The Political Economy of Policy Exceptionalism During Economic Transition: The Case of Rice Policy in Vietnam

Abstract

The global food security agenda depends on the world rice market which is the thinnest among key cereal markets and often distorted by government interventions. Existing literature suggests that these interventions are not economically efficient. This paper focuses on the political economy of those interventions, asking why they were adopted. The answer is drawn from insights on Vietnam as a case study. Although by no means a representative case, Vietnam is chosen not only for being a key rice exporter but especially so for its unique success in overcoming the inherent tension between 'socialist' and 'market-based' objectives during its transition to a market-based economy, albeit with a socialist orientation. We find that rice sector in Vietnam has not been fully reformed to follow market rules despite Vietnam's accession to the World Trade Organization. This is due to the interaction of economic liberalisation processes and the ruling Communist Party's political survival strategy. In this context, seemingly economic disequilibria are shown to be stable, enduring policy settings. In open economy politics, the case reveals how economically sub-optimal policies may be 'successful' politically even in the face of what appear to be severe domestic political constraints on reform from external economic pressures.

The economic impact of the Trans‐Pacific Partnership: What have we learned from CGE simulation?

“…This pattern is 16 Petri et al (2012), which allows for imperfect competition, also note powerful scale effects in Vietnam's principal production clusters. The study by Nguyen et al (2015), which uses simulations with both a general equilibrium model (GTAP) and a partial equilibrium one (GSIM), focuses on Vietnam and confirms the general pattern. The latter also emphasizes the role of increased investment in the economy.…”

“…A few of the earliest studies were based on GTAP7 data, which has a base year of 2004 (Areerat et al, 2012, Itakura and Lee, 2012, and Oduncu et al, 2014, while most of the remainder use either the GTAP8 data or the GTAP8.1 data (an interim update), with a base year of 2007. The work of Nguyen et al (2015), Petri and Plummer (2016) (see also the extended discussion of the simulations in Lakatos et al, 2016), Cabinet Secretariat (2015, and USITC (2016), along with this paper, use the more recent GTAP9 database, which has a base year of 2011.…”

“…Cororaton and Orden (2015) Several papers make additional assumptions about NTB cuts (see for example Burfisher et al, 2014, Ciuriak and Xiao, 2014, Cororaton and Orden, 2015, Nguyen et al, 2015, Strutt et al, 2015, Cabinet Secretariat (2015, and Disdier et al, 2016, among others). NTB shocks are designed as removal of tariff equivalents and/or shocks to import augmenting technological change, and range from cuts of 20 percent to complete removal.…”

“…There is much more that could be done at the national level for the member countries by combining work with global models with more detailed national CGE models (as in Kagatsume and Tawa, 2012), or other modeling approaches. Nguyen et al (2015) is a good example of the potential utility of the latter. This enables us to build more detailed pictures of expected changes in economic structure in TPP member economies, and to address questions that are somewhat beyond the scope of most global trade models, such as detailed sectoral impacts, regional impacts, or the effect of the reforms on household income distribution.…”

The Evolution of Rice Farming in the Lower Mekong Basin

“…Though area, yield, and production targets are still a feature of government policy in Laos, and land-use controls to keep land in paddy production have persisted in Vietnam, the role of government has largely reverted to the Thai model of providing public goods through research, extension, and rural infrastructure (roads, canals, irrigation, electrification), subsidising key inputs (seed, fertiliser, water, electricity), and attempting to support or at least stabilise the farm-gate price of paddy while controlling the retail price of rice. However, the Vietnam state still plays a major role in rice marketing and exports through the Vietnam Food Association and state-owned enterprises, and has used floor prices, export quotas, and export bans in an attempt to control domestic stocks and prices (Nguyen and Talbot 2014;Tran and Dinh 2015;Nguyen et al 2017;VNA 2018). Laos and Cambodia have also used export bans at times of high world prices with the intention of safeguarding food security.…”