11 - Push, Pull, and Reinforcing: The Channels of FDI Influence on Provincial Governance in Vietnam

Summary

For five months at the beginning of 2002, I visited ten provinces across Vietnam, interviewing local government officials and collecting data on provincial governance and economic performance. It was quite an experience, sampling the many local dishes and cultural events, but it was also a revelation on the different modes of provincial leadership. Same-level officials described their jobs and their days quite differently and the same institutions worked in unique ways. My attempts to collect the Ten-Year Master Plan (2001–2010) (Quy Hoach Tong The) in each province illustrate these differences.

I managed to obtain one plan in each province, but was shocked at how differently provincial administrations viewed this critical document. One province saw it as their accomplishment of six years of hard work and presented it to me proudly. Another province was highly secretive, declining to acknowledge its existence until they saw I had others. A third province's Deputy People's Committee Chair refused to give it to me, but the Director of the Department of Planning and Investment (DPI) handed it over later. A fourth province was willing to let me see the document but not copy it or take it away. Finally, the fifth province released it, but only in exchange for a number of documents on crossnational studies of industrial zone performance. In attempting to collect the Ten-Year Master Plan, I had encountered a variety of reactions: openness; secrecy; local institutional conflict; and mutual self-interest.

The preceding anecdote highlights a larger issue: provincial governance varies, sometimes considerably, within Vietnam. This chapter is a preliminary explanation for such differences among Vietnam's provinces. After considering geography, infrastructure, and provincial culture, foreign direct investment (FDI) helps to explain differences in provincial economic governance. In general, foreign investment has a positive impact on governance. I develop the analysis in four steps. First, I review earlier work on provincial economic governance. Second, I look at the channels of FDI influence on provincial governments. Third, I explore how large FDI inflows can alter legal relationships, solidifying the connection between the DPI and the People's Committee and limiting the reach of central institutions.