From Vietnam’s recent acceptance into the World Trade Organization to its post-Vietnam War reform and socialist ideals, this overview concisely examines the cultural, political, and economic changes currently at work in Vietnam within a historical context and then discusses the effects such changes have had on businessmen and entrepreneurs. Useful for those evaluating potential relationships with Vietnamese businesses or investments in the country's economy, this study explores matters of credit, private enterprise, monetary policy, and the role of globalization.
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About the Author
William Ratliff is a research fellow at the Independent Institute and curator of the Americas Collection at the Hoover Institution at Stanford University. His articles on foreign policy have been featured in numerous publications, including the Chicago Tribune, The New York Times, and The Washington Post.
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Culture and Change in Asia's Tiger Cub
By William Ratliff
The Independent InstituteCopyright © 2008 The Independent Institute
All rights reserved.
The Confucian Soul of Vietnam
OVER THE PAST CENTURY, a few researchers have probed the role of Confucian tradition in the formation of Vietnamese culture and life. On the one hand, the ancestors of the majority Vietnamese people (the Kinh, who make up about 86 percent of the population) may have migrated to the country from Southern China millennia ago, though only 3 to 5 percent of the 85 million Vietnamese today are identified as ethnic Chinese. Beyond this ancestry, influences on Vietnam came from China's direct political and cultural control of Vietnam beginning in the second century BC, only a century after China's own unification, and continuing until Vietnam's formal independence in 939 AD. The main philosophical and religious influences involved were Confucianism, Daoism, and Buddhism, all of which were important in the formation of various aspects of the Vietnamese character. My focus here will be on the Confucian element because it generally had the greatest impact on the economic and social milieu and on general living conditions.
One of the very insightful writers in English to bring the critical encounter of the past, present, and future into the heart of his analyses of current Vietnamese developments is Pham Duy Nghia, the head of the Business Law Department of Vietnam National University in Hanoi. In a recent book chapter, he noted correctly that "[t]he enemy keeping Vietnam impoverished lies deep in the Vietnamese soul." Even after Vietnam's independence a millennium ago, critical Chinese influence, adapted to Vietnam's own characteristics, continued and in many respects even increased, such that, as Nghia writes, "The traditional state of Vietnam, the recruitment of mandarins, and the organization of society as a whole, were based on Confucian values and examinations" right up to the expulsion of the French in 1954. The Vietnamese legal expert continues, "To appreciate the current situation in Vietnam, one needs to look back to the past to understand the way in which the Vietnamese govern their society based on their beliefs and culture." This culture and the institutions that represent it in the day-to-day world both impede and promote the growth of and prospects for entrepreneurship that I focus on here.
It should be noted that even the dominant form of Buddhism in Vietnam came in large part by way of China. It was the Mahayana version rather than the more ascetic Theravada that reached Laos and Cambodia and made them more withdrawn in social and business practice than the Vietnamese. The Confucianism that was planted in Vietnam during Chinese control included some despotic statecraft of Qin Dynasty legalism, which became central to Vietnamese as it was to Chinese history and governance. American Sinologist John K. Fairbank calls this mixture "imperial Confucianism," because it combines the Confucian philosophical system with an enforcement arm perfected by China's great unifier, Qin Shi Huang. Or, as Nghia puts it, "Confucian values were newly underpinned by penal sanctions" and thereby "transformed into enforceable norms." Thus, Vietnamese Confucianism was used to govern and control, only recently adapting in such a way as to help bring Vietnam, like China, into the modern, increasingly globalized world.
Historically, Confucianism developed interrelated traditions and institutions that had and still have an impact on life, reform, and entrepreneurship. These include:
Elite rule. Government is from the top down, a practice justified by philosophies developed through history that set hierarchies, relationships, and values with respect to individuals, families, society, and the country's leadership. Nationally, power was exercised by the emperor or dynastic head through a bureaucracy trained in Confucian moral values. The emperor's absolute power, exercised through his bureaucracy, was theoretically based on his having the Mandate of Heaven, which in practice he gained by inheriting or effectively seizing political power. Hierarchical relationships also prevailed within families, with the father filling the role of the emperor of his family, both in leadership and in maintaining links to the ancestors through proper rituals.
Morality. In Confucianism, moral values overwhelmingly trumped economic interests and goals, at least philosophically. Government leaders, from the emperor through the bureaucracy, were supposed to promote the people's interests and preserve harmony in society by providing leadership informed by moral training in the Confucian mold. The moral relationship was central also in the family. The bureaucracy, with its moral foundation, was selected through an examination system (and sometimes by other means) to bring moral leadership and harmony to society. Of course, some emperors and bureaucrats were guided to a certain degree by the perspectives of others, especially as dynasties began to wear down over the decades or centuries, and were motivated more by power, wealth, and profound moral and other forms of corruption.
Education. Education was highly regarded because it enabled one to perfect one's character for the betterment of one's self and society and, in practical terms, because it was the main route to the power, influence, and wealth that came from membership in the bureaucratic ruling elite. Confucian education focused on studies of ancient texts relating real and mythical historical experiences that were memorized and then interpreted and adapted to current governance. The educational process was long and difficult, involving many years of study and the passing of one or more examinations, depending upon the bureaucratic rank one sought. Although people at all levels of society realized the importance and consequences of education, most historically could not afford the money or time to attend schools or study privately and thus had little chance of becoming part of the elite. Such a path was, however, usually open to them and in some cases was used to rise from obscurity and poverty to power.
Confucianism's main failure in China, paralleled in Vietnam, was an inability to adapt to outside challenges and some forms of thought. Even today, one of the main challenges faced by members of Confucian-oriented societies, with their regard for memorized tradition, is a failure to think outside the box. Although many important inventions over many centuries came from China, the focus on rote learning of moral lessons from ancient texts meant that in many respects Confucianism discouraged (when it did not actually punish) the innovative individual, in particular the imaginative entrepreneur. Of course, Marxism has been the dominant philosophy in recent decades, and its attitude toward entrepreneurship has been even more jaundiced than Confucianism's.
Predominance of the group. Fitting into the group or community was a supreme virtue in the Confucian tradition, as it is, at least theoretically, in communism. Individuals were conditioned not to meddle with the hierarchy, but to do what was expected of them according to their position. Education was the most acceptable way for an individual to take initiative that could open doors to greater influence, power, and wealth. (In practice, there were other, less education- oriented ways to rise in the government hierarchy, such as buying positions or using connections.) From the family to the nation, harmony, consensus, and loyalty were the ideals rather than competition and individual creativity. People often saw life as "eating bitterness" (as the Chinese put it), so they worked hard, saved for the inevitable tough times ahead, and didn't rock the boat.
Business at the bottom of the hierarchy. Entrepreneurs and merchants were at the bottom of the Confucian hierarchy. Still, some enterprises flourished, although they were always subject to government tolerance. Intervention by the central government, ranging from bribes to outright confiscation and execution of merchants who fell out of favor, was a constant possibility and threat. Nghia points out that Asian business schools, in the spirit of the traditional Chinese art of war, describe business as being similar to military combat and that "Japanese and Chinese engage in economic competition as though they are engaged in war."
In recent decades, many features of Confucianism have been successfully adapted to the modern world and have proven to be true assets in the transformation of societies in ways that Confucius could not have imagined. As I have written elsewhere,
The profound, lingering, in many ways largely positive legacy of Confucian culture is not always consciously present, but it is there among leaders and people and guides goals and actions in ways that are rarely equaled in Latin America or India. Key aspects are the belief that: (1) education is the expressway to success; (2) goals should be far higher than mere survival and pursued with single-minded diligence and a relentless work ethic; (3) merit should be sought and rewarded; and (4) frugality and focus must guide the expenditure of funds and energies.
With particular reference to China, but equally applicable to Vietnam, the predictable result of much Confucianism led to the old quip that the only poor Chinese in the world are the ones who live in China. This is no longer true with respect to China or Vietnam. It remains to be seen how successfully the community orientation of thinking and governance can coexist with intellectually innovative and economically creative and thus potentially disruptive individuals and groups.CHAPTER 2
France, War, and Communism
IN THE MIDDLE OF the nineteenth century, France expanded its colonial empire to Vietnam, seizing the region and exercising power formally by maintaining the old Vietnamese imperial system, exploiting the people and the land for its own interests. France used the Vietnamese people primarily for physical labor or to staff lower levels of the governing bureaucracy. In the longer term, the French affected Vietnam's future in several ways. First, long before the colonial period, French Jesuit Alexandre de Rhodes devised the romanized script for the Vietnamese language that is in use today, though for its first two centuries the romanization was used largely by missionaries while Chinese characters remained the official language of the ruling Confucian bureaucracy. Second, some industrialization and urbanization emerged in the previously overwhelmingly agrarian economy. Third, aspects of French culture, particularly the language and architecture, made a clear impression on Vietnam and are still observed throughout the country today. And fourth, French colonialism and contacts with Europe sowed the seeds of colonialism's own defeat by spurring the growth of non-Confucian Vietnamese intellectuals and nationalism. Socialism and communism were among the philosophies learned by some young Vietnamese intellectuals. Among them was Ho Chi Minh, who was introduced to communism while studying in France, thus beginning his life work of driving the French (and Americans) out of Vietnam and reestablishing the country's independence.
The Japanese occupation of Vietnam during the Second World War further incited sentiments for independence among Vietnamese nationalists. With Japan's defeat in 1945, Ho declared Vietnam's independence, but the French refused to retire gracefully. Vietnam's new communists militarily humiliated and overthrew the French in 1954 at Dien Bien Phu, an obscure name that had the resonance then that Baghdad has today. By the end of 1960, Ho and his colleagues had established Soviet-inspired socialist socioeconomic structures in embryonic form. These were implemented all over the north of the country during the subsequent two decades of civil war involving the United States and several non-Vietnamese allies supporting the anticommunist south.
After the United States and the government of South Vietnam were defeated in 1975 and formal unity was reestablished in 1976, centralization was expanded throughout the country, with communist leaders seeking to punish rather than constructively integrate those who had been defeated in the civil war, as foreign correspondents and Vietnamese survivors have described. Le Duan, who had succeeded Ho Chi Minh as Vietnam Communist Party (VCP) boss in 1969 on the latter's death, rejected the reforming current already underway in parts of Asia, though not yet in China, the latter then devouring itself in Mao Zedong's Cultural Revolution. By their own choice, Vietnamese leaders launched economic policies that, while not so vicious as those in China, nonetheless impoverished rather than developed their country and isolated Vietnam from most of its neighbors when it was not at war with them, as in China, or conducting its own colonial war and government, as in Cambodia.
Commenting on the policies implemented after reunification, Vietnamese historian Nguyen Khac Vien writes that "by the end of 1960, North Viet Nam, for the most part, equipped itself with at least in an embryonic form socialist socio-economic structures." As Vien wrote in his book, under the heading "Errors and Illusions," all organs of party and state, including the mass organizations of women, youth, and labor, were mobilized "with a great deal of commotion" in a campaign to change Vietnam by "liquidating as quickly as possible all forms of private, family and capitalist economic activity." While this hit all families and private businesses, it was directed most brutally against Chinese-Vietnamese entrepreneurs in Saigon, thus sending hundreds of thousands in that ethnic group to sea as "boat people," many of whom perished before finding a friendly shore. As private enterprise was crushed, peasants in the south were herded into agricultural cooperatives like those that already existed in the north. Big state farms were created to serve as vanguard units. The result of these reforms under Ho Chi Minh, Vien wrote, was "an enormous bureaucratic apparatus" run from the top that had nothing but contempt for and hostility toward any form of dissenting ideas. It utterly failed to serve the needs of the Vietnamese people or even the government, except for concentrating its despotic power.
Le Duan and his comrades continued these policies, constructing the basic framework of the postwar government along traditional authoritarian lines, with institutions that often very conveniently dovetailed with even stricter communist ideas and practice. These included a proclaimed focus on community interests, as determined by the self-appointed ruling elite, whose moral authority was based on its having vanquished colonialism and on its allegedly scientific communist creed, this taking the place of the traditional Confucian Mandate of Heaven. The chosen policies, which included the silencing of all opposition, were exercised through legal and other institutions that often resembled traditional models that were clearly indebted to Qin Shi Huang.
Only when Le Duan died in 1986 did Vietnamese pragmatists begin the so-called doi moi renovation program, just as Chinese reforms had to wait for Mao's death in 1976. Even now, VCP leaders continue to speak of a transition to socialism, and many of the institutional structures established by Ho Chi Minh remain in place to a significant degree.CHAPTER 3
Doi Moi Renovation and Reform
VIETNAM IS ONE of the last five countries in the world to have a single-party communist government, the other four being China, North Korea, Laos, and Cuba. Since 2001 the general secretary has been Nong Duc Manh, the first ethnic minority leader to hold that position. (Manh is rumored to be a natural son of Ho Chi Minh, though he denies it.) The prime minister is Nguyen Tan Dung. Major decision-making power resides in the VCP through its Politburo, Secretariat, and Central Committee, the latter ruling on major policies several times a year and at congresses held every five years, the most recent dating to April 2006. Government ministries remain highly bureaucratic and opaque, and implementation of policy, often through provincial governments that are even more bureaucratic and corrupt, suffers from this fact. As in China, the 493-member National Assembly, which meets biannually, is becoming more active, achieving a somewhat broader popular representation and a degree of transparency.
Excerpted from Vietnam Rising by William Ratliff. Copyright © 2008 The Independent Institute. Excerpted by permission of The Independent Institute.
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Table of Contents
Survey of Conditions in Vietnam to Mid-2008,
PART I Background,
1 The Confucian Soul of Vietnam,
2 Modern History: France, War, and Communism,
3 Doi Moi Renovation and Reform,
4 Socialism: Nirvana or Not?,
PART II Overview of Reforms Today,
5 The Legal Jungle,
6 The Educational Tangle,
7 Monetary Policy and Banking Reform,
8 Resurrecting the SOE Dinosaurs,
PART III Entrepreneurship in Its Several Forms,
9 Introducing Entrepreneurship,
10 Enterprises in Vietnam: Legislation and Statistics,
11 Private Enterprise in the Broader Business Picture,
12 Businesses in Vietnam,
PART IV Special Challenges for Small and Medium-Sized Enterprises,
13 Access to the "People's Land",
14 Funding and Credit, If You Can Get It,
15 Walking Through a Business Registration,
16 Vietnamese Surprises,
PART V Confronting the World,
17 Vietnam–U.S. Relations,
18 Joining the World Trade Organization,
PART VI Conclusions and Observations,
Appendix: A Note on International Involvement in Vietnam's Reforms,
About the Author,
About The Independent Institute,
Independent Studies in Political Economy,