Over the past six months I have researched and written a research report for the UNDP on the theme of socialization in Viet Nam. The paper, which is 120 pages long and is still being refined as a ‘living document,’ is intended to inform and motivate debate on the future direction of policies governing the provision and payment for essential services in Viet Nam.

The opinions, analyses and policy recommendations of this report do not necessarily reflect the views of the United Nations Development Programme (UNDP). The report is an independent publication commissioned by UNDP. I am happy to receive any comments through the comments function or by email at jonathanlondon.hk@gmail.com

The Contributions and Limits of ‘Socialization’

The Political Economy of Essential Services in Viet Nam

May 2013

VIET NAM AT A CROSSROADS

Over two decades, the development of essential services in Viet Nam has made vital contributions to improvements in living standards. Vietnamese today are wealthier, healthier, and better educated than ever. For these and other reasons there has been considerable optimism about Viet Nam’s development prospects. It has been widely suggested that Viet Nam might replicate the performance of such high-performing Asian economies as Korea and Taiwan, whose development combined export-oriented economic growth, relatively egalitarian distributions of incomes and assets, and broad access to quality services.

Yet there are reasons to be concerned about Viet Nam’s growth trajectory. Since 2008 economic growth has slowed as have gains in human development. Social inequalities, including but not limited to those based on income, are on the rise, as are perceptions of inequity. These recent trends are symptomatic of a set of deeper institutional weaknesses in Viet Nam’s political economy that threaten to undermine the county’s growth. Institutional arrangements governing the provision and payment for education and health services in Viet Nam are particularly important in this regard.

Viet Nam has achieved impressive expansions in the absolute coverage of education and health services. Many of these gains have been facilitated by policies and practices that have mobilized resources through non-budgetary means. Yet an emerging wealth of analysis suggests sustained economic growth and further poverty reduction in Viet Nam will require significant improvements in the accessibility and quality of education and health services.

Viet Nam spends nearly 17 percent of its GDP on education and health services, a very high figure by international and regional standards.[1] A central message of this paper is that the challenges Viet Nam faces with respect to education and health are no longer mainly about the volume of resources. The central claim of this paper is that the specific combination of policies and informal practices that have evolved around the provision and payment for services over the last two decades in a chaotic and inefficient system which deepens inequalities, slows poverty reduction, and threatens to retard the country’s future economic growth. To secure a prosperous future, Viet Nam’s government must promote a transition from current arrangements to a more coherent, efficient, accountable set of arrangements fitted to the needs of all segments of the population and an internationally competitive economy.

To address these issues and to suggest ways forward, this paper develops a political economy analysis of services provision and payment in Viet Nam’s education and health sectors. The paper centers on an analysis of the origins, dynamics, and effects of a complex set of phenomenon associated with the Vietnamese term xã hội hóa, which variously translated as ‘social mobilization’ or ‘socialization.’ In adopting this focus we do not assume that ‘socialization’ captures all relevant issues. Instead, we make the more limited assumption that ‘socialization’ represents a vitally important set of issues that need to be addressed more explicitly than in the past.

‘Socialization’

Up until the late 1980s, essential services in Viet Nam were financed almost entirely through the state budget and resources generated through state-owned enterprises (SOEs) and collectives. But Viet Nam’s acute poverty imposed severe limits on the absolute amount of resources available for services. The conditions of services provision remained threadbare and the rapid dissolution of the planned economy rendered state-socialist social policies unsustainable. In the late 1980s and early 1990s, a patchwork of stop-gap measures sustained services delivery. Subsequently, and in an attempt to place services on a more secure financial footing, Viet Nam’s state began promoting a range of policies under the banner of ‘socialization.’

‘Socialization’ in Viet Nam is a buzzword and its varied and even contradictory use and meanings generate confusion. In official terms, ‘socialization’ is frequently used to refer to a specific set of formal policies. The problems with such a definition are manifold. First, the significance of ‘socialization’ policies may not be understood without reference to their particular political and economic context. Specific attention is required to public finance as the impetus for ‘socialization’ policies stemmed initially from limitations of public resources in the context of Viet Nam’s market transition. Furthermore, the implementation of ‘socialization’ policies has been accompanied by a variety of informal practices, which are which are largely absent in formal policies. For this reason, ‘socialization’ in this paper is understood empirically, as a complex set of ideas, institutions and practices that have evolved alongside efforts to reform the provision and payment for services in Viet Nam since the late 1980s and early 1990s.

At its core, ‘socialization’ policies in Viet Nam seek to address a problem familiar to all countries and to poor and developing countries in particular: how to achieve arrangements that can efficiently provide and pay for quality services in the context of economic scarcity. Across East Asia and around the world, governments have adopted a variety of responses to this problem with varying degrees of success. What about Viet Nam? The stated aims of ‘socialization’ policies are laudable. In the context of limited budgetary resources, ‘socialization’ policies aim to ‘mobilize resources and talent from society’ and to combine state, household, and other payments in a way that ensures all Vietnamese have access to a basic floor of essential services.

This paper suggests that many of the practical challenges Viet Nam faces today with respect to services provision and payment arise from the specific and path-dependent manner in which ‘socialization’ ideas, institutions, and practices have evolved. Crucially, it was the fiscal crisis and conditions of acute economic scarcity that Viet Nam faced in the late 1980s and early 1990s that made fully-subsidized provision of services untenable and required Viet Nam to transition to new arrangements.

The evolution of new arrangements would take place through a largely ad-hoc process of experimentation, combining improvisational ‘survival strategies’ that took root within service delivery units (SDUs) and top-down policies that sought to provide SDUs a firmer financial footing.  The former consisted of a mix of informal income-generating practices services staff undertook to sustain services delivery and support livelihoods. The latter consisted of ‘socialization’ policies aiming to (1) facilitate the flow of resources into services, largely by permitting co-payment schemes whereby SDUs could tap into expanding household incomes and (2) expand non-public (including private) forms of services provision so as to relieve strains on the budget and increase the supply and coverage of services over all.  In practice, both of the above objectives have been pursued in a chaotic and unaccountable manner characterized by the intermingling of formal and informal rules and poorly defined property rights.

There are, in addition, important questions to be asked about socialization which, though they have been posed in the past, have not been systematically addressed. One such question is whether and to what extent ‘socialization’ is or produces results associated with privatization of services. Another is whether and to what extent ‘socialization’ policies actually produce their intended outcomes? A third set of question concerns the future of ‘socialization’ policies and possible alternatives.

‘The bigger picture’

This paper’s focus is on the political economy of services. But the political economy of services may not be understood without reference to the broader context of Viet Nam’s political economy.. In this connection, three points bear special emphasis. First  the constraints under which services in Viet Nam developed, both with respect to resources and to state capacities. These constraints, which were severe during the late 1980s and for much of the 1990s and which gradually diminished within the context of rapid, spatially uneven economic growth and an ongoing process of institutional reforms, nonetheless remain significant. The second concerns the relationship between the challenges Viet Nam faces with respect to the governance of essential services and the institutional weaknesses characteristic of the broader political economy. The third concerns the challenges of undertaking and achieving meaningful institutional reforms.

First, in the context of the acute difficulties some form of unconventional resource mobilization was necessary and indeed unavoidable if the functioning of essential services was to be sustained. The evolution of ‘socialization,’ is inextricably linked to patterns of public expenditure and strengths and limitations in governance institutions. Correspondingly, the appropriate line of inquiry is not whether Viet Nam would have been better or worse off with or without ‘socialization,’ but rather how Viet Nam might have fared or may fare in the future given particular means of mobilizing and allocating resources, patterns of public expenditure, and institutional reforms.

This brings us to the second point, about institutions and governance in Viet Nam’s broader political economy. There are indeed striking similarities to be observed between what is occurring in services and in the economy at large. Over two decades, large flows of resources have been channeled into the productive sectors of Viet Nam’s economy, Investment rates at over 40 percent of GDP since 2005 are among the highest in the world. The efficiency of this investment r is, however, decreasing according to such measures as Incremental Capital Output Ratio (ICOR) and Total Factor Productivity (TFP). Juxtaposing Viet Nam’s productive and social sectors has an obvious implication: Analysis of problems narrowly associated with ‘socialization’ – such as formal and informal fees and non-state provision of services – cannot provide wholly satisfactory answers about the political economy of services in Viet Nam; underlying problems, such as resource constraints and institutional weaknesses, also require consideration.

As in many areas of public policy in Viet Nam, ‘socialization’ policies have frequently taken the form of ex-post responses to already existing practices,” reflecting the “trial and error” approach that was common in Vietnam at the early stages of the Đổi Mới reforms. What has not been sufficiently emphasized is how the ad-hoc measures and formal policies have shaped and reinforced interests and incentives in the provision and payment for essential services. In undertaking efforts to enhance or move beyond ‘socialization,’ Viet Nam will need to address the needs of those working in the delivery of services and to overcome entrenched resistances to institutional reforms through appropriate regulations and the use of selective incentives. This, in turn, requires a more nuanced understanding of the challenges surrounding the provision of payment for services in Viet Nam across different geographical, socioeconomic, and organizational contexts, as well as the relevant experiences of other countries.

Layout of the paper and reiteration of aims

The remainder of the paper is organized as follows. The second section examines the evolution of ‘socialization’ ideas, policies, and practices. The third section clarifies how ‘socialization’ affects Viet Nam’s welfare mix and distinguishes principal modes of ‘socialization,’ such as co-payments and the diversification of service delivery models. The fourth section evaluates the efficacy and efficiency of ‘socialization’ policies in light of stated aims. The fifth and sixth sections examine the mechanisms that mediate effects of ‘socialization’ policies in the education and health sectors, respectively. Many of the limitations of ‘socialization’ policies stem from weak accountability. The sixth section addresses these weaknesses. The conclusion summarizes key findings and offers an agenda for research, consultation, and reform.

This paper cannot claim to be comprehensive in its coverage or exhaustive in its depth. It aims to provide a sufficient basis for an informed discussion of issues which, though long recognized as significant, have rarely been the subject of a thorough-going and forward looking analysis. At a time when Vietnamese are actively weighing constitutional reforms, such an  analysis can make constructive contributions to ongoing normative debates and policy choices concerning the meaning of citizenship, services, and the social contract in Viet Nam’s ‘socialist-oriented’ market economy.

[1] Based on calculations of Vũ Quảng Việt, in consultation with the author.

For those in the English speaking universe, as you might know I’ve started a blog in Vietnamese called Xin lỗi Ông, which means ‘excuse me sir.’ And I take it as a compliment that the Vietnamese service of the BBC has posted my most recent entry on their site, which concerns the matter of the national flag. I will translate that piece at some point soon… Unfortunately, it is mediocre and times even bad piece that contains some ill-chosen words, reflects some insensitivity, and at times even shows poor logic… On the whole though, I think there are some important ideas but that it is a problematic piece..

Yesterday was a long day indeed. And I chose a strange and in respects ill-suited day to address the issue of the national flag in Viet Nam…Depending on one’s view of these things it was the worst or best day in several years to address the flag issue. More on this in a moment. But why address this lightening rod issue at all?

Since I set up my blog a great many people on social media platforms have sought to reach out to me, and many (actually a small share) display Viet Nam’s former flag, which was/is gold with red stripes… this is the flag that dates back to the Nguyen Dynasty’s last years and which was later claimed by the Republic of Viet Nam. The gold flag with red stripes still flies proudly in many Vietnamese communities around the world, particularly among those who left Viet Nam under difficult circumstances and remain deeply opposed to the continued rule of the Communist Party of Viet Nam, which was established in the 1920s, has ruled the north of Viet Nam since the 40s and 50s and the entire country since 1975.The flag chosen by the CPV, which is red with a gold star, is a creation of that Party and is associated with that Party’s rule.

Many people in Viet Nam, within and outside the Party, are of an opinion that I happen to share earnestly, that Viet Nam needs real reform in its social institutions, particularly, though not exclusively, in its political institutions. It may be that by saying this I will no longer be welcome in Viet Nam, which would be a pity, as I have and continue to devote myself to addressing some of the key issues that country faces, particularly with respect to its welfare institutions, including education, health, and social protection. I also wish to state through my experiences I know innumerable bright, committed people with longstanding ties to the party or who remain in the party. They are human beings with aspirations and worries like us all, who find themselves working within flawed institutions. As we might expect, many of them are also deeply attached to flags.

Flags, like it or not, are powerful political symbols. My modest if in some respects clumsy contention was that flags can also be an encumbrance.

My post advises Vietnamese to move on from waving opposing flags, to not remain prisoners of history, and get on with the business of pushing forward with real reforms…I suppose an implicit assumption is that all Vietnamese have role to play in this process and that pressure, in favor of reforms, could be brought to bear on party leadership both within and outside the party ranks. This is not an original position. Just within the last few months a powerful reform coalition has coalesced around a call for fundamental reforms. I somehow am (perhaps naively) of the opinion that all Vietnamese (if perhaps not all those living permanently outside the country) have a potentially constructive role to play, even if opportunities for bringing constructive pressure to bear are at present small.

HOWEVER…on the same day I chose to suggest that Viet Nam needs to move beyond flag waving, Viet Nam’s courts sentenced two young people to lengthy prison sentences for, you guessed it, displaying the yellow striped flag.

Clearly, yesterday was a big step back for Viet Nam. Yet comes in the context of remarkable changes in the the country’s political culture (if not formal institutions)… I began the Vietnamese piece by recalling that just a few days ago I stated (in another piece published in the South China Morning Post that it was “newly conceivable” that real political change in Viet Nam could occur within five years. I concluded yesterday’s piece by stating that, the harsh prison terms handed down notwithstanding, historical experiences sometimes shows that sad moments can turn into sources of inspiration. The mourning of Phan Tru Chinh’s death in 1926 stands out as a particularly noteworthy example.

Actually, despite yesterday’s undeniably regrettable turn, and without making foolish predictions, I do believe politically Viet Nam is seeing an important and historic shift owing to pressures from within and outside the party state apparatus. In the Vietnamese post I probably, perhaps even definitely, made some insensitive, even stupid statements… advising somewhat foolishly that the current flag is ‘pretty’ enough (I did not mean beautiful) and simple… exactly what kind of reaction did I expect.

So to all of the people (particularly those fond of the gold flag with the red stripes) who are furious with me for saying let the flag issue rest for now, I certainly hear you! And I do regret the offense I have caused. I am also, let me make clear, not a puppet, I have my own voice, thank you. And if I erred in my arguments I accept that. Thank you for your kind and not-so-kind comments. I have learned important things from some if not all of those posts. At the very least, I have learned that my knowledge of “Bên Kia” (the “other side”) is limited indeed. Which is not surprising as I have spend a great deal of time working with various state agencies in Viet Nam and virtually no time conducting research in overseas Vietnamese communities.

Perhaps someday Viet Nam will have a flag everyone can embrace. Alas they day has not yet come. Most Vietnamese – even many within the party, can agree that after 1975 Viet Nam’s ruling party did not do the best job in the world in facilitating national reconciliation. For evidence of this just look at the two youth locked up yesterday or the raging discussion on my Vietnamese blog. There remain deep wounds that have in many respects not sufficiently healed.This is regrettable but it is objectively the case.

Viet Nam holds enormous promise. The sooner the country can address its institutional inadequacies the faster that can occur. I do believe that might happen faster if Vietnamese would focus on the institutions first and worry about the flag later.

My hope is that in the years ahead the behavior of the state apparatus will see clear changes. South Korea is an admirable model. Yet Viet Nam has yet to find its Kim Dae Jung, to go for perhaps a more inspiring example than I cited in the blog entry in question.  Of course individual such as this are important. But change of the sort I have in mind can occur if wide swathes of Vietnamese society become politically engaged. And yes, set the flags aside. Naive? Perhaps. I’ve been accused very recently of far worse things.

JL

Photo: AFP

Important things are happening in Vietnam. Most attention has been given to the state repression that continues to sully its reputation internationally. Yet, within the past few months, Vietnam has experienced indisputable changes in its political culture, a development that is of much greater significance.

The changes consist not only of petitions or sporadic acts of defiance; in a very short period, the country has developed a lively, even pluralistic, political culture.

Recognising these changes also means recognising their limits. Driving through central Vietnam recently, I was reminded of how Stalinesque it can sometimes be. But this is no longer the only face of politics in the country.

Every day now, legions of Vietnamese are taking to the blogosphere and laying out their perspectives. Long dormant, the art of political commentary is seeing a renaissance.

For example, hundreds of citizens took to public parks in Hanoi, Ho Chi Minh City and Nha Trang to participate in human rights and freedom of association “picnics”. Yes, these acts were met with repression, threats and beatings, but they persisted. And, however fleeting, it was a Tocquevillian moment for Vietnam.

So what is going on? Three developments seem most important. First, a few significant pockets of delusional thinking and entrenched conservative reflexes notwithstanding, virtually every serious observer of Vietnam’s political economy knows it is time for substantive institutional reforms, and not simply in the economic realm.

Second, Vietnamese people are finding their voice. They are demanding change, from diverse quarters. The voices are increasingly independent and in the open. And it appears they will not soon be silenced.

This brings us to a final and perhaps most curious element: the dissipating force of state repression. It is still there and as nasty as ever when it bites. But its pervasiveness is waning. Photos of the rights picnic, for example, freely circulate online.

These degrees of freedom, it has been argued, owe mainly to factionalism within the party, within which opposing groups benefit from publicly attacking each other. My own take is that it reflects an evolving sentiment, resignation and even pride within party ranks that reliance on repressive means is an undesirable path for Vietnam.

While predicting politics in authoritarian regimes is generally foolhardy, it is conceivable that real political change could occur within five years. Talented and motivated people within and outside the party are finding a voice. At the very least, with its increasingly open political discourse, Vietnam’s political development has entered a new stage.

Jonathan London is a professor and core member of the Southeast Asia Research Centre at the City University of Hong Kong

In the ten years since my first academic publication my academic writings have been cited a total of 91 times… a modest, though respectable figure. In the five days since I set up my two blogs, I have had well over 10,000 views, including more than 5,000 views of my Vietnamese site, Xin lỗi Ông…TODAY ALONE… Academics is better than most occupations. But at moments like these one recalls its profound and shocking stupidity….
On the other hand, there are plenty of nonsense sites on the net that draw in millions…

JL

Al Jazeera has a very good — no, outstanding — documentary television series on China that is viewable online here. Episode 2, on “Power and People” is particularly compelling.

Worth watching, particularly for các bạn TQ và Việt Nam…