Economic Reform and Employment Relations in Vietnam

Ngan Thuy Collins

• Publisher: Routledge
• Year: 2009
• ISBN:
  9781135230036
• Edition: 1
• Topic: Economics
• Subtopic: Development Economics
• Index: Economics

The transformation of the Vietnamese economy from socialist planning to a market economy has led to Vietnam having one of the fastest economic growth rates in the world; and to also to Vietnam engaging much more with the international economy, joining the World Trade Organisation in 2006. This book fills a significant gap by surveying the economic reforms in Vietnam, where most studies have concentrated on other 'young tiger' economies. In particular it discusses the transformation of employment relations which have been a key part of the reforms and a necessary pre-condition to WTO membership. It examines the nature of employment reforms, analyses the motivation behind new policy initiatives and examines the detail of reforms in a range of business enterprises, reporting on extensive original research. Throughout it shows how several key forces have interacted – globalisation, government political interests, national cultural norms, market, managerial ideology and the special characteristics of particular firms – to produce a particular Vietnamese brand of post-communist market economy. Overall, this book illuminates the how employment relation practices are formed in transitional economies, and more broadly the economic and political transformation of socialist economies in the context of the global market.

1 Introduction

For the last few decades the East Asian region has been the home of substantial growth economies known as the ‘young tigers’. These include South Korea, Hong Kong, Singapore and Taiwan. More recently, China and Vietnam have added to this region’s attraction for the international community because of their dynamic transformation from socialist-planning to market-oriented economies. There has been an enormous amount of research in a variety of academic fields focusing on the region’s economic changes. Academic studies have also focused on the situation of individual countries and comparative studies of different nations have been conducted. The level of research, however, has varied across the nations within the region. In the field of employment relations (ER), most of the studies have been conducted on high-profile economies such as Japan, South Korea and China, while there are still few studies on Vietnam and its ER transition process.

This study seeks to fill this gap in the current literature on Vietnam’s economic transition in general and its ER reform in particular. Vietnam is of special interest for study because of its unique historical, political and economic situation. It is the only country to have claimed victory in a war against the United States of America, yet it suffered seriously from a post-war economic downturn. This third-world country used to be seen as having backward economic development and food shortages, whilst having a strong communist government. Despite strong nationalism and mistrust of foreigners, during the past 20 years it has managed to attract a large amount of foreign direct investment (FDI) through its economic reform process. Thanks to its economic reform policy, Vietnam has attained the second-fastest economic growth in the region after China and has become the world’s third-largest rice exporter after the United States (US) and Thailand. Consequently, learning about the approach which Vietnam has employed for its economic reform process is a necessary step in building up an in-depth understanding of Vietnam’s distinct characteristics and economic achievements.

The research studies the transformation of ER in Vietnam during the years of economic reform. Specifically, it aims to answer the following questions:

• What are the key factors influencing the reform of ER during the years of economic reform in Vietnam?
• What are the fundamental reasons behind these influences?

The book will provide a current model of Vietnam’s ER practices and will fill in the gaps in the existing literature on Vietnam’s ER reform. It will also examine the approach which Vietnam applies to its economic transformation.

Rationale for the research

From 1954 in the north and from 1975 in the south, the Vietnamese economy was run according to socialist principles. Vietnam followed a neo-Stalinist doctrine of a centrally planned economic system, with the central government controlling all economic activity. Vietnam began taking its first steps toward economic reform in 1986, marked by the Sixth National Congress of the Vietnamese Communist Party in November of that year. With the Vietnamese economy in crisis, the congress introduced policies designed to promote the transformation of the economy to a market-oriented system, together with development of a multi-sectoral economy. This was known as Doi moi (economic renovation). The reform of ER has accompanied this economic restructuring process and is a field which has undergone a particularly large number of significant policy changes. An examination of the transformation in ER policies and practices in enterprises is therefore crucial to our understanding of the government’s approach to ER reform. ER policies also impact directly on the activities of employees and administrators at enterprise level, so it is appropriate that they be used in any study of the relationship between the introduction and the implementation of government policy.

Reform in Vietnam commenced at a time when the reform process was already well under way in China and communist rule was coming to an abrupt end in Eastern Europe. Changes in the international environment have occurred in the context of globalization, but the impact of globalization on the individual socialist countries has varied. The former socialist countries in Eastern Europe have taken different approaches to their transformation process than have China and Vietnam. The events of the late 1980s and early 1990s instigated an abundance of research analysing how former socialist-bloc countries were making the transition from socialism and suggesting methods that could be applied for them to make that transition successfully. There is a substantial body of in-depth studies on the nature of the reform process in East European countries such as Russia, Hungary and Poland, as well as studies on the general trend of their reform processes.

Various transition theories arising from those studies were the basis for some Vietnam researchers’ attempts to make sense of the economic transformation taking place there, particularly attempts to explain the motivating forces and the reasons behind reforms. The theories may be divided broadly into two camps. The first camp consists of those who believe that the government has been the instigating force behind economic reform and that policy changes are largely responsible for changes in Vietnam’s economic activities (Ljunggren 1993; Perkins 1993). The second camp comprises scholars who assert that changes in government policy merely reflect changes which have already taken place at the grass-roots level and that it is at this level that the real momentum for change has occurred (Fahey 1997; Fforde and De Vylder 1996).

Because of the many difficulties faced by foreign researchers in Vietnam, especially in the early years of Doi moi, neither of these theories are founded on comprehensive empirical research. They rely largely on an analysis of new policy initiatives together with general observation of changes to Vietnam’s economic structure, but their protagonists have failed to ask the people responsible for implementing the new policies how those policies are being applied in practice.

Aims of the research

This study aims to take a step towards rectifying the lack of empirical research supporting transition theories in Vietnam by conducting a case study of the activities of ER reform of enterprises in Hanoi and Ho Chi Minh City (HCMC) during the economic reform period. It compares the policies of the government with the actual operations of enterprises, particularly in the field of ER, and attempts to understand the motivations behind the actions both of government policy makers and of enterprise administrators. By doing so the research will, it is hoped, contribute to a refinement of the current theories on Vietnam’s economic transition.

In the field of ER studies, even though substantial research has been conducted on ER transformation in the context of market economies, there are still very few in-depth studies on the nature of ER transformation in transitional economies. This study, therefore, would like to fill this gap by investigating the nature of ER reform in Vietnam.

Existing ER research is generally divided into two levels. Mainstream ER researchers usually focus on research at the micro level, studying specific ER functions and their linkage to operation at enterprise level. The second category of ER researchers is more concerned with the impact of globalization and other macro and national factors on ER policy and practices. Some of them have even built a linkage between the macro level and enterprises’ ER practices. Nevertheless, no study of this kind has been conducted on ER in Vietnam. This study began with the intention of combining investigation at national and enterprise levels to learn about ER reform during Doi moi. It hoped to develop a model of ER reform in Vietnam in order to contribute to filling this gap in the literature.

There are existing studies on the evolution of labour management from the traditional ER model to human resource management (HRM) (Dulebohn et al. 1995). Existing ER studies have commonly centred on industrialized and market economies. However, virtually no research has been conducted on the evolution of labour management in contemporary transitional economies, such as socialist-planning economies like Vietnam. Filling this gap in the literature is the final aim of this study.

Structure of the book

The book has nine chapters. Chapter 2 reviews several related theories so as to build up a theoretical framework for the research. Globalization and transition theories are reviewed in order to learn about the international political and economic context of Doi moi and the patterns of transition from planned to market economies of socialist countries in general and of Vietnam in particular. The review of theoretical and empirical ER studies covers the evolution of ER and its incidence in the East Asian region, with special emphasis on aspects relevant to Vietnam. Since very little research has been conducted on ER in Vietnam, the studies of China’s ER reform are an important part of the literature review because it is a country with similar circumstances to those of Vietnam but on which far more research has been conducted. The chapter concludes by describing the theoretical framework used to analyse the primary data of this study.

The review and investigation of Chapters 3 and 4 are aimed at providing a general picture of economic reform and its impact on the business sector as well as reforms to ER policy at national level. The information gained through these chapters provides necessary background knowledge for the later investigation of ER changes at enterprises. Chapter 3 provides a background to the Vietnamese economy before and since Doi moi. The review pays particular attention to the policy changes which have most affected business activities during Doi moi, and to the reasons why these policies were introduced and the impact they had on the actual operations of each business sector. In Chapter 4, the investigation then focuses on changes in ER policies introduced by the Vietnamese government since Doi moi started. The details of ER policy changes in each issue and the way they were enforced and regulated are carefully examined. Importantly, the chapter attempts to discover the motivations behind the policy decisions in an effort to understand the relationship between the state’s introduction of policy reforms and their implementation by enterprises.

The next three chapters examine the case-study data to look for evidence of ER changes at enterprise level. Chapter 5 describes the research methodology of this study and the case-study profile. Chapter 6 uses the results of the case-study data to investigate the relationship between several case-study characteristics and the adoption of new ER practices, in order to learn whether these characteristics are relevant to ER practices in Vietnam. In Chapter 7, the enterprises’ reaction to the ER policy changes and the extent to which they have implemented them are examined. The chapter questions the suitability of policies and describes the ways in which enterprise management overcomes any policy directives which they deem to be harmful to their enterprise. This forms part of a more general examination of the relationship between the state, which formulates the policies, and the enterprises, which are entrusted with the responsibility of enforcing them. The reasons behind the relationship between ER practices and the enterprise characteristics discussed in the previous chapter are investigated. They enable the reader to gain a fundamental understanding of ER changes within enterprises and to identify the key enterprise-related factors influencing the adoption of new ER models by enterprises.

Chapter 8 discusses the results of the investigations in previous chapters, particularly the findings from the case-study data. The key factors influencing ER reform during Doi moi are identified. The research findings from the book are used to analyse whether reforms in ER are consistent with any of the current approaches or whether, in fact, a new theory needs to be formed to adequately explain these reforms. The chapter also assesses whether Vietnam’s ER follows any pre-existing international models or whether its unique characteristics mean that none of these models are applicable. The chapter concludes with the development of an ER model for Vietnam during the economic transformation process. The final chapter identifies the contributions made by this study to the field of ER and transition theories and their implication for ER policy’s makers and practitioners. It concludes with a summary outlining the limitations of the book and the implications of the study for future research.

2 Globalization, transitional economies and transformation of ER

This chapter will review a number of key issues in order to provide a theoretical framework for the central theme of the book, namely the key factors influencing the reform of ER during Doi moi in Vietnam.

The economic and political changes which occurred in the socialist bloc during the past century have reflected aspects of the globalization process. Whilst some of the effects of globalization were specific to the socialist (or formerly socialist) countries, all these countries share the common characteristic of changing from a central-planning to a market-oriented economy. These economies have led to the adoption of new models for managing people at work.

Along with the similarities, many aspects of the impact of globalization on the change process are unique to each country, owing to differences in economic, social and historical backgrounds. The uniqueness of Doi moi in Vietnam is a combination of the transfer of the economy from a socialist-planning to a market-oriented principle, within a unique historical context, and a background of being surrounded by the fast and dynamic growth of neighbouring countries. Vietnam is one of the few countries still choosing the socialist ideology as the main principle for its society, and the situation of its post-war economy makes the Doi moi very different from the economic reforms that have occurred in the other former socialist countries or in the region generally. Correspondingly, the evolution of labour management during Doi moi has been different from that in other former socialist economies.

A review of theories on globalization and its impact on business in the following section provides a foundation for understanding the international context of Doi moi in Vietnam.

Globalization and business

Robertson (1992, 1995) defines globalization as all the processes by which the people of the world are incorporated into a single world society, a society in which humanity becomes a collective actor for the first time. This philosophy is certainly recognizable in United Nations (UN) attempts to construct universal norms around the idea of human rights and in the rise of social movements, such as Greenpeace International, which operate across political boundaries.

However, globalization in a business sense is usually described as a shift in traditional patterns of international production, investment, and trade. A popular view of globalization is the absence of borders and barriers to trade between nations (Dicken 1992; Sera and Koh 1992; Cox 1994) and a concurrent worldwide trend towards homogeneity and uniformity as boundaries dissolve and people become more aware of cultural differences and diversity (Kahn 1995).

In the development of transnational processes, foreign exchange is now traded freely across political boundaries, and capital investment and marketing are increasingly being conducted on a global scale. According to Holton (1998) this process involves FDI and the development of strategic business alliances across political and industrial boundaries. This kind of transnational economy has been the characteristic mode of economic globalization since the 1960s. Within a transnational economy, individual nations are increasingly dependent not only on trade but also on flows of capital from outside. This is seen as a necessity for achieving economic growth, and for gaining access to new technology and maximizing employment.

One of the crucial elements of globalization is FDI activity through the operation of multinational corporations (MNCs) (Narula 1996). As claimed by Dunning (1993), MNCs engage in FDI and organize the production of goods and services across countries. International trade has grown considerably since the 1950s, thereby adding to the enormous growth in the number of MNCs, which operate primarily through FDI (Waters 1995; Narula 1996). And this demonstrates that the production of goods and services outside their original boundaries has accounted for a large proportion of total sales by MNCs (Chan 1995; Waters 1995).

The globalization process has been accelerated by the emergence of a new model of production, which ‘shifted from Fordism to post-Fordism—from economies of scale to economies of flexibility’ (Cox 1994:46). In other words, the big company with large numbers of semi-skilled workers working on the production lines for standardized goods is no longer in fashion. The new model uses a smaller number of employees to handle research and development, technological organization and innovation (Cox 1994).

The impact of globalization on individual nations

There are several debates on the impact of globalization on the nation-state, but in general ...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• List of illustrations
• List of abbreviations
• Acknowledgements
• Preface
• 1 Introduction
• 2 Globalization, transitional economies and transformation of ER
• 3 Doi moi and the transformation of the business sector
• 4 Reform of ER policies
• 5 Methodology and the profile of case studies
• 6 ER practices in enterprises
• 7 Enterprise response: initiation and implementation
• 8 Negotiation process: globalization, government and enterprises
• 9 Contribution and implication of the study
• Appendix 1: Interview guide for enterprise management
• Appendix 2: Interview questions for trade union officers
• References