Challenging the Investment Climate Paradigm: Governance and Growth in Vietnam
This project investigates who drives economic reform and which reform components have an impact on private investment. It does this for the case of Vietnam where central government has delegated important economic reform powers to the provinces.
The research shows that in those provinces which are making most progress in economic reform, the private sector played an important role; not against government, but with government. There was no formal public-private coalition but the dynamic was one of proactive government seeking the input from the private sector, and the latter lobbying for and contributing to responsive and effective government. Both national and foreign enterprises played a role but small enterprises tended to be marginalised from the process. Some of the best insights come from comparing provinces and observing how different alignments of interest influenced the reform process.
Quantitative research on the actual impact of economic reform on private investment showed varied results. Reform aimed at improving transparency is strongly associated with higher investment. However, no statistically significant relationship was found between other reform components and private investment. The results have significant implications for policy, given the prevailing assumption that changes in the quality of local economic governance will spur improved economic performance.