THE ROLE OF INSTITUTIONS IN ECONOMIC DEVELOPMENT AMONG DIFFERENT DEVELOPMENTAL LEVELS ​IN VIETNAM

Abstract

The world has witnessed remarkable development in Vietnam after the Vietnam War since the implementation of the Doi Moi Policy in 1986. The dissertation used a mixed method approach to explore the development in Vietnam. Initially, a developmental taxonomy was built to identify different developmental levels in Vietnamese provinces. Subsequently, panel regression was used to prove the causal relationship between institutional factors and economic development. In this stage, the study contributed a new argument for New Institutional Economics asserting that different developmental levels can intervene in this causal relationship. Eventually, a case study was conducted in a certain Vietnamese province to cultivate greater understanding of the local development. This qualitative study looked for positive factors leading to the local development as well as negative issues impeding the local development and send recommendation to pursuit development and further sustainable development in the local context.

Four clusters and developmental transition are identified with their main characteristics and implication for the State, the province and policy makers. Some institutions creating conditions for human development, social capital development and business development positively contribute to economic development. Meanwhile, it appears “payoff” mindset to gain economic priority in Vietnam governance; such as low degree of participation, informal charges in public transactions, low access to land and security. From the case study of Ben Tre province, the author would emphasize on the factor driven stage of development in Cluster 2, putting major investments on institutions, infrastructure, primary health care and good education.

The study contributes significant evidence of Vietnam to support New Institutional Economics and New Public Management. Enabling government-oriented managerialism provides incentives and responsiveness, improves public service delivery, create favorable environment for citizen satisfaction and business development. Good governance would enhance economic development by lowering transaction cost, lowering transformation cost and increase labor specialization/human development. Different levels of development would intervene in the causal relationship between Institutions and Economic Development.

The study also sent comprehensive recommendations for policy framework to the government in designing developmental polices in Vietnam. Provinces in Cluster 1 would be in the efficiency-driven stage, by investing roughly half of capital in efficiency enhancers with higher education and training, goods and labour market efficiency, financial market development, technological readiness and market size. The cluster would then invest 40% in basic requirements for institutions, infrastructure, macroeconomic environment, health and primary education. The remaining 10% would be invested in business sophistication and innovation. Provinces in the other three clusters would be in the factor-driven stage, requiring a substantial 60% capital investment in basic requirements, a moderate investment of 35% in efficiency enhancers and only 5% in innovation and business sophistication.