Economics of Vietnam

Tufts economist works to bring about reform in Vietnam

David Dapice has spent most of his career crossing borders.

As a political economist who specializes in international development, he's worked in countries around the globe, particularly in Southeast Asia and Latin America.

David Dapice © Mark Morelli

"Academia tends, for necessary reasons, to divide up knowledge," says Dapice, associate professor of economics. "Most problems don't work that way." What's needed, he says, is a "broader perspective," whether you're a student writing a senior thesis or a government official formulating economic policy.

For the past 10 years, Dapice has been working with other American academics to provide guidance to professionals and government officials in Vietnam, as that country makes a slow and difficult transition to a market economy. "It's a fascinating and rewarding challenge to interact and teach, to create that broad awareness," he says.

Dapice's development work began in the 1970s in Indonesia; he turned his focus to Vietnam in the early 1990s, when he became the chief economist for the Vietnam program at the Center for Business and Government at Harvard's John F. Kennedy School of Government. Dapice now divides his time between the Vietnam program and his teaching at Tufts.

A nation in transition
There is much work to be done in Vietnam, which is struggling to move from a centrally planned economy that was dependent on subsidies from the former Soviet Union to a market economy that can compete on a global scale. Trade relations between Vietnam and the United States were normalized in 2001, when Vietnam was granted Most Favored Nation status by the United States.

"It's a transitional economy," Dapice said. "Most people now work in the private sector, and that share is increasing every year. They're moving toward a full market economy."

Over the past 10 years, the major step has been the deregulation of agriculture, as collective farms were abolished. The service sector is now also largely private, Dapice said.

"But the state still controls the largest industries, about 40 percent," Dapice said. "Whether they will succeed or fail in their overall direction depends on how they handle the issue of state enterprise. If they follow the example of China, they will pare down the state enterprises to a strategic few and make them more efficient," he said.

One of the biggest obstacles is the current Vietnamese financial system, which revolves around the state banks, whose function in the past was to transfer money to state enterprises. The banks have not adopted effective domestic investment strategies. In fact, much of their capital remains tied up in offshore accounts, causing what Dapice described as a "major blockage" in the Vietnamese economy.

Success or failure?
Dapice is not sanguine about rapid economic improvement if things continue as they have. In a recent paper that attracted attention among the Vietnamese hierarchy, Dapice argued that "Vietnam, in spite of a number of successful reforms, is closer to failure than success with its strategy for rapid, export led-growth.

"This failure will not show up in the next year, but will become apparent in the next three or four years," he wrote. "The likely failure is due to an inability to create the conditions that cause private foreign and larger private domestic investors to flourish."

One of the recipients of the paper was Prime Minister Phan Van Khai. "The paper was quite critical, but to my surprise and relief, he distributed it widely and even read from it at a meeting," Dapice said. He hopes efforts such as his may "make it possible to move the process of decision-making in a different direction."

"That's the kind of role that is not played by other agencies, which are not always able to speak clearly about problems that do exist," he said.

'Window on the world'
The other obstacle is education. Vietnam lacks a first-rate university with an adequate degree of academic freedom, and, unlike China, has not invested enough money in sending students abroad for higher education, Dapice said.

"They need a real university with a greater degree of academic freedom, the ability to ask questions and collaborate with those abroad. When [the Vietnamese] think of 'cooperation,' they think of working institution-to-institution," Dapice said. For example, most Vietnamese professors would never dream of sending an e-mail with an academic query to a counterpart at an American university. The Vietnamese professor would assume there needed to be some formal agreement between the two universities.

"They need to think in a different way, to get used to the way the world operates," he said. "A first-rate university would be a window onto the world."

To that end, Dapice is involved in the Fulbright Economics Teaching Program at the University of Economics in Ho Chi Minh City. The program brings together faculty from the United States and Vietnam; students are mostly government managers at the local level and other mid-career professionals. The curriculum focuses on public policy.

International perspective
Dapice says his work overseas has not diminished his appreciation for the classroom. "I very much enjoy the students here. I remain committed to Tufts," he said. He is a faculty advisor to both Education for Public Inquiry and International Citizenship (EPIIC) and Tufts Institute for Leadership and International Perspective (TILIP). "These are very exciting programs, and they're really what distinguish Tufts from many other very good institutions."

Just as developing countries like Vietnam need to create "windows on the world," American universities need to have an international perspective as well, Dapice said. At Tufts, this perspective already exists and flourishes.

"I think Tufts has been actively trying to cultivate a really international perspective. That's unusual for an American campus that's primarily undergraduate," he said. "Of course, we have Fletcher [School of Law and Diplomacy], but undergraduate programs like International Relations are among the leading ones in the country; social sciences are strong; the university abounds in high quality.

"All this helps to make Tufts a special place, playing a special role in figuring out where American education is going," he said.