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.

Key contacts

Project details

start date
1 October 2010
end date
15 February 2013


Supported by

About this project

Viet Nam


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Hubert Schmitz

Emeritus Fellow

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Neil McCulloch

Honorary Associate

Edmund Malesky
Pham Thi Thu Hang
Tuan Dau Anh
Nguyen Duc Nhat

Recent work

Journal Article

Drivers of Economic Reform in Vietnam’s Provinces


Allowing provinces to find their own way forward was central to Vietnam's progress in institutional and economic development. This article examines who drives this process of economic reform and finds that, in those provinces making the most progress, the private sector played an important role,...

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Hubert Schmitz & 3 others

2 February 2015


Who Drives Economic Reform in Vietnam’s Provinces?

IDS Research Report Summary;76

Vietnam keeps surprising the world with the speed and depth of its economic transformation. This research report suggests that the decentralisation of certain economic powers from central to provincial government has contributed to this success.

Image of Neil McCulloch
Neil McCulloch & 3 others

6 June 2012