A woman fans coals to heat up a cooker on the railway track in downtown Hanoi. When investment decisions are made based on corruption, it is not only the honest firms that suffer, but also the public through lower quality and higher cost works.
As Vietnam sits on the cusp of becoming a middle income country, reflections on achievements and emerging challenges are inevitable.
Like a runner with tremendous stamina, Vietnam has made great strides in reducing poverty and in maintaining economic growth even through a global downturn. At the same time, we remain aware that Vietnam continues to face formidable challenges, among them corruption.
Corruption is not unique to Vietnam, nor is it a new problem.
Indeed, given that Vietnam’s economy has performed so well in recent years despite the prevalence of corruption, it would be easy to become complacent and to wonder whether fighting corruption is indeed a priority. Some may wonder if corruption is greasing the wheels of growth, asking “why focus on corruption when growth is so strong?”
But this is the wrong question. They should be asking “how much faster would growth be and how much fairer would its economy be if corruption were better controlled?”
By now there is considerable evidence from around the world about the impacts of corruption on the factors that drive growth. Investors seeking locations where they can operate cleanly and efficiently may be deterred by corruption, even if considered “petty.”
Some may choose to invest anyway, drawn by the hard-working labor force or the dynamism of the economy, but they face greater costs and higher risks. Firms with fewer scruples, those willing to take shortcuts, get the competitive advantage. Whether paying willingly or not, the need for unofficial payments drives up the costs of firms.
When the World Bank conducted its survey of enterprises in 2009, more than 40 percent of those that had sought a construction permit reported that it had come with a suggestion of a gift or unofficial payment; and more than 40 percent of those that had sought government contracts said the same.
But it is not only the honest firms that suffer, it is the people of Vietnam, though lower quality and higher cost public works. When investment decisions are made based on corruption, rather than efficiency, the wrong projects get built in the wrong places at the wrong price.
Indeed, Vietnam’s economists often note that it seems to take much more capital to generate Vietnam’s GDP than is true in most countries. This is often attributed to inefficiency of public investment. The sources of such inefficiency are many, but corruption is surely among them.
And as corruption allows some officials and firms to carve out advantages for themselves, at the expense of the rest of society, corruption harms equity as well as efficiency. The losses to society -through illnesses untreated, children undereducated, and roads too expensive – dwarf the gains for the unscrupulous ones who twist the system to their advantage.
Vietnam deserves better.
To fight corruption effectively there needs to be not only vigorous enforcement, but also increased transparency. Vietnam has made great strides in improving clarity in many areas, but there remains a long way to go. As emphasized in the Vietnam Development Report 2010, prepared by the World Bank together with other partners, although many laws call for certain information to be public, in reality information is often difficult to obtain.
A more recent study of the transparency in land management provided further evidence: even though many documents are required to be published online, only half of provincial websites actually had the information such as reports on land use, and as few as 9 percent had maps of land-use situations online. Transparency provisions in the law are not being fully implemented.
And Vietnam Development Report 2012, released for the meeting of the Consultative Group, completes the picture – provinces with more transparency have, on average, significantly lower levels of corruption.
Whether it is the unofficial payments that beset firms and citizens or the misappropriation of funds in state-owned enterprises, corruption forces the honest and hard-working people of Vietnam to run uphill; lack of transparency forces them to do it in the fog. With a new National Assembly and the launch of a new Socio-economic Development Plan (SEDP) at hand, now is the time for renewed vigor in building transparency and fighting corruption.
Vietnam’s achievements are laudable and its future promising once it steps out from the shadow of corruption.
By Victoria Kwakwa
The writer is the World Bank country director for Vietnam. The opinions expressed are her own.