INTRODUCTION

There are three main characteristics of a rentier state. First, oil revenues are paid to governments in the form of rent. Second, oil revenues are externally generated from exports. Third, oil revenues are directly accumulated by the state (Benli 2014). Furthermore, in order to qualify as a rentier state, oil should account for at least 40 per cent of the country’s gross domestic product (GDP). Usually, only a small percentage deals directly with the extraction of the natural resources. The majority participates in the distribution and utilization of the natural resources (Belbawi 1987).

Brunei is therefore a rentier state; its vast income from oil and natural gas provides its basis as a rentier state. It is among the world’s most dependent economies on oil and gas, which accounts for around half of its GDP and 90 per cent of export revenues (Department of Economic Planning and Statistics 2020a). Revenues from oil and gas have made the GDP per capita levels in Brunei the second highest in Southeast Asia (Organization for Economic Co-operation and Development 2018).

Mahdavy (1970) and Beblawi (1987) argued that overdependence on oil revenues can have negative political, economic and social impacts on a rentier state. On the economic side, it can cause enclaved development which is termed a “resource curse” or “Dutch Disease” whereby the booming oil sector distorts the growth of other sectors. The role of most rentier states is largely limited to the distribution of rent earnings among the population by providing goods and services for the community welfare and by acting as the major employer in the country.

Brunei is not an exception. Employment in the government sector entails high incomes and is a major vehicle for redistributing the rents from oil revenues. In 2019, the public sector employed 33.78 per cent of the country’s total employed persons. It employs more locals—49.53 per cent of the total locals employed—compared to non-locals who constitute 2.5 per cent of the total non-local employed persons in Brunei. It should be noted that the 66.50 per cent of the total employed persons are locals.

To judge of a religion from its literature is not perhaps entirely satisfactory, for there are influences which cannot be expressed in writing, and can only be gauged from their results on the lives of individuals, and on the progress and social condition of races. The investigation which is before us tonight has, however, the advantage of that accuracy which attaches to documentary evidence. In regard to those statements which are found in the works which Islam has produced in such abundance there can be no mistakes, except the bare possibility of errors of translation, which in these days of intensive linguistic studies are not liable to be frequent or important. The liability to pass an unfair judgment on Mohammedanism from a study of its literature is therefore confined to misinterpretations of the text, or to a one-sided selection of the works to be studied, or an unfair selection of extracts from those works. It will therefore be my endeavour to consider Mohammedan literature from many different points of view, and to take as great a variety of works as possible under review, in the hope that we may obtain as broad a view as possible of the teaching of Islam.

In the first place it seems obvious that we should devote a good deal of attention to the Koran itself, after which I propose to consider the main teachings of the Koran, the Traditions, and other current Moslem literature on certain fundamental subjects, such as the doctrine of God, the universe, science, the future life, sociology etc., in order to show the influence of their literature upon the Mohammedans themselves.

The Arabian prophet left nothing to his followers in his own writing. Moslem authorities are not even agreed as to whether he was able to read and write. It is quite certain, however, that the Koran is his own composition either written down by his amannenses, or immediately committed to memory and afterwards recited from time to time at public worship. The commentator Bukhari states that it was not until about a year after Mohammed’s death that the Koran was first collected as a whole.

Editors’ Note

Questions of the modernization of the Malays were also raised in a discussion in the Society begun by Rev W. Murray’s “The Influence of Modern Civilization on the Malay” and responded by David Bishop. In Murray’s piece, which provided the standard characterization of the Malays by Europeans of that period, Murray rooted their character not only in the effects of climate. He also attributed it to the nature of the pre-colonial system of governance which had left the Malays “unambitious and lazy”. The British presence had been able in part to counteract this by providing a system of peace and law and order which had been able to effect external changes in the Malays. This, he argued, could be translated into internal changes that would modify the Malay from “a pirate and warrior … into a lover of peace and order”. This image which Murray expressed in terms of the domestication and taming of the Malay character did not, however, suggest for his critic, Bishop, that the Malays would modernize fully. In his view the Malay character and nature would require their continued dependence on British tutelage as “the Malay has been slow to adopt Western ideas and manners”. Arguing that, despite exceptions, the Malay is “conservative and suspicious of innovations, unambitious and unprogressive”, he noted that “[t]he great majority of the Malay lads in school are deplorably devoid of ambition, and seem only to desire to get along with as little trouble and as little exertion of brain-power as possible. The forces of heredity are apparently too strong.”

If the Committee of the Society, in fixing the subject of this paper, contemplated the Malay in widest sense of the word—that is, as a race peopling not only the Malay Archipelago generally so called, but also Formosa, the Philippines, Madagascar, and South Africa—it proposed a subject far greater than I can possibly deal with. Even in the narrowest sense of the Malay resident at our doors, I am afraid that all I can offer is an essay somewhat disjointed and incomplete.

In 2017, the Vietnamese government began drafting eighty-five articles of a regulatory bill to open three special economic zones (SEZs) in Phu Quoc, Van Don and Bac Van Phong that offered foreign investors fewer regulations and greater fiscal incentives. The SEZ project first appeared in Quang Ninh province’s proposal for the establishment of Van Don in 2014 after Pham Minh Chinh’s meeting in 2013 with Chinese SEZ researchers from the China Center for Special Economic Zone Research (CCSEZR) of Shenzhen University. The initiative was then expanded into Bac Van Phong’s and Phu Quoc’s economic zones of Khanh Hoa and Kien Giang provinces, respectively, at the “International Science EEZ development – Experience and Opportunities” conference, which was co-organized by the Quang Ninh government and CCSEZR on 20 March 2014. The seminar brought together more than four hundred provincial government and private industry leaders, policy experts and academic professors to discuss “the mechanisms and specific policies for the special economic zones” (Tuan Anh 2015).

In October 2017, the SEZ draft bill was proposed and submitted for revision at the fourth session of the 14th National Assembly (NA), and then re-submitted at the fifth session. On 23 May 2018, Nguyen Khac Dinh, chairman of the 14th NA’s legal committee, announced that the majority of NA delegates agreed on the necessity to open public discussions on the bill’s regulatory scope and potential benefits of SEZs for the Vietnamese economy (Lawsoft 2018). According to the Politburo’s Conclusion No. 21, the reasons for opening these economic zones include “taking advantage of the regional potential; attracting strong investment capital, advanced technology, new management methods; generating more resources and motivations; and helping accelerate the process of economic development and restructuring of provinces, regions and the country as a whole” (Le Kien 2017). The draft law contains a controversial provision permitting the foreign lease of land in SEZs for up to ninety-nine years, and this sparked numerous waves of demonstrations and riots between June and September of 2018. At the sixth session, the NA conclusively approved the withdrawal of the SEZ bill. Out of 483 delegates, 423 of them voted in favour of the postponement, only 8 voted against it, and 55 abstained.

China’s role in Vietnam’s rapid economic development is significant but contentious. In the past two decades, Vietnam has significantly benefited from integration into the regional production network anchored in China. Yet there have been mounting concerns in Vietnam that close economic ties between the two countries are asymmetrical, and that the Vietnamese economy is increasingly dependent on China. For years, policymakers, experts and observers have expressed worries about the country’s high reliance on Chinese inputs in its export industries and the deep penetration by Chinese firms in its domestic consumer and construction markets (Tran 2019; Tuoi Tre News 2013; Ngan 2014). Of particular concern is that, despite the exponential growth in Vietnam’s exports and the number of free trade agreements (FTAs) signed by Vietnam to diversify its trade relations, raw materials and equipment used by the country’s manufacturing exporters continue to be dominated by Chinese products, and there is no evident sign that the situation is improving (Ngan Anh 2014).

That this is taking place amid increasingly complex geopolitical competition between the United States and China adds another layer of complexity (Vu 2015; Vu 2017, pp. 297–8). China has increasingly leveraged its economic might to achieve foreign policy goals by employing various inducements and sanctions (Chheang 2018; Reilly 2013). Inducements, such as infrastructure projects under the Belt and Road Initiative, may be attractive to many, although simultaneously China is increasingly using economic sanctions to change the behaviour of other states (Hufbauer and Jung 2020). It is unsurprising that economic dependence is considered to pose a much greater political risk in Vietnam because of its territorial dispute and historical tensions with China (Tuoi Tre News 2013).

Concerns over Vietnam’s economic dependence largely arise from the fact that China is its largest trading partner. Moreover, Vietnam continues to record a large trade deficit with China. The asymmetric nature of bilateral trade between Vietnam and China worries many. For Vietnam, China is too big and too important. In contrast, for China, Vietnam is a relatively small trading partner in its global trade.

A study of UNCTAD (2013a) indicates that about eighty per cent of global trade (in terms of gross exports) is associated with the international production networks of multinational enterprises (MNEs). It means that a large number of products are produced from different locations across borders around the globe.

It is believed that developing economies embedded in low-value-added chains can improve their position in GVCs. One of the most useful ways to do this, and one which is widely applied, is by further attracting and improving the quality of inward FDI flows. FDI may create both direct and indirect effects on a country’s participation in GVCs. The direct effect is that foreign and domestic enterprises in a joint venture are likely to produce sophisticated products and deepen their participation in GVCs, while the indirect effect is that FDI can create spillover impacts (including horizontal and vertical spillovers) on the level of innovation of local firms (Javorcik 2004, 2008). After having accumulated sufficient capabilities, many of these local firms undertake outward international expansion and become MNEs. Alternatively, to enhance their position within GVCs, firms from developing economies that started off at the lowest position can use international expansion as a way to move up to a higher value-added position. The primary direction of their move depends on the governance structure of the value chain.

Thanks to the growing importance of global FDI and trade, particularly of the manufacturing sector, a large body of research on the nexus between GVCs, FDI and economic growth has concentrated on China (Yao 2009; Fu 2011; Zhu and Fu 2013; Swenson and Chen 2014; Wang and Chen 2020). Meanwhile, little attention has been paid to the GVC participation of smaller developing countries such as Vietnam. A large number of studies on Vietnam have focused on the country’s conventional trade (Tran and Heo 2009; McCaig 2011; Truong et al. 2019; Nguyen et al. 2016; Nguyen 2015; Ha and Tran 2017).

Along with the implementation of economic renovation, total commodity trade exchange between Vietnam and the rest of the world grew rapidly from only $13.6 billion in 1995 to $157 billion in 2010 and $518 billion in 2019.

In the early summer of 2018, a rare wave of protests rocked Vietnam. Believing the draft law on Special Economic Zones (SEZs) would give China the right to occupy strategic geopolitical positions across the country, many thousands of angry citizens poured out on to the streets demanding it be withdrawn. In Binh Thuan province, protesters burned police cars, vandalized the provincial government office and attacked members of the police force (Duc Trong 2018). In response the National Assembly voted to withdraw the SEZ law, although this was seen by the Vietnamese Communist Party (VCP) as a priority to boost economic development. This was not the first time the regime had to back down because of popular pressure. In 1997 a revolt by farmers against corruption in Thai Binh province ended with a government concession. The then permanent member of the VCP’s Secretariat, Pham The Duyet, holding the fifth most powerful position in the party, was sent to discuss matters with the enraged farmers. In the aftermath of the Thai Binh revolt, the VCP issued the grass-roots democracy directive, which aimed to prevent such incidents from happening in the future. Mr Duyet stayed on in his position until the end of his term.

It is striking to compare responses to similar incidents in China. In early 1989, a series of protests broke out across the country, most prominently at Beijing’s Tiananmen Square. The then general secretary of the Chinese Communist Party (CCP), Zhao Ziyang, visited the site and talked with the protesters, urging them to end their hunger strikes. He was among the CCP faction that wanted to seek a peaceful solution. The ultimate result, however, was the opposite: On 4 June 1989, tanks and soldiers from the People’s Liberation Army (PLA) invaded the square and massacred hundreds—if not thousands—of protesters. Mr Zhao was himself a victim: he was stripped of the party chief’s position and placed under house arrest until his death. The Tiananmen incident created a path dependence for the CCP to solve popular tensions: coercive actions are preferred over making concessions, particularly for incidents that are deemed threatening to the regime.

Higher Education Governance and Political Regimes

Probably nobody would deny that higher education cannot be isolated from politics. The politics of higher education has been addressed by many higher education researchers, especially those in the United States (see McLendon 2003). For instance, a significant number of studies, including a seminal work by Burton Clark (1983), have critically analysed how higher education is governed by the state, and how such a relationship has been fundamentally restructured in the era of neoliberalism. But apart from notable exceptions such as Levy (1980; 1981) and Jungblut (2015), most higher education scholars tend to treat the state quite homogeneously. In other words, these scholars do not usually differentiate state models in their analyses of higher education governance.

In fact, higher education is governed by different logics in democratic and authoritarian regimes. In multi-party democracies the state cannot easily twist the arms of universities, although through financial policies, for instance, it is possible to exert indirect influence. In contrast, although authoritarian regimes generally have the power to dictate the internal affairs of universities, they are deeply perplexed when making policies. The logic, in its simplest form, runs like this: since universities usually nourish the democratic spirit (Bueno de Mesquita and Downs 2005; Sanborn and Thyne 2014), authoritarian regimes normally try to abolish the higher education system entirely (as illustrated by the Chinese Cultural Revolution), hamper the expansion of higher education, or adopt preferential admission and funding schemes to channel most higher education benefits into the regime’s loyal constituencies (Hanson and Sokhey 2020). But when it comes to the largely unquestionable contribution of higher education to economic development (Lane and Johnstone 2012), authoritarian regimes seem to be left considerably bewildered. Simply put, economic development could be a double-edged sword for these regimes. It contributes to social stability, a primary source of legitimacy for the regime’s resilience, but at the same time produces the middle class that will normally demand more autonomy from the state. Recent empirical evidence, however, tends to challenge this simplistic prediction of modernization theory, and shows that authoritarian regimes are markedly adept in reaping the benefits while significantly reducing the threats of economic development (see Wright 2010 for the case of China).

Throughout its history, the Vietnamese Trade Union has accompanied the ruling Vietnamese Communist Party (VCP) at the national and sub-national levels (Collin 2020; Schweisshelm and Do 2018). In the global economic crisis of the 1930s, the working environment in Vietnam under French rule was tough. Trade unions were illegal as strikes were repressed and activists were stifled by the colonial power (Pringle and Clarke 2010). In 1929, the VCP established the Red Federation of Trade Unions (Tong Cong Hoi Do), its first trade union federation, to call workers to fight for national independence (Collin 2020). From the beginning, the trade unions not only prioritized protecting the interests of members and combating exploitation by employers, but also liberating the country from foreign invaders. In 1946, a year after the formation of the Democratic Republic of Vietnam in the North, the Red Federation of Trade Unions was renamed the Vietnam General Confederation of Labour (VGCL). Leaders of the VGCL were members of the VCP. During the subsequent war against the United States, the union became an essential wing of the VCP to gather workers for war-oriented production in order to build a socialist economy in the North and to assist the national revolution in the South. In contrast, labour associations emerged in the South along with an explosion of strikes (Schweisshelm and Do 2018). This included organizing thousands of strikes with the Trade Union of Southern Liberation Vietnam (Lien hiep Cong doan giai phong mien Nam Viet Nam) during the 1960–1970s (Kerkvliet 2010; Schweisshelm and Do 2018).

After the war ended, when private enterprises were confiscated and became state-owned, the two unions merged. Trade unions continued to serve as the “transmission belt” of the government and the extended personnel department of state-owned enterprises in order to achieve economic targets and social stability (Collin 2020; Zhu and Fahey 2000). Before Doi Moi, the legitimacy of Vietnamese trade unions depended on their alliance with the Communist Party at the national and sub-national levels, and with managers in the state-owned enterprises and community-owned enterprises—the only form of enterprise at that time. The VCP controlled all aspects of labour relations, while the unions mostly played an administrative role rather than a representative function (Zhu et al. 2008).

As Vietnam strives to achieve productivity-driven growth, aiming to join the ranks of upper-middle-income countries with a modern industry by 2030 and becoming a high-income country by 2045—as set out at the 13th Communist Party Congress in 2021—the question of what shape the country’s largest domestic firms will take is a major concern. In theory, large firms are better able to exploit economies of scale and are equipped with the resources to invest in capital- and technology-intensive sectors. In the foreseeable future, such firms are likely to take the lead in increasing the productivity of Vietnam’s corporate sector, where small and micro enterprises dominate and robust medium-sized enterprises are largely absent—a phenomenon referred to as the “missing middle” (Le 2018; Dinh 2013). Moreover, foreign-invested firms, which have come to comprise a sizeable share among Vietnam’s largest firms over the past decade, have largely taken advantage of inexpensive labour and land to undertake processing production using imported materials (Le 2018). In this context, large domestic firms are of particular relevance for the country’s ambitious medium- and long-term economic development strategy.

Cross-country experiences, however, demonstrate that large firms have not necessarily taken on positive roles in national economic development. Given their size and position in the economy, such firms are often capable of negotiating special favours from the government. Large firms, if properly supported, incentivized and disciplined to perform effectively, could become a driving force in the development of strategic industries and economic competitiveness (Amsden 1989; Wade 1990). But, where effective control mechanisms are absent, large firms may fall into unproductive rent-seeking and collusive activities. Understanding who the large firms are and how they relate to the state therefore constitutes a crucial agenda in exploring Vietnam’s economic development prospects.

To date, the discussion surrounding large domestic enterprises in Vietnam has centred primarily on state-led industrialization, and with wholly or majority state-owned conglomerates as the primary vehicle. In a country where one-party rule by the Communist Party has been sustained and the constitution assigns the state sector to play “a leading role of the economy”, attempts have been made to maintain the state’s ownership and control over the commanding heights of the economy.

How has Vietnam transformed from a country undergoing a socialist revolution in the 1970s to having what we call a “red crony capitalist system” today? What is the main dynamic that has shaped this transformation? In answering these questions, this chapter builds on the rich scholarship of the history, politics and political economy of Vietnam’s market reform. By reviewing developments in Vietnam as the country slowly evolved from its socialist system of the war and revolutionary period, we locate the cause of the reform in the comprehensive crisis facing socialist Vietnam in the late 1970s and early 1980s when the revolutionary regime sought earnestly to realize its utopian dreams. Originally a temporary solution to a crisis, market liberalization came to acquire a dynamic of its own, releasing vast social and economic potential. Yet, as we argue, the determination of the ruling Vietnamese Communist Party (VCP) to protect its power and privileges has restrained those potentials considerably while being itself corrupted by emerging socio-economic forces, leading to the rise of red crony capitalism and a looming legitimacy crisis confronting the party today. By “red crony capitalism”, we mean the prevalence of close family and other forms of political connections between Communist Party members and business owners.

The chapter is arranged in five sections. The first two address the ideological, political and economic context of the reform, beginning with a brief review of the careers of the first generation of communist leaders from the late 1920s who were still at the helm of the Vietnamese state in the late 1980s. Their socio-economic vision was profoundly shaped during the protracted revolution they had led, and that vision played a decisive role in guiding the developmental course of the first post-war decade in Vietnam. During that decade, the VCP sought to establish the socialist system in the South in the same way it had done in the North since 1954. This forced march to socialism led to a profound political, social and economic crisis. Even with generous help from the Soviet bloc, Vietnam was in a dire situation in the early 1980s as already poor economic production and living standards continued to worsen.

During an eight-day spectacle of its 13th National Congress in 2021, the Vietnamese Communist Party opened the curtain on a political theatre that reaffirmed the party’s ruling leadership. This 13th National Congress also marked thirty-five years since the Vietnamese Communist Party (VCP) ushered in Renovation in order to divert the economy towards a path of market reforms. Having survived the collapse of the Soviet Bloc, today, the high economic growth generated under these reforms has provided the party with a claim to performance-based legitimacy. Between 2016 and 2020, Vietnam continued to attract significant foreign investments that sustained an annual growth rate of 6 per cent. During the global coronavirus pandemic, the country’s GDP growth dropped to 2.91 per cent, its lowest growth rate in decades. Yet Vietnam was still recognized as one of the three Asian economies, along with China and Taiwan, to have maintained a positive growth rate despite the severe impact of the pandemic (Lee 2021). This gave the newly elected leadership at the 13th National Congress the confidence to exude continued optimism in the nation’s future (Duc Binh et al. 2021).

Now, at this important juncture, it is a timely opportunity to take stock of Vietnam’s economic and political developments, and to closely dissect the contradictions behind the VCP’s success story. As this volume shows, the previous five years from 2016 to 2020 offered causes for both hopes and concerns. Despite the resilience of the Vietnamese economy, many problems persist, some of which are structural, including the low productivity of the labour force, an inefficient state-owned sector, rising national debt, and the country’s low position on the global value chain of production (P.V. 2020). Back in 2010, VCP leaders formally declared 2020 to be the year when Vietnam was to become a modern, industrialized economy (Ng Tong 2010). Ten years later, the goalposts for the party’s performance have been expediently shifted. The party now aspires to transform the economy and to achieve national industrialization by 2035 (Song An 2021), but that goal remains elusive to date.

In politics, the VCP has tightened its grip over political elites during the previous five years.

The Sixth National Congress of the Vietnamese Communist Party (VCP) was an important milestone in Vietnam’s development path as it marked the significant transformation of the Vietnamese economy. With the economic reform of Doi Moi (Renovation) in 1986, Vietnam transitioned to a socialist-oriented market-based economy. This structural transformation, particularly in trade liberalization and the promotion of foreign direct investment (FDI), facilitated Vietnam’s participation in regional and global production networks or value chains. Participation in the global value chain (GVC) benefited the country in various ways, including enhancing its capabilities and competitiveness, improving its product quality, bringing financial stability, and expanding its markets (Korwatanasakul and Warunsiri 2020, p. 1). As a result of participating in the GVC, Vietnam—once one of the world’s poorest countries—reached an average growth rate of nearly 7 per cent in the period from 1990 to 2019, which is one of the highest growth rates in the world, and it became a lower-middle-income country in 2010 (World Bank 2020). Moreover, GDP per capita increased almost thirteenfold from US$210 in 1989 to US$2,700 in 2019 (World Bank 2020). The reform also attracted a large amount of FDI into the country: Vietnam’s FDI net inflows rose sharply from US$0.18 billion in 1990 to US$15.5 billion in 2018 (World Bank 2020).

In 2021, the 13th National Congress may mark another turning point in Vietnamese history. Despite the past economic success, the slowdown of growth has signalled to the VCP the need for another major structural transformation after thirty-five years of Doi Moi reform. In a fast-changing world, the economic policies implemented in the past (e.g., the focus on labour-intensive activities) are unlikely to apply to the current market environment and conditions. While enjoying the benefits of the GVC, Vietnam is continuing over time to lose competitiveness in its strategic industries. Without a well-planned economic strategy, the benefits from GVC participation may be illusory and leave the country with structural stagnation, particularly in terms of innovation and technological development.

This study provides a novel analysis through the lens of the GVC framework and empirical data of trade in value-added to examine issues related to the dilemma of development and global integration in Vietnam.