From industrial policy to economic and social upgrading in Vietnam

Three and a half decades ago, Vietnam embarked on a journey from a planned to a market economy with the launch of Doi Moi, or renovation reforms. This journey has been difficult, full of setbacks and successes. The industrial policies at that time and since have defined the standard of living for the Vietnamese people and are now an important part of their economic past, present and future.

This country study explores how Vietnam can improve economic policies to achieve social upgrading linked to economic upgrading. It investigates the history and present approaches to  industrial policy in Vietnam and identifies examples on the national, regional and sector levels. It builds on the findings of a first phase of findings from the FES regional project Core Labour Standards Plus (CLS+) : that evidence indicates that market mechanisms do not necessarily lead to social upgrading, especially because buyer-driven global value chains, which dominate international trade in emerging and developing countries, are prone to trap countries like Vietnam in low-value-added tasks

In case studies, the authors analyse the effects of industrial policies on the ground: In one of them, the case studies of Binh Duong Province, the study reflects the potential of industrial policies. Within 20 years after establishment, Binh Duong, in the south-eastern region of Vietnam, shifted from a poor, agricultural province to one of the most industrialized provinces in the country and the first to completely eradicate poverty.

Drawing from examples like this one, the research team of Do Quynh Chi, Nguyen Huyen Le and Hoang Xuan Diem provides tangible policy recommendations for decision-makers: One of the principle findings is that instead of granting preferential treatment to the remaining state-owned enterprises, the State should require all companies to play by market rules and compete with non-public enterprises as theses preferential treatments turn out to be counterproductive to the situation for workers on the ground. In terms of social upgrading, the economic reforms have helped create millions of jobs in the formal sector, reduce the poverty rate and increase real wages overall. However, the rate of real wage growth slowed down while the gender pay gap remains substantial. According to the authors’ findings one of the main reasons is that trade unions have not been able to represent workers in genuine collective bargaining at the workplace. Thus, the wage paid to many workers is basically the minimum wage, which without overtime pay leaves them with an income that is far below a living wage.

This study underpins the essential point our partners across Asia have made time and time again: The social aspects of industrial policies should be discussed and corresponding solutions should be integrated into those policies.

Download the full study here: