the neocolonial dependence model and its application to vietnams economic development

HO CHI MINH CITY CAMPUS---***---ECONOMIC DEVELOPMENT TERM REPORTMID-Major: International Business EconomicsTHE NEOCOLONIAL DEPENDENCE MODEL ANDITS APPLICATION TO VIETNAM’S ECONOMIC Lectu

HO CHI MINH CITY CAMPUS

-*** -ECONOMIC DEVELOPMENT

MID-TERM REPORT

Major: International Business Economics

THE NEOCOLONIAL DEPENDENCE MODEL AND ITS APPLICATION TO VIETNAM’S ECONOMIC

DEVELOPMENT

Lecturer: Lê Hằng Mỹ Hạnh

Ho Chi Minh, August 2023

LIST OF ABBREVIATIONS

Chapter 1 INTRODUCTION 1

Chapter 2 THEORETICAL BASIS 2

2.1 Economic Dependence 2

2.2 Developing countries 2

2.3 The International-Dependence Revolution 2

2.4 The Neocolonial Dependence Model 2

Chapter 3 APPLICATION TO VIETNAM’S ECONOMIC DEVELOPMENT FROM 1975 TO PRESENT 4

3.1 1975 -1985 Period 4

3.2 1986 -1995 Period 6

3.3 1995 – 2005 Period 7

3.4 2005 – Present 9

CHAPTER 4: LESSONS LEARNED 12

CONCLUSION 15

REFERENCE 16

ABBREVIATIONS MEANINGS

U.S.S.R Union of Socialist Soviet Republics

HDI Human Development Index

COMECON

English: Council for Mutual Economic Assistance Russian: Совет экономической взаимопомощи Sovyet

Ekonomičeskoy Vzaimopomošči UNDP The United Nations Development Programme U.S United States of America

FDI Foreign Direct Investment

ODA Official Development Assistance

ASEAN Association of Southeast Asian Nations APEC Asia-Pacific Economic Cooperation

WTO World Trade Organization

CPTPP Comprehensive and Progressive Agreement for

Trans-Pacific Partnership COVID-19 Coronavirus Disease Of 2019

Chapter 1 INTRODUCTION

In contemporary times, Vietnam's successful journey of global integration stands out, particularly considering its status as a communist nation The process of this integration becomes apparent through the country's remarkable advancements in international engagement These advancements include transitioning away from dependence on the former Union of Socialist Soviet Republics (U.S.S.R), redefining its ideological course, and taking significant strides towards participation in regional and global institutions The timeline for this transformative process spans from Vietnam's reunification after the Vietnam War in April 1975 up to the present day Following this reunification, Vietnam's leadership aspired to propel the nation towards prosperity by embracing a socialist-oriented economy Unfortunately, both economic and human development goals remained elusive due to a complex interplay of internal and external factors

In this report, we will analyze these factors by using the Neocolonial Dependence Model during four time periods including 1975-1985, 1986-1995, 1995-2005 and

2005 to present

Chapter 2 THEORETICAL BASIS 2.1 Economic Dependence

Economic dependence is the reliance of developing countries on developed-country economic policies to stimulate their own economic growth Dependence can also mean that the developing countries adopt developed-country education systems, technology, economic and political systems, attitudes, consumption patterns, dress, and so on

2.2 Developing countries

Developing countries exhibit significantly diminished levels of industrialization, per capita income, and human development They are often denoted as less developed

or characterized by low income These challenges encompass a range of concerns including poverty, inadequate access to essential services such as healthcare, education, and governance, elevated unemployment rates, insufficient infrastructure, and a lower standard of living affecting a considerable portion of the populace

In other words, we may define a developing nation as one with a moderate to low Human Development Index (HDI), an underdeveloped industrial base, and a relatively poor standard of living This index provides a global comparison of poverty, illiteracy, education, life expectancy, and other aspects The term

"developing country" carries some ambiguity and can encompass a diverse array of nations at varying stages of development

2.3 The International-Dependence Revolution

According to international-dependency models, developing nations are enmeshed in

a relationship of dependence and dominance with wealthy nations and are plagued

by internal and international institutional, political, and economic rigidities Three major streams of thoughts can be sorted out: Neocolonial Dependence Model; the False-Paradigm Model; the Dualistic- Development Thesis

In this report, we only use the Neocolonial Dependence Model to explain how Vietnam is allowed to position itself as an active contributor to global solutions while reaping the benefits of international cooperation

2.4 The Neocolonial Dependence Model

The neocolonial dependence model serves as an explanatory framework for underdevelopment, stemming from historical factors and the influential role of advanced capitalist nations in the core of less developed nations at the periphery Rooted in the Marxist tradition, this model hinges on the North-South divide, where affluent countries in the North possess the means and authority to exert impact on their underdeveloped counterparts in the South (Todaro & Smith, 2015) Contrary to this, it argues that the pronouncedly uneven structure of the global capitalist system bears external accountability for the lack of progress in third-world nations The advancement of less developed countries is hindered by calculated exploitation or disregard by more affluent nations Within underdeveloped countries, a select elite ruling class acts as an intermediary for the preferences of wealthier nations, thereby upholding this pattern and the continuous cycle of underdevelopment

As per the neocolonial dependence framework, underdevelopment stems from the deliberate or unintended exploitation of developing nations (Di Maria and Stryszowski 2009) Consequently, a power disparity emerges, with wealthier countries positioned at the core and less affluent ones at the periphery Within economically disadvantaged countries, select elite factions, such as landowners and governmental hierarchies (e.g., the military), who benefit from or are

"compensated" by existing ties and harbor resistance to change, contribute to this situation This scenario has been consistently observed in numerous African nations, including but not limited to Nigeria, South Africa, Ghana, Sudan, Zimbabwe, Mali, Congo, and Kenya

Within this framework, there is advocacy for revolutionary uprisings against governing elites in developing nations, with a call for a restructuring of the global capitalist system The objective is to emancipate the third world from the dominance of both domestic and first-world oppressors While this stance might deviate from capitalist ideologies, certain proponents assert that the establishment of Communist regimes could potentially break the cycle of dependence and underdevelopment Notably, Vietnam's engagement with the global community for developmental purposes has yielded affirmative outcomes, showcasing achievements in both economic advancement and human development

Chapter 3 APPLICATION TO VIETNAM’S ECONOMIC

DEVELOPMENT FROM 1975 TO PRESENT

3.1 1975 -1985 Period

The period from 1975 to 1985 marked the years following the reunification of Vietnam and the beginning of the country's efforts to rebuild its economy under a new unified government During this time, Vietnam faced significant challenges due to the destruction caused by the war, the loss of foreign aid, and the economic isolation resulting from political factors Analyzing this period through the lens of the Neocolonial Dependence Model can provide insights into how external factors influenced Vietnam's economic development

Economic Dependence and Isolation:

- Impact of War and Destruction: The Vietnam War had left the

country heavily damaged both in terms of infrastructure and human capital The economic dependency on foreign aid and assistance became evident as Vietnam struggled to rebuild itself without significant external support

● Soviet Union and Eastern Bloc Countries: provided financial aid, technical assistance, and military support to Vietnam during and after the war The Soviet Union, for instance, was a major supporter

of Vietnam's post-war reconstruction efforts (December 18, 1975: for economic aid and technical assistance It covered some forty major projects in electric power, food industry, production of building materials and geological surveys.)

● Council for Mutual Economic Assistance (COMECON): Vietnam, as a socialist country, was a member of COMECON, an economic organization of socialist states COMECON provided economic cooperation and assistance among its member countries, including trade agreements and technology transfer

● Cuba: Cuba provided various forms of assistance to Vietnam, including medical aid, technical expertise, and training programs

Cuban doctors and medical personnel were sent to Vietnam to help in the healthcare sector

● International Organizations: While Vietnam was isolated from much of the Western world due to its political alignment, it did receive some assistance from international organizations The United Nations Development Programme (UNDP), for example, provided assistance in various development projects

● Bilateral Agreements: Vietnam signed bilateral agreements with various countries to receive aid and support These agreements covered areas such as infrastructure development, education, and healthcare (apart from mentioned above countries, there’re also China, India, North Korea, Arab Countries such as Iraq and Libya, Non-Aligned and Developing Countries such as Algeria, )

● Humanitarian Aid Organizations: Humanitarian organizations from around the world provided aid to Vietnam to address pressing needs, such as food, medical supplies, and basic necessities

‐ Isolation from Global Markets: Following the war, Vietnam faced

international isolation due to its political alignment and historical context This isolation hindered its access to global markets, technological advancements, and foreign investment (U.S economic sanctions against Vietnam after the fall of the U.S.- backed Government of South Vietnam)

Resource Extraction and Dependency:

‐ Loss of Agricultural Productivity: The war had disrupted agriculture

and the rural economy, which was a crucial sector This loss of productivity led to a dependence on imported food and agricultural products

- Resource Constraints: Vietnam's economic structure was heavily

reliant on agriculture and primary resources The inability to access advanced technology and modern farming techniques limited its ability to diversify its economy

Foreign Debt and Economic Policies:

- Debt Burden: Vietnam faced a significant debt burden due to

war-related expenses and post-war reconstruction efforts This debt often came with conditions and policy recommendations from external creditors

3.2 1986 -1995 Period

The period from 1986 to 1995 in Vietnam is known as the "Đổi Mới" (Renovation) era, during which the country implemented a series of economic reforms aimed at transitioning from a centrally planned economy to a socialist-oriented market economy Analyzing this period through the lens of the Neocolonial Dependence Model can provide insights into how external factors influenced Vietnam's economic development during its reformative years

Economic Opening and Foreign Investment:

‐ Dependency on Foreign Capital: To kickstart economic growth,

Vietnam opened up to foreign investment and established foreign investment zones The need for capital investment led to reliance on foreign sources

‐ External Control: While foreign investment helped modernize

industries, concerns arose about foreign corporations exerting control over key sectors, potentially leading to a form of economic dependency

Trade Relations and Structural Adjustments:

‐ Export-Oriented Growth: Vietnam adopted an export-led growth

strategy to boost its economy This strategy increased dependence on international markets and exposed the country to fluctuations in global demand and prices

‐ Dependency on External Demand: The focus on exports made

Vietnam's economic growth susceptible to changes in the global economy, which could impact its trade balance and overall economic stability

Technology Transfer and Expertise:

‐ Dependency on Foreign Expertise: Vietnam sought foreign expertise

and technology to modernize its industries While this was essential for development, it also meant a degree of dependency on external know-how and innovation

‐ Potential for Technological Gap: Relying on foreign technology

without developing domestic capabilities could lead to a long-term technological gap and a form of technological dependency

Foreign Aid and Structural Reforms:

‐ Foreign Aid Conditionality: Some international financial institutions

offered aid with conditions related to economic liberalization and structural reforms While aid was crucial, conditions might have influenced Vietnam's policy direction

‐ Impact on Sovereignty: The balance between economic reform and

maintaining national sovereignty could have been challenged by conditions that aligned with external interests

Global Economic Institutions:

‐ Participation in Global Trade: As Vietnam integrated into the global

economy, it became subject to international trade rules and agreements These rules could influence Vietnam's policy choices and trade strategies

‐ Market Access vs Dependency: While global trade opened up new

markets, it also made Vietnam dependent on external demand and subjected its economy to the dynamics of the global market

Resource Extraction and Export Dependence:

‐ Dependency on Resource Exports: Vietnam's economy relied heavily

on primary exports such as agriculture and natural resources This could expose the country to fluctuations in global commodity prices, affecting its economic stability

3.3 1995 – 2005 Period

During the period from 1995 to 2005, Vietnam achieved significant progress in various domains, fostering its economic development, regional integration, and human development The following summarizes the country's achievements in key areas:

Economic Development:

‐ Trade Liberalization: Vietnam made substantial strides in trade

liberalization, dismantling trade barriers, and embracing market-oriented