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 email@example.com
The Contributions and Limits of ‘Socialization’
The Political Economy of Essential Services in Viet Nam
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. 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.
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.
 Based on calculations of Vũ Quảng Việt, in consultation with the author.