The contrast of the relatively weaker economic performance of provinces around the Ha Noi–Hai Phong axis to the provinces around Ho Chi Minh City serves as the basis of an analysis of investment conditions and factor markets from which all provinces across Viet Nam may well benefit. The paper highlights the striking differences in economic performance observed between these northern and southern provinces as per major economic indicators, despite comparable levels of infrastructure development, human capital and proximity to major cities and ports. The authors argue that the historical factors commonly cited for the underperformace of northern provinces are fast disappearing, and that it is indeed the mix of policies as well as the extent and efficiency of their implementation that mostly accounts for the observable economic divergence.
Fostering growth throughout all Viet Nam, including in the north, is critical to building wider national constituencies for the implementation of successive reforms. The transition experiences of many countries have shown the need to spread the benefits of economic growth in order to avoid the formation of coalitions blocking future reforms beneficial to the population at large. In its analysis of the economic performance of Hai Duong, Vinh Phuc, Bac Ninh, and Bac Giang, the paper raises concerns about the fact that much of the business activity in these provinces appears to be state-linked and still enjoys protection and subsidies that will render them unviable in the fast-approaching integrated economy.
Distorted land prices and discretionary treatment of businesses by local officials are underlined as the major constraints to the development of domestic private sector. Increasing the collaboration between the lower levels of officials and the provincial leadership is suggested as the critical element in the efficient implementation of economic policies, and especially important when dealing with prospective investors. The paper also recommends re-classification of farmland and the reduction of land prices outside industrial zones. In line with previous CIEM and UNDP initiatives, such as establishment of Domestic Business Forum, the authors underline the need to further improve the performance of business associations at provincial and regional level, and to promote cross-provincial lesson sharing on best and worst practices. Underpinning provincial efforts, national leadership is considered critical to reward provinces that promote competitive businesses, job creation and efficient growth, providing the appropriate incentives for the development of local private sectors.
This study aims to spark debate among policy makers, researchers and development professionals across Viet Nam. If it leads to a better understanding of the constraints to private sector development at the provincial level and more vigorous discussion about viable policy initiatives critical to further improve provincial business environments, it will have indeed served its purpose.