International Economic Integration as Leverage for Reform?
Vietnamese reformers hope that the Trans-Pacific Partnership (TPP) will be a catalyst for SOE reform. Yet, Vietnam’s most important international trade agreement so far – the WTO – has brought unsatisfying results. Joining the WTO by itself proved insufficient to fulfill reformers’ hope of changing big-yet-weak state-owned enterprises (SOEs). The emergence of state economic groups (SEGs) on the verge of WTO accession significantly undermined the WTO’s potential positive impacts on SOE reform. External economic commitments can be a catalyst for SOE reform, but they lose much of their impact if they are not supported by an internal political coalition, which is the decisive factor for domestic reform. To make future international trade commitments truly a catalyst for SOE reform, it is recommended that:
- Government and National Assembly should stay focused on the performance of SOEs by regularly publishing the data of SOEs in general and SEGs in particular, benchmarked against the private sector, on key dimensions such as investment, credit, employment, industrial production, and budget contribution.
- Government should publish the audit report on every SEG in the 3rd quarter of the following year, and the National Assembly should ensure this deadline is enforcedd.
- Ministry of Planning and Investment should enforce the current plan of SEGs’ restructuring. Ministry of Finance should implement the equitization program and impose hard budget constraints on SEGs. Ministry of Industry and Trade (MOIT) should implement agreed upon competition policy by regulating monopoly effectively or reducing economic concentration of SEGs in their relevant markets.
- Government – MOIT in particular – should make SOE reform part of its duty to fulfill international commitments, and then use TPP as a “strategic maneuver” to reform SOEs.
Dr Tu Anh Vu Thanh is a Global Leaders Fellow, currently working in Princeton