The Philippines and Vietnam – Contrasting development models

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MIKE WOOTTON

MIKE WOOTTON

LEAVING aside the first time I set foot in the Philippines, in about 1979 from a flight which stopped in Manila for a couple of hours on its way from Osaka to Bangkok, my first real visit here was from Vietnam in 1992. I’d been living and working in Saigon and there was a need to help out in the Philippines.

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In 1992 Saigon was still fairly underdeveloped, there were frequent electricity outages, the roads flooded whenever it rained and I remember visiting somebody in a hospital there which was a most appalling place — filthy, dirty with mould on the walls.

Hotel accommodation was limited to the places named in books about the Vietnam War; the Continental, the Rex and the Caravelle. There were no taxis and everybody cycled around, with a lucky few having motorbikes. The telephone service was virtually nonexistent. There was massive excitement in the small expat community when the first pizza restaurant opened.

But for all that it was a charming place, gentle and very artistic with a good depth of culture, underneath was a steely discipline and an obsessive focus and determination to succeed. Arrival in Manila through an airport, which was okay if unremarkable at the time, was a positive culture shock; there were lots of taxis, shopping malls, fancy hotels, plenty of private cars, there was a brand new Makati Shangri-La, western style restaurants and there was a buzz about the place. Makati at a glance felt quite “first world.”

Now, 24 years later, Vietnam is a development success story and remains a one-party communist state. Between 1986 and now, poverty has been reduced from 50 percent to 3 percent and GDP per capita has increased from $100 to over $2,000 – catching up with the Philippines.

Vietnam, like Deng Xiao Ping’s China, adopted a policy of “Doi Moi” in 1986 in order to propel the economy forward as a socialist-oriented market economy. Central planning the command economy was dropped and the nation was, to a point, opened up but still with strong and pervasive government control.

There has been spectacular growth in industrial development founded on small and medium enterprises – over 30,000 of them, contributing nearly 40 percent of GDP. It is a newly industrialized economy as well as being very egalitarian — opportunities and rewards are shared in an equitable and even-handed way. Infrastructure has and continues to be addressed, roads are being built and electricity generation capacity grew from 12,000 MW in 2005 to 25,000 MW in 2010.

The Vietnamese do not speak English although some speak some French, an inheritance from colonial days, the regulatory and business environment is difficult and still under development. There are restricted areas for foreign investment and there is a population of about 90 million, many of whom live in the countryside. Much command economy-type bureaucracy remains.

But Vietnam has a policy of attracting foreign direct investment and, despite the hurdles and risks to foreign investors, it has managed to attract between $10 billion and $12 billion over the last six years and reached $14.5 billion in 2015. FDI in the Philippines hovers around $1 billion to $2 billion per year.

The Philippine government spends as much on medical care today as Vietnam did in 2001 (0.9 percent of GDP). In true socialist manner, the Vietnamese state supports medical and educational needs for the population. But that said, the multilaterals are pushing (or at least trying to push) Vietnam into a full market-based economy – they can’t wait to make it one, it is one of their primary missions.

Vietnam, it seems, is doing okay. It is on a growth path which includes lots of social responsibility designed to maintain inclusiveness — the iron hand of the state will ensure that.

The Philippines has electricity generation capacity of about 16,000 MW for its 100 + million population and a poverty incidence of about 25 percent. Almost everything that can be privatized has been or will soon be privatized. Whilst there is at least nominally a national economic planning function, its outputs and targets are hostage to a labyrinthine bureaucracy and obstructiveness as well as the whims of the local private sector for their fulfillment.

Vietnam has risen from a nation ravaged by war over 30 years — first the French and then the Americans, was a “victim” of colonization for over 1,000 years by various Chinese dynasties and a mere 67 years by France — to become a regional socio-economic star, and there is every indication that it will continue its upward trajectory, leaving behind many of its neighbors including the Philippines.

Vietnam is on a different type of growth track. The Philippines can produce good financial statistics but they do not reflect any improvement in quality of life of the bulk of the population, nor any mushrooming of manufacturing facilities or increases in exports. Vietnam has other more basic statistics to support its progress which reflect a different focus on growth; industrialization and the establishment of thousands of small and medium sized enterprises, government-led and funded educational and health services development, and the attraction, despite barriers, of significant amounts of foreign direct investment, creating jobs and improving the national skill base.

A paternalistic socialist government, or even a benign dictatorship for that matter, can, it appears, propel real inclusive economic development much more effectively than abrogation of responsibility to a vested private sector all in the name of democracy and the “free” market (with the encouragement of the ever more liberal multilaterals)!

In closing, I see that Rolls Royce, a well renowned capitalist icon, have a showroom in Hanoi, similar I guess to the one they have at the Fort. I also see that Maserati and Lamborghini are available in Vietnam as they are in the Philippines. Let’s hope that Vietnam doesn’t get diverted from its inclusive path by the prospect of such shiny goodies.

Mike can be contacted at mawootton@gmail.com.

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