State versus State: The Principal-Agent Problem in Vietnam’s Decentralizing Economic Reforms

Abstract

The overarching topic of this volume is the exercise of political power in Vietnam. Various chapters illuminate the Communist Party of Vietnam’s (CPV) staying power (Vu), dissent and its repression (Kerkvliet, Thayer), selection methods in an authoritarian assembly (Malesky), and civil society (Wells-Dang) and accountability (Vasavakul). All these chapters focus on the CPV’srelationship with the rest of society. This chapter adds a different approach by analyzing relationships within the CPV — between central and provincial Party elites. This principal-agent problem emerged after the 1986 doi moi market reforms, which gave provincial leaders more influence in Ha Noi, as provincial revenue increasingly paid the bills of the central treasury. Moreover, international economic integration altered dependencies within the state. The economic performance of localities began to depend less on domestic factors than on foreign direct investment (FDI) and international trade; thus local cadres may look to foreign investors and markets as they seek rents from political office. Such a constellation poses a challenge to central authorities, because local leaders can engage in fence breaking — a process of pushing the legal envelope as far as possible, and on occasion intentionally overstepping provincial legal authority during interprovincial competition for foreign investors. Contestation within the CPV at different levels of the Party apparatus is likely to impact forms of dissent and coercion, the development of civil society, and of course the (s)election processes of Party leaders.