Vietnam's Doi Moi Disproves the Philippines' Trust Me Bro School of Economics
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| Vietnam now enjoying the benefits of open FDI Source: Quan Doi Nhan Dan |
The Vietnamese cunningly exploited the fears and desires of the countries of ASEAN that wanted to befriend them. They talked tough over their radio and newspapers. I found their leaders insufferable. They were filled with their own importance, and prided themselves as the Prussians of Southeast Asia. true, they had suffered, taken all the punishments that American technology had inflicted on them, and through sheer endurance plus their skillful propaganda, exploiting the American media, defeated the Americans. They were confident that they could bear any power in the world, even China, if it interfered with Vietnam. For us, the puny states of Southeast Asia, they had nothing but contempt. they declared they would establish diplomatic relations with member states of ASEAN individually, and refused to deal with ASEAN as a group. Their newspapers criticized the existence of U.S. military bases in the Philippines and Thailand and spoke collusive relations between China and Singapore.
SINCE REUNIFICATION IN 1975, the economy of Vietnam has been plagued by enormous difficulties in production, imbalances in supply and demand, inefficiencies in distribution and circulation, soaring inflation rates, and rising debt problems. Vietnam is one of the few countries in modern history to experience a sharp economic deterioration in a postwar reconstruction period. Its peacetime economy is one of the poorest in the world and has shown a negative to very slow growth in total national output as well as in agricultural and industrial production. Vietnam's gross domestic product ( GDP) in 1984 was valued at US$18.1 billion with a per capita income estimated to be between US$200 and US$300 per year. Reasons for this mediocre economic performance have included severe climatic conditions that afflicted agricultural crops, bureaucratic mismanagement, elimination of private ownership, extinction of entrepreneurial classes in the South, and military occupation of Cambodia (which resulted in a cutoff of much-needed international aid for reconstruction).
The meeting with an arrogant Communist who blamed Singapore
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| Vietnam's PM Phan Van Dong with Singapore's Lee Kuan Yew Source: National Archives of Singapore |
This would've been worse than the economic condition that LKY described about the Marcos Years. In 1975, the late Ferdinand E. Marcos Sr. was also the president of the Philippines. Yes, the Philippines never had a parliamentary system! Returning to the topic, LKY even mentioned the late Prime Minister Pham Van Dong of the CPV (p. 110). Take note that Vietnam doesn't operate under a parliamentary system. LKY called Pham arrogant and objectionable. That was the impression LKY had on Pham during the state visit to Singapore. LKY even noted that, unlike Singapore, Vietnam was a country rich in natural resources. It's important to note that Pham openly declared himself a Marxist-Leninist What became astounding was this on pages 311-312 of From Third World to First:
Then he (Pham, emphasis mine) turned to economic relations, with the astonishing news that Singapore could contribute to Vietnam's reconstruction. When I gently remonstrated that we must get some return for our goods and services, he bluntly said Vietnam's economy was not developed and the possibilities for trade were limited. That night, as I walked him to dinner, he again said Vietnam could not trade but needed help, Singapore had benefited from Vietnam from the Vietnam War, selling the Americans war material, hence it was our duty to help them. I was dumbfounded by this arrogant and belligerent attitude.
As we drove along the waterfront the next day, he saw the many ships at anchor Once again he charged that we had profited immeasurably from the Vietnam War and developed Singapore at the expense of their own. I was incredulous. I could not understand how we were under the obligation to help them because they had been impoverished by a war we had not caused and in which we had played no part. I said the main war materials we supplied to U.S. forces in Vietnam were POL (petrol, oil, and lubricants) from American and British oil companies. The profits to Singapore were negligible. He looked skeptical. I said we were prepared to trade but not to give aid. He was not pleased. We parted civil but cold.
Rereading this part would remind me of LKY's meeting with Marcos Sr. Sure, there's amicability between their sons, former prime minister Lee Hsien Loong and Philippine President Ferdinand "Bongbong" R. Marcos Jr. Bongbong was even invited to a racing track show. I wonder if the protests were simply against Bongbong or was it because the event happened in Singapore? Anyway, this detail about Pham's humility later on, a step in Vietnam's restoration on page 314:
In Hanoi, I asked to call on Pham Van Dong. Although he had retired, he received me at their seat of government, a 1920s stone building which had been the office of the French governors. He had met me at the main door at the top of a flight of stairs. Obviously infirm, he stood erect with great effort, then walked unsteadily to his chair some distance away. They had switched off the air-conditioning because he could not stand the cold. He was frail but spoke with great firmness and determination. He recalled our meeting in Singapore, and said the past was over; Vietnam was opening a new page. He thanked me for my friendship in coming to help them. He sounded bitter and chastened. I remembered the haughty and arrogant leader who came to Singapore in 1978. Seeing how tough he was in defeat, I was thankful that Deng Xiaoping had punished the Vietnamese. They would have been unbearable as the victorious Pruissians of Southeast Asia.
While reading this, I can say that Pham was arrogant, blaming Singapore for Vietnam's poverty. Did Pham think he could get Vietnam better by blaming Singapore? Maybe Pham did but he was later apologetic. It's like some people who used to blame the rich they're poor. Instead, it was time for Vietnam to open a new page. Vietnam had a crushing defeat that changed its perspective. The late Deng was already opening up China to the world market.
Understanding Do Muoi and how Vietnam became powerful under him
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| Nguyen Duy Cong (Do Muoi) and Lee Kuan Yew Source: VOVworld5 |
FROM ISOLATION TO PROSPERITYBy the mid-1980s, the development model Vietnam had borrowed from the former Soviet Union and its East European allies had revealed numerous flaws and was proving outmoded. On the political and diplomatic front, tense relations with China, the heavy burden of Vietnam's troop presence in Cambodia and strict sanctions imposed on it by the US placed Vietnam in a difficult bind. On the one hand, the country was blocked from cultivating new relations with other countries; on the other, it had become ever more dependent on the Soviet Union for political support and economic and military assistance.The turning point came with a dramatic reduction in Soviet economic and military assistance after the mid-1980s and the economic hardship this caused. For the sake of the country's survival, Vietnam's leaders were forced to adopt economic and political reform, or Doi Moi. In essence, Doi Moi in its early stages was focused mainly on the removal of self-imposed barriers to progress and the utilization of various market-oriented measures, including liberalization of the domestic market, encouragement of foreign direct investment, or FDI, and the private sector, and reduction in subsidies to state-owned enterprises (SOEs).These steps quickly brought positive results. From a country faced with perpetual food shortages, Vietnam in 1989 for the first time exported 1.4 million tons of rice. It has since remained a rice exporter. In 2008, it exported 4.7 million tons, becoming the world's second largest rice exporter after Thailand. Indeed, Vietnam's exports were instrumental in stemming the threat of a severe international food crisis in early 2008.What impresses most, however, is the continuous high economic growth rate that Vietnam has recorded in the 20 years since the introduction of Doi Moi. Vietnam recorded average annual economic growth of 6.5 percent over that period, one of the highest rates among developing countries. And with annual per capita income of $1,000 in 2008, Vietnam was removed from the list of the world's least developed countries. The high economic growth rate in turn helped reduce Vietnam's poverty rate from 70 percent in the mid-1980s to 37 percent in 1998 and 19 percent in 2007.
Those who think Vietnam didn't accept FDIs, that their only "FDI" is to sell their products worldwide, have these questions to answer. How can Vietnam expect to produce quality products for worldwide export, if it's not even tested? Did Vietnam create worldwide products in an isolationist environment? The fools at PAFL wrote the claims above. Below is the translation in English:
Vietnam won the revolution, and they had a national industrialization and agrarian reform. What Vietnam's "Open FDI" means that the koriktor (a mockery of Corrector) actually means is that, those are finished products that are sold in the world market.Meanwhile, in the Philippines, we don't have industries meaning that if it's open FDI here in the Philippines, our raw materials will be consumed by the greedy foreigners.
However, when LKY went to Vietnam, that was a Vietnam battered. Even Pham admitted the problem. If Pham still thought of self-industrialized development--it would crash like the Great Leap Forward of the late Mao Zedong. Now, it's time to focus on Do Muoi's role in Vietnam's development. LKY's meeting with Do Muoi highlighted several key points. I would present this excerpt from page 315 of From Third World to First, to highlight how LKY helped influence Doi Moi:
They were still communist in many ways. Kiet was noncommittal after the discussions we held int he morning and afternoon of the first day. Immediately after these two meetings, I was taken to meet the Communist Party general secretary, Do Muoi, who had been briefed on the contents of the two discussions in the 20 minutes that elpased from my meeting with the prime minister. Kiet must have got the nod after my meeting with Do Muoi because that night, in his dinner speech, he picked up a point I had made, on which he had earlier been noncommittal, that Vietnam should not have too many international airports and seaports, but should concentrate on building one big international airport and one big international seaport so that they could be included in the world network of airports and seaports.
We discussed their loss-incurring state-owned enterprises (SOEs). They wanted to privatize them or sell them off to the workers and others. I explained that this method would not proivide them with what was critical--efficient management. Singapore Airlines was 100 percent government owned, but it was efficient and profitable because it had to compete against international airlines. We did not subsidize it; if it was not profitable, it would have to close down. I recommended that they privatize their SOEs by bringing in foreign corporations to get an injection of management expertise and foreign capital for new technology. A change in the management system was essential. They needed to work with foreigners, to learn on the job. Privatization within the country by selling to their own people could not bring about this result.
How would people who still insist on self-industrialized national development, ever explain away that recommendation that LKY gave to Vietnam? Some say Singapore only opened to FDI because of its lack of natural resources. LKY mentioned Vietnam was rich in natural resources. He didn't tell them to just rely on their natural resources. Venezuela tried to rely on its natural resources but failed. The late Hugo Chavez's policies caused Venezuela's hyperinflation. Vietnam may have a lower currency than Venezuela. However, Vietnam is doing much better than Venezuela.
On page 316 of From Third World to First, we can read this encounter between LKY and Do Muoi:
When he (Do Muoi) asked how he could increase the flow of foreign investments, I suggested that they should abandon the habits they learned in guerilla warfare. Development projects for the south that had been approved by the Ho Chi Minh authority had to be approved again in the north by Hanoi officail shwo knew little about conditions there. It was time-wasting. Next, projects approved by the government in Hanoi were often blocked by local authorities because of the supremacy of the local commander in charge, a legacy from their guerilla days.
If foreign investments were bad, why in the world would Do Muoi ask LKY how to increase them? In fact, LKY even pointed this out on page 317:
In fact, the Vietnamese had made progress. As a result of more contacts with foreigners and greater information on the market economy, ministers and officials had a better understanding of the workings of the free market. Greater street activity, more shops, foreign businesspeople, hotels--those were all signs of prosperity in Ho Chi Minh City and Hanoi.
In contrast to what fools like the administrators (and followers) of pages like PAFL think--it was because Vietnam opened its economy to foreigners that helped. I could now enjoy Vietnamese products left and right. Universal Robina has a branch in Vietnam. Apple has a factory in Vietnam. Vietnam Briefing reveals this on Vietnam's economic restrictions:
Investors from ASEAN, the United States and Europeand countries are increasingly moving capital into projects in Vietnam, because of its highly attractive environment, and strategic business location.Vietnam allows 100% foreign ownership in most of its sectors, including trading, manufacturing, IT, education sectors and more. For this reason, the country is viewed as being relatively wide open for foreign investors to enter the market and setup an LLC or other type of business entity.However, a small number of business fields are limited for foreign-investment, and require that a foreign investor form a joint-venture with a local partner. These include:
- Advertising services;
- Agriculture, hunting, and forestry related services;
- Telecommunication services;
- Travel agencies; Tour operator services; Entertainment services;
- Electronic gaming businesses;
- Container handling; Customs clearance services; Auxiliary transport services;
- Internal waterways transport, rail and road transport services.
Concerning the economic restrictions, the Vietnam Embassy gives these details:
Article 8
Capital contribution of a foreign party or foreign parties to the legal capital of a joint venture enterprise shall be agreed by the parties and shall not be limited provided that the contribution is not less than thirty (30) per cent of the legal capital, except in cases stipulated by the Government.
In the case of a multi-party joint venture enterprise, the minimum capital contribution to be made by each Vietnamese party shall be determined by the Government.
With respect to important economic establishments as determined by the Government, the parties shall agree to increase gradually the proportion of the Vietnamese party's contribution to the legal capital of the joint venture enterprise.
Article 16
The legal capital of an enterprise with foreign owned capital must be at least thirty (30) per cent of its invested capital. In special cases and subject to approval of the body in charge of State management of foreign investment, this proportion may be lower than thirty (30) per cent.
During the course of its operation, an enterprise with foreign owned capital must not reduce its legal capital.
When we look into it, Vietnam now has the 2013 Constitution. Vietnam amended its Communist constitution several times. What's even more wonderful is that Vietnam's constitution doesn't have economic restrictions in it! Economic restrictions are passed through legislation. That means every time there's the need to restrict or ease the economy--it becomes easier. It's because constitutional amendments aren't that easy to make, after all. An irony that Communist Vietnam understood it better than the democratic Philippines.
After reading this, the Philippines must unlock its potential as a democratic country. I'm not saying there's nothing good in the 1987 Constitution of the Philippines. However, its greatest weakness is that the economic restrictions are in the constitution. The Philippines can no longer afford to stay behind because of Pinoy Pride. Vietnamese Pride Economics didn't help Vietnam. Pinoy Pride Economics will not help the Philippines.
