Vietnam Development Report (VDR) 2010: Modern Institutions

The Vietnam Development Report focuses on devolution and accountability, two aspects of modern institutions.

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Institutions are not buildings or organizations, they are the rules by which citizens, firms, and the state interact. This Vietnam Development Report focuses on devolution and accountability, two aspects of modern institutions that are the essence of Vietnam’s experience in the past two decades.

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The Doi Moi reforms are widely credited with improving incentives for production and growth. Devolving responsibility to decentralized actors, to farmers and firms, and allowing them to sink or swim yielded strong results in a way that hierarchical controls could not. Yet, Vietnam’s experience of the past two decades has also exhibited devolution in other respects: to provincial and lower levels of government, to administrative and service delivery units, to the courts and to elected bodies, and to the media and civil society.

Devolving authority and removing hierarchical controls may have benefits, but also poses a fundamental problem: how can accountability be assured after devolution? The fundamental tension between autonomy and accountability is not self-correcting. Accountability mechanisms will not automatically evolve to mediate these new relationships. Rather they need to be consciously created. In fact, many new forms of accountability are being introduced, but they are not always optimal, and important gaps remain.

In surveying the breadth of Vietnam’s institutional reforms and the experience of the past two decades, this Vietnam Development Report highlights several repeated themes.

• The extent of devolution has been substantial, both geographically and functionally.
• New systems of accountability are being put in place, but often with a lag and not always of the best form.
• In the devolved system, conflicts of interest are becoming more evident.
• Information plays a central role in any system of accountability.
• The most successful reforms had a constituency that was empowered to push for change.
• People are becoming more demanding—as Vietnam endeavors to develop into a modern middle-income country, the pressure for better services, and more voice and participation will only get stronger.

The first decade after Doi Moi was the era of devolution of economic power, from central planners to farmers and enterprises. The second decade saw significant devolution of powers and responsibilities to the provinces, and stronger accountability for communes. More recently, functional devolution to service delivery units has improved results even while raising new challenges in aligning accountability with incentives. As Vietnam approaches middle income status, the question for reformers is how to shape the devolving state and strengthen accountability in the next decade.

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This Vietnam Development Report, like its predecessors, draws on the contributions of many development partners. The VDR series provides a vehicle to communicate not only with government and the broader community, but also among donors that contribute to its preparation. The VDR series aims to influence the reform agenda, build consensus among thinkers and the public at large, harmonize upstream among donors, and position those involved as substantive contributors of knowledge and expertise. The present VDR, focused on Modern Institutions, represents a joint report of the donor community on progress and prospects for Vietnam’s development and aspirations for a devolved, yet accountable, system.