

a revolutionary organisation with socialist

tendency since its inception, focused on

mass mobilisation, dissemination and

education and the organisation of the

worker and peasant classes In contrast the

VNP downgraded and denied the leading

role of the worker class in the revolutionary

process This stance of the bourgeois class

had been pointed out by F Engels: “The

interest of the bourgeois class is to hide the

existence of a worker class” and “to hope

for the existence of a bourgeois class

without a worker class” [3]

It is fair to say that, on the one hand, the

way the VNP arranged and built up its

forces reflected the influence of the

San-min doctrine which did not advocate class

struggle but preferred to regulate the

various classes On the other hand, it was

impacted by the fierce ideological struggle

which was going on between the VNP and

the Vietnamese Revolutionary Youth

Association regarding the position and role

of the Vietnamese worker class The articles

by Dat Cong (Pham Tuan Lam) on the

newspaper “Thuc nghiep dan bao” clearly

expressed the view that rejected class

struggle and deny workers‟ leading role in

the nationalist movement In that context, the

Nam Dong Publishing House also lent

support to the policy of class regulation

Therefore it is understandable why the VNP

did not advocate class struggle in the first place, and why later on it moved closer to revolutionary nationalism

Since the VNP did not realise the strength of the masses, it did not believe in

it and did not want to rely on it, but sought individual strength, personal heroism, enthusiasm and eagerness, which characterise the petty bourgeoisie class The party regarded the masses as a mixed bag of people, and as such they cannot win In its view, in order to have independence, it was necessary to defeat the enemy And in order

to defeat the enemy, it was necessary to have weapons and military training The VNP therefore gave priority to military matters and made bombs to prepare for great events in order to make a name for the party This was evident by the fact that the party‟s Assassination Committee, which was located right next to its central office and led by Doan Tran Nghiep (“Ky con”), constantly carried out assassinations and terrorist acts against individuals [5]

Because they did not realise the strength

of the masses, after the assassination of Bazin in February 1929, to mitigate the effects of the French brutal retaliation, instead of relying on the masses to maintain their activities and rebuild their base, in their desperate situation, the VNP leaders made every effort to prepare for a last-ditch act of violence spurred on by the ideal of individual heroism that “even if we do not succeed, we [would still] become [true] persons.”

In short, although the VNP‟s basic political thought changed overtime, its core ideology remained nationalism However, the party‟s nationalism was not entirely similar to the San-min doctrine of Sun Yat-sen Sun Yat-sen found that the spirit of

Vietnam Social Sciences, No 6 (194) - 2019

Chinese people had waned under political

oppression and economic power of the

West, so he advocated a renewal of national

power; the people had to regain national

sovereignty and to rebuild the country by

themselves Sun Yat-sen‟s doctrine also

aimed at achieving ethnic equality between

the Han, the Mongols, the Tibetans…, but

deep in his heart, he wanted the Han people

to hold the reins of government [13] Thus

his nationalism was actually Han

hegemonism In contrast, the core nature of

the party‟s nationalism was patriotism and

national self-reliance

The VNP‟s view also differed from the

views on national issues of the two

organisations, namely the Vietnamese

Revolutionary Youth Assiociation and the

Tan Viet Revolutionary Party, the

revolutionary ideas of which are part of the

proletarian ideology aimed at totally

liberating the nation from the oppression of

colonialism, proceeding with proletarian

revolution, then allying with the world‟s

proletariat to overthrow capitalism and

build a communist society

Obviously, the VNP was neither a secret

organisation nor a revolutionary organisation

with socialist tendency So, it is fair to say

that the VNP was always a revolutionary

party representing the ideology and

interests of the Vietnamese bourgeoisie and

petty bourgeoisie in the 1920s

Although the VNP did not opt for

proletarian ideology as a way to achieve

national liberation, its ideology and

political policies before 1930 never were

against the communists

Due to limitations of revolutionary

logic, the VNP principles “were not as

thorough and penetrating as the political platform of the Indo - China Communist League later on, but they did not contradict the content of first period of the new-styled bourgeois democratic revolution led

by the Indo-China Communist Party…” [9, p.204] The ideological foundation and the core content of the VNP‟s view was patriotism and national consciousness On this score there was no difference between the VNP and the communists When assessing and seeking contact with the VNP, the Youth Assiociation - the organisation representing the proletarian revolutionary tendency in the years before

1930 - was critical of the party‟s risky and adventurous acts, (typical were the assassination of Nhu and Uyen, the two

traitors sent by the French Sureté to

capture Nguyen Thai Hoc in May 1928 in Hai Phong) while, on the other hand, it wanted to associate and coordinate with the party‟s members in its activities On its part, the VNP did not conduct adversarial acts against the Youth Assiociation; it even sought to unite the two parties organisationally in the years after its founding

Being subject to the changing circumstance of the nation and the world after World War II, the VNP‟s nationalism carried new features and meanings totally different from the nationalism of the feudal era During the era, under the influence of the strongly changed context of both the nation and the world after World War I, the party‟s nationalism had new contents and was dissimilar with Vietnamese feudal nationalism In feudal times, nationalism was premised on Confucian ideology with

the idea “The countries (i.e Vietnam and

China) are separate, customs of the North

(i.e China) and the South (i.e Vietnam) are

different” (Nguyen Trai, “Great

Proclamation upon the Pacification of the

Wu [invaders]”), but at the moment

nationalism was associated with the

demand to fight colonialism, to gain

national independence, liberty and

self-reliance in order to make the country strong

and the people prosperous

5 Conclusion

As such, the Vietnam Nationalist Party was

a patriotic bourgeois political party that

pursued revolutionary nationalism and was

an important component of the nationalist

movement in Vietnam in the 1920s With

its actions, the party made important

contributions to the formation and

development of modern Vietnamese

nationalism as well as to the momentous

steps in the national liberation movement in

Vietnam in the years before 1930

Note

2 There are various types of nationalism:

a/ Ethnic nationalism; b/ Civic nationalism; c/

Expansionist nationalism; d/ Radical nationalism, e/

Left-wing nationalism

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Publishers, Ontario, Canada]

[11] Nguyễn Thành (2002), Ảnh hưởng của Tôn

Trung Sơn và chủ nghĩa Tam dân ở Việt Nam,

Nxb Khoa học xã hội, Hà Nội [Nguyễn

Thành (2002), Influence of Sun Yat-sen and

San-min Doctrine in Vietnam, Social Sciences

Publishing House, Hanoi]

[12] Bùi Công Trừng (1958), Góp phần nhỏ bé về

lịch sử cách mạng cận đại Việt Nam, tập 1,

Nxb Sự Thật, Hà Nội [Bui Cong Trung

(1958), A Small Contribution on Modern

History of Vietnamese Revolution, Vol 1

National Political Publishing House, Hanoi,]

[13] Tôn Trung Sơn (1995), Chủ nghĩa Tam dân,

Viện Thông tin khoa học xã hội, Hà Nội [Sun

Yat-sen (1995), San-min Doctrine, Institute of

Social Science Information, Hanoi]

Vietnam’s Economy: Overview and

Assessments of Prospects

Tran Dinh Thien1

1 Vietnam Institute of Economics, Vietnam Academy of Social Sciences

Email: trandinhthien09@gmail.com

Received on 5 November 2019 Revised on 12 November 2019 Accepted on 18 November 2019

Abstract: Since 2007, Vietnam has gained considerable achievements with regard to

economic development such as the attraction of Foreign Direct Investment (FDI) or international trade growth at a high level However, the achievements still cont ain many uncertainties, entailing the decline in economic growth The period of 2018 -2019 witnessed the “abnormal” positive growth of Vietnam’s economy while the regional and global economies were experiencing adverse impacts from the “US-China trade war” (begun with the “battlefield” of trade and now spreading to other “battlefields” such as technology and finance) as well as geopolitical turmoil in numerous hot spots This positive growth is not something random but the result of a strong restructuring process that Vietnam had made efforts to implement in the previous stage In the context that the world is currently going through many changes, it is a “strong dose of reagent” for the country’s goal of becoming an upper-middle-income country by 2035

Keywords: Economic growth, foreign direct investment, inflation, restructuring

Subject classification: Economics

1 Overview of the period of 2007 - 2019

Vietnam’s accession to the World Trade

Organisation (WTO) in January 2007 has

opened enormous opportunities for the

country’s economy The consequent boom

in trade and foreign direct investment led to

the possibility of speeding up the economic

growth Vietnam would be able to quickly

narrow the gap between it and other leading economies in the region

In fact, Vietnam has been, for years, seen as a “success story in attracting FDI” and being able to maintain its high commercial growth (Figure 1) These factors have created the two most important growing motivations for the country’s economy during the period of

đổi mới, or renovation

Vietnam Social Sciences, No 6 (194) - 2019

Figure 1: Strong FDI and International Merchandise Trade

Source: The General Statistics Office of Vietnam

However, there was another side of the coin

of the story: the sudden increase and decrease

of FDI flows as well as import and export

(Figure 2) have made it hard to control the macro stability This pushed the economy into

a long-lasting unstable state and growth decline Vietnam Inward FDI

Vietnam International Merchandise Trade Performance

Figure 2: The Growth of FDI and International Trade are Weird

Source: The General Statistics Office of Vietnam

This fact has inner reasons: Vietnam has

not been well prepared (with regard to

infrastructure, human resource, governance

and macro regulation) for its integration in

order to turn the opportunities into real

development benefits On the contrary, in

the condition of a fast open-door economy,

the poor internal capability has turned

potential opportunities into development pressure and challenges, which were hard to overcome Figure 3 indicates that Vietnam’s economy soon fell into the prolonged instability, abnormal inflation increase and GDP growth decline in line with the “unexpected” growth of FDI and import-export

Vietnam Social Sciences, No 6 (194) - 2019

Figure 3: Vietnam’s Economic Growth and Inflation in Period of 2002-2012

Source: The General Statistics Office of Vietnam

That Vietnam’s economy fell into

difficulties right after joining the WTO was

really unconventionally Not so many

people might think that the accession to

organisation could lead to such a situation

of developmental, which was totally

contradictory to everyone’s prediction and

expectation Vietnam was not able to make

use of opportunities for integration to move

forward and narrow the gap with other

leading economies in the region, which was

so well done by China, the country joining

the WTO five years earlier than it

Since 2011, Vietnam has put into

practice the Plan for Restructuring the

Economy and Renovating the Growth

Model, focusing on three focal points: public

investment, state-owned enterprises and the

system of commercial banks This, in

essence, is the way to re-start market reforms

in new circumstance with an aim to changing the system of resource distribution, restoring the macro stability and improving the growth rate

However, the process was challenged with numerous difficulties and progressed in a slow manner The economy has remained unstable GDP growth rate decreased and troughed in 2012 and was not yet able to return to the 2010 level in 2016 (Figure 4)

It was not until 2017 that Vietnam’s economy started to be improved Over the next three years (2017-2019), the economy has witnessed a faster growth rate; and the Consumer Index Price (CPI) has been under a proper control as well as kept at a stable and low rate (under 4%/year)

Figure 4: Vietnam’s Economic Growth and Inflation in Period of 2010-2018

Source: The General Statistics Office of Vietnam

It should be noted here that the two-year

period of 2018-2019 was also the US-China

trade war time, during which the trend of

growth rate decline and turmoil covered the

whole world’s economy as well as those of

the ASEAN In such a challenging situation,

Vietnam was still able to maintain a high GDP growth rate and good control of macro stability Its achievements even surpassed those of the other ASEAN countries and are predicted to continue with the pattern in 2020 (Figure 5)

Figure 5: GDP Growth of Some ASEAN’s Economies

Source: Cao Viet Sinh, Gabriel Demombynes, Victoria Kwakwa, et al., (2016), Vietnam

2035: Towards Prosperity, Creativity, Equity and Democracy, World Bank and the

Ministry of Planning and Investment

Vietnam Social Sciences, No 6 (194) - 2019

Another surprising achievement, which

should be stressed, is that in 2019, Vietnam

made a record of climbing 10 places up in the

Global Competitiveness Index (GCI) of the

World Economic Forum (WEF), while most

of other ASEAN economies went down in

their rankings (Table 1)

Together with efforts to accelerate the international integration and sign new-generation Free Trade Agreements (FTAs), Vietnam is now actively improving its investment environment and upgrading its national competitiveness The fact should

be acknowledged

Table 1: Global Competitiveness Rankings of Asia-Pacific Countries/Territories in 2019

Source: World Economic Forum, 2019

In order to have a more authentic

evaluation on the fast changing economy,

we need to dissect the move of Vietnam’s

economy in 2019

2 Vietnam’s economy in 2019:

“Unconventionally” bright

The latest data on Vietnam’s economy

shows that the positive trend continues to be

strengthened (Table 2) This seems to be an

“unconventional" achievement record in the

context of the unstable global economy and sharp declining trend in growth rate under the impacts of the US-China trade war

It is because Vietnam’s economy is much smaller in size and weaker in capability yet greater in the openness compared to those of China’s and the US’s, while these are its two biggest trade partners The conflicts between these two biggest trade partners push Vietnam’s economy into a dilemma, which is highly likely to expose the country to strong negative impacts and vulnerability

Table 2: The Nine-month Snapshot of Vietnam’s Economy in 2019

- Supplemented capital, capital contribution and share purchase 82,3

Note: (*) - value over the same period last year

Source: The General Statistics Office of Vietnam

However, Vietnam seems to have been

dealing with those impacts from the

US-China trade war in quite an efficient

manner The data in Table 2 shows that in

the first nine months of 2019, Vietnam

reached the highest GDP growth rate in

the past nine years; CPI was, at the same

time, well under control and reached its

lowest level in the past three years There

have been also new moves in the

attraction of foreign investments The

number of FDI projects has increased

significantly (26.4%), but the average

scope of the capital decreased, equivalent

to only 40% of that of 2017 On the other

hand, the inflows of Foreign Indirect

Investment (FII) to Vietnam in 2019

increased dramatically, reaching a record

of 82% in comparison to the same period

in 2018 The M&A market in Vietnam has been ignited and shown signs of booming This unconventionally trend is closely related to the anomalous increase of

“capital of Chinese-citizenship” invested into Vietnam since the start of the US-China trade war The great number of small-scaled projects in Vietnam has caused justifiable worries about the level

of technology and environmental impacts

on the economy It also carries the risk of increased Chinese goods intruding into Vietnam along with “investment flows”

so that they can “change their origins” before being exported to the US

Vietnam Social Sciences, No 6 (194) - 2019

In the “gloomy time” of the world trade,

Vietnam’s import-export growth in the first

ten months of 2019 remained considerably

high, continuing its role as the motivation for

economic growth (Figure 6) However,

changes in the structure of trade growth

indicate a warning nature: 16.1% increase in

the import from China causes a 47.9%

increase of trade deficit for Vietnam from

China in comparison to the same period in

2018 Meanwhile, the export from Vietnam

to the US sharply went up (26.6%) [8] This

places Vietnam in the danger of being

included into a “list” of economies that can

be under sanctions by President Donald

Trump’s Administration for “origin frauds”

(helping to export goods of Chinese origin to

the US)

Recently, the development of enterprises

in Vietnam has also been impressive All

three growth indexes (the number of

enterprises, capital size and job creation)

during the first ten months of 2019 are

positive This has proved the drastical return

of trust in Vietnamese enterprises while the world economy is still in fluctuation

In the first ten months of 2019, there were 107 countries and territories investing into Vietnam Hong Kong (China) leads the list with an investment capital of USD 6.45 billion Following up is the Republic of Korea with USD 5.52 billion, making up 19% of the total investment into Vietnam The third place in the list belongs to Singapore, which is followed

by China, Japan and others Among the countries and territories, investments from China and Hong Kong tend to increase in comparison to the same period

in 2018 due to the impacts of the US-China trade war Specifically, the investment from China has almost doubled, while that from Hong Kong (China) has increased by 3.84 times in comparison to the same period

in 2018 [8]

Figure 6: No of Newly Established Enterprises in Nine Months of Year during 2015-2019

Source: The General Statistics Office of Vietnam

Explaining clearly essence of the

“upward” trend of Vietnam’s economy

recently will help to identify prospects of the

economy and evaluate its real competence

accurately in the current unstable world

It is grounded to affirm that the

improvement in Vietnam’s growth rate and

the country’s stable trend, which is

ever-more attracting foreign investments, is not

simply out of “benefits” from the US-China

trade war This attractiveness originates

from changes in the basic structure of the

economy itself, which had happened far

before the US-China trade war

Continuously in many years, Vietnam has

made efforts to implement strong reforms in

two aspects, internal institutions and

open-door policies to integrate with foreign

countries, thereby establishing a new

foundation for growth and development

Some administrative reforms that

Vietnam has yielded success can be named

as followings: i) reform in the growth and

development model with two main

orientations: prioritising the private sector

and targeting a high growth rate based on the

firm macroeconomic stability; ii) active

engagement in new-generation FTAs

(especially the CP-TPP and EVFTA),

thereby creating strategic advantages in

comparison to other economies in the

region; iii) implementation of new strategies

in attracting FDI with priorities over

attracting high technologies to create high

added values and linking chain - global

production network; iv) encouragement for

startups and innovative activities; v)

government reforms along with developing

the “tectonic state” (a term of Vietnamese

origin, implying a state which is

constructive and facilitating)

The above reforms clearly show the desire and measures to develop a risk-resilient economy, thrive to a high development level and narrow the gap between Vietnam with countries that started earlier Although achievements have been still modest so far, those reforms clearly indicate orientations of making fundamental structural changes to firmly improve the situation The US-China trade war with its severity and very intense negative impacts is playing the testing role in Vietnam’s reform efforts That testing is, in fact, bringing about positive results Vietnam is an increasingly attracting destination for foreign investments That results from efforts in improving the internal investment environment and actively integrating into the world

According to the ranking of the best economies for investment by the US News

& World Report, Vietnam has impressively stepped up from place 23 in 2018 to place 8

in 2019

The publication asserted that reforms of economic policies conducted since 1986 had made Vietnam a stronger and more competitive country It had also become more integrated since its accession to the WTO in 2007, the Association of South East Asian Nations (ASEAN), the Asia-Pacific Economic Cooperation (APEC) forum and major trade agreements Invest-

in is the category that Vietnam earned the best scores in being ranked in this ranking

by the US News & World Report

For overall results, the country stands

39th in the 2019 list, stepping up from the place 44th in 2018 Among the categories, Vietnam scored the highest in “Open for business” thanks to its low production fee The ranking was based on the evaluation

Vietnam Social Sciences, No 6 (194) - 2019

by 7,000 company leaders worldwide with

eight categories reflecting criteria, namely

the start-up spirit, economic stability,

favourable tariff policies, innovation, skilled

labour force, expertise in technology,

dynamism and corruption The criteria were

compiled based on a report in 2011 by the

World Bank (WB), which emphasised four

factors that could make a nation an ideal

destination for investment: the people,

environment, relations, and legal framework

That trend is the most clearly reflected in investment inflows to Vietnam from East Asian economies such as the Republic of Korea, Japan, Singapore and Chinese Taipei (the territory of Taiwan) long before the outbreak of the US-China trade war (Figure 7) The trend of increasing investments into Vietnam from these “time-tested” investors has remained unchanged during the trade war

Figure 7: Major Sources of FDI in Vietnam

Note: Accumulated base, in millions of USD

Source: Foreign Investment Agency of Vietnam

The Republic of Korea (RoK) is the

biggest investor into Vietnam in all spheres:

the number of projects, the amount of

investment capital, the coverage of

investment (in sectors and provinces) and

especially the number of big groups as

investors In 2019, China (including Hong

Kong) has become the year’s biggest

investor in Vietnam However, progressively, by February 2019, among the

130 countries and territories still having valid investment projects in Vietnam, the RoK has come out on top with the total registered capital of USD 63.7 billion, making up 18.4% of Vietnam’s total investment capital (Table 3)

Table 3: Foreign Direct Investment Projects Licensed by Main Counterparts

Source: The General Statistics Office of Vietnam

After the FTA signing between the

RoK and Vietnam in 2015, promoted by

the high investment growth, the trade

volume between the two countries has

increased by nearly 50% Overtaking the

US, the RoK has become Vietnam’s second largest trade partner, ranked only after China In 2018, their two-way import-export turnover was USD 68.2 billion (Figure 8)

Figure 8: Vietnam Has Become The Hottest Investment Destination of the RoK’s FDI Flow

Source: The General Statistics Office of Vietnam

The two countries are targeting a

bilateral trade turnover of USD 100 billion

in 2020 - a really tough goal when there is

only one more year to go Nevertheless, the US-China trade war seems to play a strong motivating role in the realisation of this

Vietnam Social Sciences, No 6 (194) - 2019

goal It should be noted here that the export

turnover of the RoK to Vietnam has

surpassed that to the US (Figure 9)

Enterprises of the RoK are being driven

away from China due to the US-China trade

war; and most of them have chosen Vietnam as their next destination There are good reasons to predict a boom in the export from the RoK to Vietnam in the years to come

Figure 9: Vietnam’s Export Performance: Republic of Korea versus US

Source: The General Statistics Office of Vietnam

3 Prospects of Vietnam’s economy in the

period to come: positive and bright, yet

full of challenges

It is risky to make any predictions of long

or even medium term in such unforeseeable

fluctuations of the world’s economic and

political affairs The riskiness of such

predictions is high from technological,

geopolitical and economic perspectives

However, for Vietnam’s economy, the

short-term projection is based on

highly-convincing foundations

Major international institutions such as

the WB, the International Monetary Fund

(IMF), or the Asian Development Bank (ADB) have all made their predictions about Vietnam’s economy in 2020 The predictions might be more or less different from one another in their extents, but they are consistent in terms of the basic trend: while the global and regional economies continue to be trapped with difficulties or even to face a more declining and unstable state in some years to come, the prospects

of Vietnam’s economy are still seen as positive with two emphasised points:

Firstly, Vietnam will be still able to

maintain a high GDP growth rate and macro stability in comparison to the majority of other economies in the world

Secondly, GDP growth will be slowing

and inflation increasing compared with

2017-2018, albeit not by much The main argument

provided by the WB is that Vietnam’s economy cannot move fast forward alone in

an unstable and declining world

Table 4: Vietnam's Economic Prospects of 2020-2021

Source: World Bank (2019), “Taking Stock: Recent Economic Developments of Vietnam”,

Special Focus: Vietnam's Tourism Developments - Stepping Back from the Tipping Point-

Vietnam's Tourism Trends, Challenges and Policy Priorities

The ADB has also forecasted the similar

trend in “Asian Development Outlook 2019

Update: Fostering Growth and Inclusion in

Asia's Cities” released in September 2019 [7]

Accordingly, the developing Asia’s GDP

is forecasted to slow down from 5.9% in

2018 to 5.4% in 2019 and 5.5% in 2020

Inflation rates across that region are projected

to increase from 2.5% in 2018 to 2.7% this

year and in 2020 Meanwhile, Vietnam’s

GDP is forecasted to slow from 7.1% in 2018

to 6.8% in 2019 and 6.7% in 2020 – just a

slight decrease and thus can ensure that it is

still one of the highest-growing economies in

the region The macro control of Vietnam

remains good with the inflation rate projected

to decrease from 4.2% in 2018 to 3.4% this

year and in 2020 [4]

According to the above predictions, the

prospects of Vietnam’s economy in some

years to come are optimistic The

enhancement in efforts to reform and open

the economy for integration, which is most

clearly shown through the promotion of new

strategies in attracting FDI, and the active

implementation of FTAs, has increased the

practicability of the above-mentioned trend

Among the factors, which create huge and different advantages in attracting foreign investments and differences for Vietnam, the

“golden population” (the 100-million-people market with a high potential of income growth) and the “trade and investment hub” are truly stood-out ones The fact that Vietnam has participated in 16 FTAs, covering most of the biggest markets, enables investors to easily get access to the market and build up their business network at the global scale

Vietnam has five sectors/areas with tremendous development potentialities in the future: i) industries with traditional comparative advantages such as textile, footwear, electronics, agricultural production and aqua-culture; ii) tourism, entertainment, education, healthcare, pharmacy and retail distribution to serve consumers; iii) connection, supporting network, production value chains and logistics; iv) infrastructure and real estate, including those for housing, offices, tourism, retail and industrial zones; v) platform economy, green economy, smart cities, fintech, e-commerce and others

Vietnam Social Sciences, No 6 (194) - 2019

These are priority areas targeted for

foreign investments in the period to come

However, not everything is advantages for

Vietnam The country’s economy itself is

suffering from several weaknesses and

unreleased bottlenecks They are: i)

insufficient infrastructure; ii) incomplete

reform in the public sector; iii) unqualified

human resource and strong trend of pay

rises; iv) weak contingent of domestic

enterprises and lack of an effective

connection mechanism with the FDI sector

In external relations, the large reliance

on China’s market and the danger of being

made use of for commercial fraud, which

can lead Vietnam to sanctions imposed by

the US in the context of global trade

conflicts, especially between the US and

China, and have not been controlled yet,

constitute a warning-worthy fact

Additionally, although Vietnam has still

kept a good control of exchange rates so far,

the fact that it is “trapped” between the two

leading trade partners with regard to import

and export has put the country’s domestic

currency and monetary policies under risks

The focal task of Vietnam at present is to

overcome the obstacles in the years to

come, and there are grounds to believe that

the country will yield positive results

Vietnam’s great aspiration is to rise fast

to escape from its backwardness in the

period to come It has set certain objectives

to thrive in some areas, especially in the

digital economy It is also making efforts to

become an upper-high-income country in

the next 10-15 years

In doing so, Vietnam has to reach an

average economic growth rate of 7.5%/year

in the next ten years The implementation of

the task needs to be actively started right in

2020 [4]

4 Conclusion

The FDI, as well as goods import - export, have been the two most important motivations of Vietnam since the country’s accession to the WTO However, the

“strong fluctuations” of the two factors has made it hard to control the macro stability and pushed the economy into a long-lasting unstable state and growth decline

Efforts to restructure the economy as well as institutional reforms focusing on the business environment improvement have helped Vietnam to show signs of strong revitalisation regardless of negative impacts from the international context

However, the regional and global scenarios are increasingly becoming unstable and unpredictable, which is projected to adversely affect the prospects of Vietnam’s economy in the time to come Therefore, to accomplish the set goal of becoming an upper-high-income country before 2035, Vietnam needs to make more concerted efforts to restructure its economy with two main driving forces, namely developing an equitable and transparent business environment and reforming the public administrative apparatus to move towards the target of the “tectonic state”

“Restructuring Vietnam’s economy in 2011-2020 towards sustainable development”

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[1] Ngân hàng Thế giới (2018), "Điểm lại: Cập

nhật tình hình phát triển kinh tế Việt Nam",

Chuyên đề đặc biệt "Tạo thuận lợi thương

mại bằng cách hợp lý hóa và cải thiện tính

minh bạch của các biện pháp phi thuế quan"

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on Vietnam's recent economic developments”,

Special Focus: Facilitating Trade by

Streamlining and Improving the Transparency

of Non-Tariff Measures]

[2] Ngân hàng Thế giới (2019), "Điểm lại: Cập

nhật Tình hình Phát triển Kinh tế Việt Nam",

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thách thức và ưu tiên chính sách cho ngành du

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Vietnam”, Special Focus: Vietnam's Tourism

Developments - Stepping Back from the Tipping

Point - Vietnam's Tourism Trends, Challenges

and Policy Priorities]

[3] Cao Viết Sinh, Gabriel Demombynes, Victoria

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tư Việt Nam phối hợp thực hiện [Cao Viet Sinh,

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(2016), Vietnam 2035: Towards Prosperity,

Creativity, Equity and Democracy, World Bank

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[4] Nguyễn Quang Thuấn (chủ biên) (2018), Kinh

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Nxb Khoa học Xã hội, Hà Nội [Nguyen Quang

Thuan (chief author) (2018), Economies of the

World and Vietnam in 2017-2018: Creating Platform for Rapid and Sustainable Growth,

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Quang Thuan (chief author) (2019), Economies

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Nam - Hàn Quốc: Một phần tư thế kỷ chia sẻ cùng phát triển, Nxb Đại học quốc gia Thành

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[8] https://www.gso.gov.vn/default.aspx?tabid=621& ItemID=19388, retrieved on 12 September 2019

Impacts of ASEAN Economic Community on Integration of Vietnamese Industry

Tran Xuan Hiep1, Nguyen Huy Hoang2

1 Duy Tan University, Da Nang

Email: hiepdhdt@gmail.com

2 Institute for Southeast Asian Studies, Vietnam Academy of Social Sciences

Email: hoangnh.iseas@gmail.com

Received on 6 March 2019 Revised on 15 April 2019 Accepted on 9 May 2019

Abstract: The regional and international economic integration, especially through Free Trade

Agreements (FTAs) as well as initiatives of bilateral and multilateral integration, have been leaving great impacts on the integration of the Vietnamese industry in particular and the whole economy in general In this paper, the author focuses on analysing the influence of the ASEAN Economic Community (AEC) on the integration of the Vietnamese industry, thereby giving some related indications to make contributions to promoting the development of the industry in the time to come The paper also evaluates the impacts of the AEC on the Vietnamese industry through trade and investment channels between Vietnam and countries within the AEC

Keywords: ASEAN Economic Community (AEC), Vietnamese industry, impacts, integration Subject classification: Economics

1 Introduction

After Vietnam was reunified in 1975, the

country continued to implement industrial

policies to create a new economic

structure, based on the revitalisation of

agriculture and development of industrial

production The main goal at that time was

to meet the needs of equipment and

consumer goods, especially food and

foodstuffs Over time, the development of

regional and international integration trends

through FTAs has been leaving great impacts,

which leads to improvement and creates more integration opportunities for the Vietnamese industry in particular and the whole economy in general The establishment

of the ASEAN Community and the AEC pillar is one of the most important developments, strongly affecting the process

of reaching out to the world This article3assesses impacts of the AEC on the integration of the Vietnamese industry The structure of the paper is as follows: After this introduction, the status of the integration process of Vietnam’s industry is

elaborated in Section 2, which is followed

by an analysis and discussion of the

opportunities and challenges for the

integration in Section 3 Section 4 is set to

discussed the impacts of the AEC on the

country's industry, and the concluding

remark is placed in Section 5

2 Status of the integration process of

Vietnam's industry

In the late 1980s, economic and social

difficulties inside the country in combination

with serious economic crises in socialist

states were key factors leading to Vietnam’s

economic renovation process In the

industrial sector, in 1991, Vietnam

developed the concept of “industrialisation

and modernisation” with the core contents of

promoting the economy’s diversity, reducing

the large dependence on heavy industries

and combining the industrialisation of

traditional industries with the development

of advanced ones to meet requirements of

the globalisation process and

knowledge-based economy [4]

In 1996, Vietnam set out the “strategy

of industrialisation and modernisation

promotion”, in order to advance to an

industrialised country with modern

infrastructure by 2020 In the first years,

sectors given with development priorities

included agricultural processing, consumer

goods production, and export-oriented ones

The strategy also emphasised the development

of electronics, information technology and

mechanical engineering, construction of

industrial parks, priority processing zones,

and hi-tech areas, as well as the development

of small and medium-sized enterprises In

2001, Vietnam developed the “strategy of industrialisation and modernisation promotion with the socialist orientation for the fundamental development of a newly industrialised country by 2020”, in which sectors given with development priorities comprise agricultural processing, textile, footwear and leather, electronics, information technology, and some mechanical industries The strategy placed special priorities on the development of hi-tech industries and chose

to develop some projects in petroleum, machine manufacturing, basic chemicals, and building materials Vietnam also made a plan for dividing industrial development areas through the development of big industrial clusters with the focus on open economic zones

In addition, the first decade of the 21stcentury witnessed crucial changes which had great effects on the structure of Vietnam's industry Firstly, the country has become the official member of the World Trade Organisation (WTO), while taking part in the negotiation and signing of many trade agreements with important partners such as the US, the European Union (EU), and Japan Secondly, the Government and National Assembly decided to pass the Laws on Enterprises of 2000 and 2005 to create a shared playground which is more competitive and equitable for all enterprises (private, state-owned, and FDI enterprises) [8]

In 2011, Vietnam launched the programme

of industrialisation and modernisation promotion intending to advance the country

to become a modern industrialised one by the middle of the 21st century The programme’s main contents are restructuring the manufacturing industry by industrial sectors, regions and production values;

Vietnam Social Sciences, No 6 (194) - 2019

developing machine and heavy industries;

selecting to develop spearhead manufacturing,

hi-tech, energy and mining industries;

prioritising the development of products

with good competitiveness and the ability to

join in the production network and global

value chain; strongly developing supporting

industries, and promoting the manufacturing

industry through the development of

industrial clusters [5]

In 2014, Vietnam’s Prime Minister

approved the “industry development strategy

of Vietnam to 2025 with a vision to 2035”

Main contents of the strategy are “to

effectively mobilise all resources from

domestic economic sectors and external

resources to develop and restructure the

industrial sector towards modernity; focus on

training a skilled, disciplined, and innovative

workforce for the industrial sector;

prioritise the development and transfer of

technologies in the industrial sub-sectors

and fields with competitive advantages and

modern and advanced technologies such as

agricultural, forestry and fishery product

processing, electronics, telecommunications,

new and renewable energy, mechanical

engineering, and pharmaceutical chemistry;

rearrange the allocation of industrial space in

order to promote the combined strength of

sub-sectors, regions and localities for

profound participation into the global value

chain” Groups of industries prioritised for

development include processing and

manufacturing (mainly mechanical engineering

and metallurgy); chemistry; agricultural,

forestry and fishery product processing;

textile, footwear and leather; electronics and

telecommunications and new and renewable

energy [12]

The goal is that, by 2025, Vietnam's industry will have developed with an appropriate structure by sectors and regions, great competitiveness for integration, modern technologies, active participation in the global value chain in some specialisations and fields, adequate competence to basically satisfy requirements of the economy and export and

a qualified workforce to meet the needs of a modern production sector By 2035, the country's industry will have developed with the majority of sectors applying advanced technologies, generating internationally-recognised products, participating profoundly in the global value chain, using energies in an economical and efficient manner, and competing equally in the international integration, as well as a workforce which is professional, well-disciplined, highly-productive, and active in research, design, and manufacturing [12] Changes in the industrial policy to meet requirements within the country as well as rapidly-changing regional and international economic environments have brought positive results to Vietnam The country is currently a highly-open and rapidly-growing economy in Asia The average growth rate

of the past decade reached 6.1% In addition, the proportion of the population living in extreme poverty fell sharply from approx 50% in the early 1990s to just below 5% in 2012 [15] and 2% in 2016 [16] In particular, Vietnam has developed from the low-income to the middle-low-income status since 2008 in accordance with the World Bank’s standards when its GDP per capita reached USD 1,0704 Industrial development, especially in the manufacturing sector, is an important contributor to the above success Specifically, the industrial

sector accounted for 33% of the country’s

gross domestic product (GDP) in 2015 and

36.6% in 2018; attracted 21% of the total

employment in 2013 and 26% of the total

employment in 2018 [15] Manufactured

and processed products occupied more than

half of Vietnam’s total exports in 2003 and

have been constantly increasing since then

Vietnam has also emerged as a favourite

destination for many international investors,

with the total foreign direct investment

(FDI) registered in Vietnam for the period

of 2011-2015 amounting to over USD 88

billion, in which the implemented capital

reached USD 58.5 billion FDI inflows into

Vietnam have continued to increase recently

and set a record in 2017 with the registered

FDI (including new registrations and

additional adjustments) amounting to USD

35.8 billion (implemented capital: USD 17.5

billion), which was 44% in comparison to

2016 Specifically, the processing and

manufacturing industry accounted for 44.2%

of total registered FDI of Vietnam, followed

by the electricity production and distribution

field (23.3%), and real estate business (8.5%)

According to partners, there are 115

countries and territories having investment

projects in Vietnam, among which Japan

ranks first with 25.4% of the total

investment capital and is followed by the

Republic of Korea (23.7%) and Singapore

(14.8%) [9] However, in the integration

process, the development of Vietnam's

industry still has many shortcomings In

particular, the biggest limitation lies in the fact

that the competitiveness and added values of

industrial products remain low Moreover,

production and trade activities with industrial

products are mainly undertaken by FDI

enterprises, while the participation and

contribution of domestic enterprises to the value chain of production and distribution of industrial goods do not show much significant improvement

3 Opportunities and challenges for the integration of Vietnam’s industry

Theoretically, the AEC will apply a tax rate

of 0% on goods originating from its member countries; therefore, Vietnamese manufacturing and exporting enterprises, especially in the industrial sector, have many opportunities to access to a huge consumer market and the continuously growing middle class of Southeast Asia On the other hand, most of the Vietnamese manufacturing enterprises have to import machinery and equipment from ASEAN member countries Therefore, when the AEC is founded, import costs are expected

to be lower In terms of investment, with its favourable position and strengths such as stable politics and abundant labour force, the AEC is expected to promote external investment flows, not only from ASEAN countries but also from countries outside the region, especially advanced ones such

as Japan, the Republic of Korea, the US and the EU, into Vietnam At the same time, along with attracting investments, the technology transfer process has also taken place more drastically and positively, making contributions to the improvement of quality and competitiveness of Vietnam’s industrial products in the regional and international markets

The potential benefits that the AEC may offer Vietnamese industrial enterprises are also manifested through the formation of

Vietnam Social Sciences, No 6 (194) - 2019

regional production and supply chains, in

which Vietnam can play a more significant

role Internationally, as a unified production

market, the overall competitiveness of the

ASEAN’s industrial production will be

strengthened, thereby creating benefits for

enterprises of member countries, including

Vietnam Under the pressure of integration,

Vietnamese manufacturing enterprises must

increase their investments in technological

innovation, adjust strategies to adapt to the

competition and optimise costs, benefits,

and the market scale, innovate products, and

reorganise domestic and regional distribution

and consumption networks in a more efficient

manner In addition, the reduction or

elimination of transaction costs and the

business environment aligned with the

Southeast Asian region are also favourable

conditions for Vietnamese enterprises to

penetrate more deeply into the markets of

ASEAN’s member countries [1]

In the field of human resources, the

participation in the AEC is expected to have

positive impacts, including an increased

number of jobs in the industry, especially

for some manufacturing and processing

sectors such as textile, footwear and leather,

and food processing, and the development

of a screening process for unskilled workers,

thereby creating necessary pressure for

education and training institutions and

enterprises operating in the industrial sector

to invest more in training programmes to

improve skills for learners and workers It

can be said that the competition in the

skilled labour market, both from supply and

demand sides is a positive factor affecting

the process of improving the labour

productivity and employment quality of

Vietnamese industrial enterprises

Besides opportunities, the AEC also creates significant challenges for the industry and Vietnam’s overall economy The biggest challenge is the disparity in production and business levels between the industries of Vietnam and more-developed countries in the ASEAN such as Thailand, Malaysia or Singapore Certainly, once the AEC is formed, the competitive pressure on Vietnamese young and small-scale manufacturing enterprises will increase, as well as that Vietnam itself shall bear external risks When becoming a member of the AEC, in the face of fierce competition from the AEC members, some sectors of Vietnam will experience some time of difficulties, possibly at the first stage Many people commented that the sectors facing the most difficulties were mainly sub-sectors and products in the agricultural area such as animal husbandry, food processing, sugar, fresh and processed fruits and forestry, wood processing and some service industries [3] The similarity in producing such goods between Vietnam and other ASEAN countries is relatively strong, while the competitiveness in price and quality of Vietnamese goods are lower than products

in the same category of ASEAN members

If enterprises do not renovate themselves, investing in production equipment and modern management methods, they may be acquired, cornered and merged with foreign enterprises or even go bankrupt

Another major challenge is that by participating in the AEC, Vietnam must increase its capital reserves to upgrade its infrastructure, machinery production systems and corporate governance in order to promote the competitiveness of industrial goods not only in the Vietnamese market

but also in regional and international

markets in the medium and long terms In

addition, the fiercer competition in the

labour market may cause negative impacts

on Vietnam’s industrial production sector

because the labour force level remains low,

mainly operating in the agricultural sector

As a consequence, many workers are at risk

of losing their jobs or being forced to shift

to other industries that require a lower level

of technology, but their incomes and

benefits will be reduced

4 Impacts of the ASEAN Economic

Community on Vietnam's industry

The AEC’s actual impacts on Vietnam's

industry are mainly analysed through trade

and investment channels between Vietnam

and ASEAN

In terms of trade, Figure 1 shows that the

total Vietnam - ASEAN trade of goods has

increased sharply, from nearly USD 6

billion in 1996 to USD 18.9 billion, USD

41.5 billion and USD 49.7 billion in 2006,

2016, and 2017 respectively Notably, the

period of 2006-2017 witnessed the strong

growth of trade in goods between the two

parties Vietnam’s most important trading

partners in the ASEAN are Thailand,

Malaysia and Singapore, accounting for

around 70% of the total trade between

Vietnam and the ASEAN Going into

import and export activities, in the period of

1996-2017, the export from Vietnam to the

ASEAN increased sharply from USD 2.58

billion to USD 21.5 billion As a result, the

ASEAN is currently the fourth largest

export market of Vietnam, ranked only after

the EU, the US and China Meanwhile, in

the same period, Vietnam’s import value from the ASEAN also increased from USD 3.33 billion to USD 28.02 billion, and the latter is currently the third-largest supplier

of goods to the former, ranked only after China and the Republic of Korea

In terms of trade balance, in trade relations with the ASEAN, Vietnam has always been the deficit bearer, with deficit values tending

to increase since 2012 up until now (see Figure 1) In particular, the market that Vietnam experiences the highest trade deficit

of up to USD 5.85 billion is Thailand, followed by Singapore and Malaysia, with deficit values of USD 2.34 billion and USD 1.65 billion, respectively On the converse side, Cambodia and the Philippines are the two markets that Vietnam experiences the largest trade surplus, reaching USD 1.76 billion and USD 1.68 billion respectively Regarding the structure of goods, according to the report of the General Department of Customs in 2017, Vietnam mainly exports to ASEAN manufactured products, such as phones and components, computers, electronic products and components, iron and steel, machinery equipment and spare parts, and means of transport and spare parts Meanwhile, Vietnam has strongly reduced its dependence on the export of products from natural resources, especially crude oil, from 42% in 2006 to 15.2% and 3.3% respectively in 2010 and 2017 Thus, the structure of Vietnam’s export to the ASEAN in the past decade made clear changes, with the increasing focus on the group of processing and manufacturing products, thereby showing the improvement

of Vietnam’s industrial production sector in the integration process into the AEC

Vietnam Social Sciences, No 6 (194) - 2019

Figure 1: Vietnam’s Merchandise Trade with ASEAN Countries in Period of 1996-2017

Unit: billion USD

Source: General Department of Customs

However, the contributions to production

activities and added values of products of

domestic enterprises in Vietnam remain

limited Vietnamese domestic enterprises

mainly engage in assembly and processing

activities, which belong to the lowest

segment of the value chain, while other

stages with higher added values such as

parts and accessories production,

advertisement and branding are still majorly

undertaken by foreign companies The

increasing share of higher-tech exports to

the ASEAN in Vietnam is generally in line

with the expanding trend of foreign

investment inflows into the manufacturing

sector, especially the electronic industry of

Vietnam This fact shows that changes in

Vietnam’s structure of industrial production

and trade with the ASEAN since 2000 up

until now are largely due to external factors

In the long term, such dependence can create

adverse impacts on Vietnam’s industrial production and foreign trade with the ASEAN as well as other countries Because multinational enterprises operate based on profits, they are likely to switch

to other markets to maintain or seek higher profits once the advantages of investment incentive policies and labour cost of the Vietnamese market are finished As a result, Vietnam’s manufacturing sector is significantly affected by great impacts on the overall competitiveness of the export sector and economy in the AEC Generally, in the future, the advantages of cheap labour cost in Vietnam will be continously disappearing Therefore, if Vietnam’s industries and export sector do not shift to higher production chains, it will directly impact the revenue growth and added values of exports to the ASEAN market

With regard to import, in previous years,

Vietnam mainly imported from the ASEAN

essential goods, input materials, and capital

goods, such as petroleum of all kinds, textile

and footwear materials, plastic materials,

chemicals, machinery, equipment, tools and

spare parts However, in 2017, besides

petroleum products and goods imported from

the ASEAN, Vietnam focused on goods for

processing and export as well as consumer

goods such as computers, electronic products

and components, phones and accessories, and

CBU cars Thus, the structure of Vietnam’s

imports from ASEAN market at present

includes mainly industrial goods On the

one hand, it satisfies the demand for input

imports for industrial production; on the

other hand, the heavy reliance on

intermediate inputs from the ASEAN for a

long time has exposed the weaknesses of

Vietnam’s supporting industries At the

same time, it also shows that Vietnam has

not yet successfully taken advantage of

many benefits brought about by the growth of

investments from multinational companies,

including enterprises from the ASEAN to

improve the production capacity of domestic

industrial sectors In addition, Vietnam’s

imports from the ASEAN still comprise

many luxuriuos (especially cars) and low-tech

goods, which often create negative impacts

on the environment and society

In the field of investment, according to

data from the Foreign Investment Agency,

by October 2017, eight ASEAN countries,

including Singapore, Malaysia, Thailand,

Brunei, Indonesia, Philippines, Laos, and

Cambodia, had invested in Vietnam ASEAN

investors have invested in 18/18 sectors of the

national economic classification system, with

3,362 valid projects and cumulative total

investment capital of USD 64.5 billion, accounting for 20.61% of the total registered investment capital of the whole country In terms of scale, while the average project size

in Vietnam is about USD 14 million/project, the size of capital in an ASEAN project is about USD 20 million/project This is encouraging because many large-scale projects from ASEAN countries have made their presence visible in Vietnam [10] Specifically, the investment capital is focused on the processing and manufacturing industry with 1,020 projects and the total investment capital

of USD 22.32 billion, accounting for 37.7% of the total projects and 39.2% of the ASEAN’s total investments in Vietnam This industry is followed by the real estate sector with 104 projects and the total investment capital of USD 16.9 billion, accounting for 29.7% of the total investment capital and the construction sector with 175 projects and the investment capital of USD 3.34 billion, accounting for 5.8% of the total investment capital

Among ASEAN members, Singapore is always the biggest investor in Vietnam, with the accumulated FDI capital of USD 41.7 billion by October 2017, followed by Malaysia (USD 12.1 billion) and Thailand (USD 8.4 billion) These are also three among the top ten countries investing in Vietnam Although Vietnam has achieved many praise-worthy results in attracting investments

of ASEAN countries, the results are still not commensurate with the potential of Vietnam and ASEAN countries Vietnam has not fully exploited the advantages of ASEAN countries, including the geographical proximity, customs as well as cultures with many similarities, tax and investment incentive policies in the process of developing the AEC

Vietnam Social Sciences, No 6 (194) - 2019

Table 1: FDI Capital (Implemented) from ASEAN and World into Vietnam

in Period of 2010-2017

Unit: million USD

Country 2010 2011 2012 2013 2014 2015 2016 2017 Brunei 13.24 40.67 5.20 34.15 36.85 78.58 162.43 18.44 Cambodia 0 0.62 0.34 0.41 0.84 0 8.02 2.53 Indonesia 0.71 14.84 29.64 16.43 22.38 11.22 12.36 18.01 Laos 34.06 0.38 0 0 0 1.30 7.16 0.17 Malaysia 131.13 232.00 122.07 59.39 163.75 1285.01 472.53 114.46 The

Philippines 4.24 1.28 11.22 0.15 5.60 2.83 28.27 11.80 Singapore 1078.31 1129.81 992.02 1801.09 1219.52 638.48 1250.60 2085.64 Thailand 39.18 97.73 102.07 166.96 98.13 136.05 365.24 280.12 ASEAN 1300.88 1517.34 1262.55 2078.59 1547.08 2153.46 2306.61 2531.17 The world 8000.00 7519.00 8368.00 8900.00 9200.08 11800.00 12600.00 14099.98 ASEAN/

World (%) 0.16 0.20 0.15 0.23 0.17 0.18 0.18 0.18

Source: Author’s compilation and calculations from the ASEAN Database

In terms of investments in foreign

countries, Table 2 illustrates the flow of

direct investments in ASEAN countries of

Vietnamese enterprises It can be seen that

in comparison to the implemented capital

of ASEAN countries in Vietnam, the

implemented capital of Vietnam in the

ASEAN market is much lower In terms of

market structure, in 2010, most of the

investment capital of Vietnam implemented in

the ASEAN focused mainly on the

Cambodian, Singapore and Malaysian

markets In 2017, Cambodia and Myanmar

were the two largest foreign investment

markets of Vietnamese enterprises Investment

projects of Vietnamese enterprises are mainly

focused on the fields of agriculture, forestry,

energy, mining, real estate and finance, of

which Vietnam has advantages and potential

in cooperating with the regional countries However, investment activities in ASEAN countries of Vietnamese enterprises remain limited and difficult, stemming from the enterprises themselves as well as the host countries In particular, the biggest limitation lies in the fact that the project implementation progress remains slow, and the implemented investment capital is still low such as less than 40% in Laos [7] Simultaneously, the flow of investment capital for implementation has grown unevenly, indicating the instability in investment activities of Vietnamese enterprises

in the markets of ASEAN member countries

In addition, the foreign investment activities of Vietnamese enterprises are not highly linked to one another, and enterprises have not paid adequate attention to environmental issues during the investment process

Table 2: FDI from Vietnam (Implemented) in ASEAN Countries

Source: Author’s compilation from the ASEAN’s Database, https://data.aseanstats.org/

Shortcomings in the industrial

development, expressed through trade and

investment activities between Vietnam and

ASEAN countries in the process of forming

the AEC, mainly stem from the limitations

of competitiveness of Vietnamese industrial

production enterprises in general and

enterprises having relations of goods

exchange and trading with the ASEAN in

particular The limitations are clearly

exposed in the science and technology level,

governance capacity and the connectivity

among enterprises and associations in

sectors, which are still weak Vietnamese

enterprises have not prioritised the

investment in research and development

(R&D) or the link of this activity with

educational institutions, especially at the

higher education level Meanwhile, because

the horizontal or vertical links between

enterprises and trade associations are weak,

they cannot create the pervasiveness and

overall competitiveness of Vietnam’s industrial products exported to ASEAN countries In addition, the enhancement of interaction between ministries and branches

of the Government and enterprises, especially through trade promotion activities

in the ASEAN, is insufficient and weak Another important reason is that despite improvement in the business environment, business and investment attraction policies and infrastructure system of Vietnam, there remain many downsides According to the World Bank’s Global Business Environment Report 2018, Vietnam’s business environment has made encouraging progress and been ranked 68th out of 190 surveyed countries,

up by 14 places in comparison to the 2017 Report Nevertheless, there is still quite a big gap between Vietnam and regional countries such as Thailand (26th), Malaysia (24th) and Singapore (2nd) In particular, the lowest indicators are retail investor protection

Vietnam Social Sciences, No 6 (194) - 2019

(81st); tax payment (86th); cross-border trade

(94th); startups (123rd) and addressing the

insolvency status (129th) [13] Similarly,

according to the World Bank’s Logistics

Performance Index (LPI) 2016, Vietnam was

ranked 64th out of 160 economies surveyed,

which is still far from many other countries

such as Singapore (2nd), the Republic of

Korea (24th), China (27th), Malaysia (32nd)

and Thailand (45th) [14]

5 Conclusion

The AEC is not the endpoint and the

ASEAN countries will continue the process

of economic connectivity This is reflected

in the adoption of the ASEAN Economic

Community Blueprint 2025 by the member

states The prospect of developing a more

cohesive and competitive ASEAN by 2025

also helps its members, including Vietnam,

improve their competitiveness At the same

time, Vietnam will be a link in the

production network of the whole region,

thereby directly impacting the country’s

industrial production, commercial and

investment activities with the ASEAN and

its neighbouring countries Therefore, the

development of industry, trade and

investment between Vietnam and the

ASEAN is not just limited within the

Southeast Asian region but should be taken

into consideration in the bloc’s trend of

economic connection with other countries

In order to efficiently develop the industry

and promote foreign trade and investment

activities between Vietnam and the ASEAN,

Vietnam needs to fundamentally and

comprehensively transform the modalities of

production and export of goods towards

increasing the contributions of scientific and technical factors and skilled workforce, improving the institutional framework, business investment environment, developing the infrastructure and logistic services, as well

as formulating policies to orient the import and export of goods In addition, diversifying production and export activities, especially for industrial goods with high added values, effectively exploiting advantages from the AEC and beyond-AEC period, developing prioritised supporting industries, strengthening the attraction of FDI, technology transfer and industrial cooperation between Vietnam and the ASEAN, are measures that need to be implemented with focus in order to promote the industrial integration and enhance the efficiency of trade and investment activities between the two sides in the years to come

Notes

1, 2 The paper was published in Vietnamese in:

Nghiên cứu Đông Nam Á, số 11, 2018 Translated by

Vu Xuan Nuoc, edited by Etienne Mahler

3

The research is the result of the ministerial-level

scientific project: The Process of Formation and

Development of Industrial Clusters in the ASEAN Economic Community

4

Every year, the World Bank classifies member countries into groups based on their per capita incomes Income threshold for country grouping is based on 2012 data as follows: Low income (less than USD 1,035 per person); middle-low income (USD 1,036 - USD 4,085); middle-high income (USD 4,086 - USD 12,615); and high income (from USD 12,616 or higher) It means that countries with per capita incomes of about USD 1,000 will develop from the low-income to middle-low income status