Differentiated private sector development and business organization in Vietnam

A segmentation of Vietnam’s private sector affects firms and the country’s economy

The article by Lotte Thomsen is published in Competition & Change Vol. 13, No. 1, March 2009 29–50. It forms a basis for understanding how Vietnam’s transitional regulatory regime has encouraged a segmentation of the country’s emerging private sector, which means that the existing local resource base is not fully utilized. The existing literature on the development of a private sector after the introduction of economic reforms in Vietnam in the mid-1980s has mainly focused on the progress of the reforms per se and the differential treatment of the private and state sectors. This article argues that, although these are certainly crucial issues that present obstacles to the country’s wider economic development, understanding differences within the private sector is equally important.

Private sector segments
Based on open-ended interviews with 68 private clothing enterprise owners, the article suggests that the distinctions within the private sector in Vietnam are based mainly on the geographical location of companies and the ethnicities and origins of their owners. These factors influence enterprise owners’ relationships with the state, including former state sector employment, Communist Party membership, formal education and personalized relationships with bureaucrats. The influence of the former planned economy is greatest in northern Vietnam, where the ethnic Vietnamese constitute most of the private sector, and where the economy became centrally planned after the country’s independence in 1954. The tradition of a market economy is much stronger in southern Vietnam, where the planned economy was only introduced after the reunification of North and South Vietnam in 1975 and merely functioned up to the introduction of reform. Moreover, the Ho Chi Minh City private clothing sector, have a relatively large number of businesses owned by Vietnamese Chinese.

Against this background, the paper uncovers:
· One Vietnamese-owned private sector segment in Hanoi
· Two different Vietnamese-owned segments in Ho Chi Minh City distinguished by the origins of their owners in Northern or Southern Vietnam
· One Vietnamese Chinese-owned segment in Ho Chi Minh City.

The article explores differences between these segments in the nature of firm-level management and control, and discusses the impact on the development of the wider Vietnamese economy. The article is one of the outputs from the author’s PhD dissertation.

Lotte Thomsen is now a Postdoc at Copenhagen IT University ()

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