Vietnam’s Servicisation Policy – A Case Study of “Post Hoc” Policy Development

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Introduction

An earlier paper in this journal reported on the importance, both in Vietnam and elsewhere, of the existence in Vietnam of a national strategy for servicisation. This is rare, globally. The Vietnamese official record tells us in a limited way about the implementation and deployment of this strategy, and signs for how the conceptual basis for it has been evolving. Note the evidence presented in the earlier paper for published Vietnamese research and the use of the slogan “the shift to services” [Nguyen Dinh Chuc & Ta Phuoc Duong 2019]. It starts with a quick review of the pattern of growth since the end of the COVID-19 epidemic, focussing on structural change.

The Vietnamese pattern of growth and structural change since the end of the COVID-19 epidemic (2022–2024)

Despite the official slogan of “Industrialisation and Modernisation” (Công nghiệp hóa, hiện đại hóa¹), as discussed in the earlier article [Fforde 2022], and drawing on earlier work [Fforde 2018] the pattern of structural change in Vietnam in the period of rapid growth that started in 1992 has been one of servicisation – the services sectors have increased their share of GDP faster than industry. This is the global pattern since the end of the Cold War, and this has been widely ignored by relevant donors and researchers [Fforde 2018; Fforde 2024a; Fforde 2024b].

As recognised in Ministry of Planning and Investment [2023a: 2], in 2022 the share of services rose – with service sector GDP increasing 8.0% compared with industry sector growth of 7.8%. Services were 56.7% of the increase in GDP and industry 38.2%. This continued the general trend seen since the 1990s. The latest Statistical Yearbook puts this data in another way by reporting the total value-added contributed by services to GDP (current prices) as 41.3% in 2022 and 42.5% in 2023 [GSO 2024a: 241]. Servicisation, therefore, is continuing.

Within this overall trend, as also noted in Ministry of Planning and Investment, in 2022 a number of services sub-sectors showed relatively fast growth: wholesale and retail sales; transport and storage; food and accommodation; finance, banking and insurance. According to GSO these four services sub-sectors were generating around 22% of current price GDP in 2023, compared to 23.9% in manufacturing (24.6% in 2022) [2024a: 245–246].² There were however declines in the reported value-added of health and social services.

The overall trend seen during the period of fast growth since the early 1990s – servicisation – therefore continued after the end of the COVID-19 pandemic.³ This is the “observed reality”; the question is “what does it mean”, and so what instrumental logic can be deployed to justify policy. This is problematic and requires considerable creative efforts as the topic is extremely under-researched [Fforde 2016] globally, despite the empirical evidence that since the end of the Cold War developing countries have on average servicised, not industrialised, and that the faster individual countries have grown, the more they have servicised [Fforde 2018]. This poses major questions about the validity of mainstream policy advice [Fforde 2024a; Fforde 2024b]. It can also be added that whilst it is true that Vietnamese manufactures exports have grown to very high levels, the domestic value-added from these as shown by the official data to be very low, likely below 15% of gross exports using one set of data [Fforde 2021: 50], or 30% using recently revised data.⁴

Since servicisation remains a pattern of structural change that is under-researched, the fact of the continuing trend is important, supporting adherence to the servicisation strategy, even if the reasons behind it, which could support policy logic, are still not clear.

The services strategy – the Vietnamese official record

Vietnamese official reference those documents that are deemed relevant (see the first part of the Bibliography). A valuable document is the Report of the Ministry of Planning and Investment on implementation of the services strategy (referenced here as Ministry of Planning and Investment 2023a). This was preceded by others, and these show the slow but continuing emergence of an evolving position on how policy might relate to services sector growth. Given the reality of servicisation as an observable statistically measured process (a rising share of GDP), by contrast there is also a reality of a rather slow pace in the creation of a Vietnamese policy narrative able to explain the observed pattern of structural change – servicisation – and what is causing it, and so what policy instruments should work to support it.

The fact that this is still not very clear may be seen as following long-standing Vietnamese practices of what can be called “post-hoc” policy development, where the identification of a trend “in reality” that is deemed positive (as, clearly, servicisation now is in the Vietnamese context) is then used as basis for policy development, in a sense through trial and error, and, associated with this, a process (initially incomplete) of development of an explanatory framework that, over time, explains the expected results of policy.⁵

The policy documents therefore are best seen in terms of steps in a historical process, showing varied understandings of putative instrumental logics (what might cause what), and policy, thus, as something that is “deployed” (triển khai) rather than “implemented” (thục hiện).⁶ This is clear from examination of the texts chronologically. To repeat, these texts are collected because they are referenced, and reference each other, in documents found by searching for them and for services.

Initially, in 2016, we find the 4^th Plenum of November that year addressing the importance of reforming the growth model and increasing the quality of growth [Ban Chấp hành Trung ương 2016].

The opening section of this document is called “Situation and Causes”. It points to macroeconomic stability and a growing economy, with positive aspects to structural change (the changing contribution of different sectors to GDP growth). Notably, whilst industry is said to have recovered step-by-step, GVA in services had “grown well”– that is, better than industry (p. 1). Further, the reasons for problems in changing the growth model are said to be, fundamentally, “subjective”; this is not explained to be a lack of knowledge, but a lack of awareness and vision on the part of the Party, state, businesses and the community (p. 3). This is, the analysis states, resulting in stagnation in the development of good factor markets (that is, for capital and labour) that can allocate and effectively utilise the forces of development (p. 3).

This logic can be inverted – if a part of the economy is growing fast, then there is a prima facie case that there will be factor markets there that are working well. But institutional change is identified as the main instrument. And we find later in the document identification of three strategic breakthroughs:

1. The institutions of the capital market
2. Continued investments in the socio-economic infrastructure
3. Development of human resources (pp. 5–6).

We need to note that no concrete target is given for restructuring of the pattern of GVA generation in GDP. Section 4, however, gives seven areas for restructuring: state enterprises, financial markets, investment (especially public investment), public service entities, agriculture, industry, and (finally) (4.7) services.

Under 4.7 we see emergence of a central idea, which is that services GVA should grow faster than GDP – meaning that services’ share of GDP should increase – servicisation. This focusses upon an aspect of economic change that is clearly defined and measurable – servicisation as the chare of services in GDP. There is no statement of this effect in section 4.6 referring to industry, so positive structural change focusses upon servicisation, not industrialisation. Within services, we find the beginnings of identification of a potential way to prioritise, calling for concentration on services sub-sectors that have potential, “with intellectual content and high skill levels” (p.10) such as finance, banking, shipping, logistics, petroleum support, air travel, business services et al. – also tourism. An issue here is that high GVA may indeed accompany high payments to workers, but this does not mean they are skilled, and constant price sectoral GDP, often identified as productivity when seen as “per worker” is a very troubled measure [Fforde 2024b].

Implementation of these ideas is presented on p. 13. Primarily, this is left to the initiatives of Party and State organs, but concretely this is expected to lead to better targeting of investment (p.13) to suit the strategy.

Here, then, we see in 2016 the Party’s Central Committee announcing a strategic shift, without being too detailed about how this can be brought about. Centrally, though, the services share of GDP is to rise, meaning that wages and profits (GVA) in services are expected to be relatively high.

In 2017, we start to see conceptual and practical development of the servicisation strategy emerging in a key and over-arching documentation of overall state activities [Chính phủ 2017]. This document is the year’s 1^st January regular overall statement on official targets for the year (here 2017) relating to socio-economic change. The document is rather long (83 pages). It seems to me, though, not to be particularly interested in servicisation. This comes later, in February 2020, when we find a clear statement of services policy in a decision by the Premier [Thủ tướng Chính phủ 2020], that points towards approval of a general strategy that is then approved in a document cited here as Premier [Thủ tướng Chính phủ 2021], more than a year later (April 2021). The years 2020–2021 were of course the time of the COVID-19 crisis. We need to note that the February 2020 document refers to the Plan for the restructuring of the services sector, whilst that of April 2021 refers to the General Strategy for development of the services sector. And the later still 2023 report of the Ministry of Planning and Investment reports on deployment of the General Strategy.

A reading of these two documents coming from the Premier suggests a far more sophisticated attempt to start to understand how and why servicisation occurs (and so development of a policy logic) than that from Report section of the Ministry of Planning and Investment in 2023, which is in contrast to the far more developed thinking found in that same documents Appendix (see below). This is very interesting. It almost suggests that the Report and the Appendix were written by different groups of people.

These documents then suggest two parallel processes – a push to make increases in the services share of GDP part of economic development strategy, and a push to understand how this is happening and how specific policies may be generated to support it (itself supported by processes of trial and error as policy changes and their effects are observed). Initially, much is made of policies that arguably have positive effects that are not sector-specific, but which can claim to have supported services. For example, policies to improve the operation of factor markets may well support services, but they are generic – they support market-oriented economic growth generally.

This stance would seem naturally to lead to diversity and variation, and we can note (jumping ahead) that the report from the Ministry of Planning and Investment [May 2023] also shows that a number of Ministries and localities had been slow in reporting on their activities to support the General Strategy: a diverse series of historical processes rather than general implementation of a clear concrete strategy. However, one thing that ties things together is the clear sense that services are the fastest-growing part of the economy (as we saw from the GDP data). The “policy practice” can therefore be seen as suited to uncertainty and relative ignorance of causality, yet logical and “post hoc”, with understanding viewed as something that will develop over time as the situation is watched and various policy levers pulled. We can note that there is no evidence (such as in the Ministry of Planning and Investment Report) of systematic pooling of experiences in a provisional summing-up (a “sơ kết”).

To return to the historical sequence, in 2021, referring to the XIII Party Congress held in January of that year, Nguyễn Quang Thuấn [2021, July] references strategy towards reforming the growth model and restructuring the Vietnamese economy. However, whilst stressing the importance of developing services (p. 6), this is not said to be new, and top importance is placed upon shifting from broad-based development to development that is both broad and deep (p. 1). Then there is reference to continued strengthening of “Industrialisation and modernisation” (p. 5), and (said to be new) introducing better technology so that industry would generate over 40% of GDP by 2030. And then, reading this text, we come to services. There is no concrete target for their share of GDP in 2030, but priority is given to tourism, trade, communications, transport, logistics, and technical and legal services. At this point in time (2012), there is no clear policy of prioritising services above industry, and there is no clear sense of how services sectors might continue to grow faster than industry.

However, things start to become clearer, and late in 2021 Văn phòng Chính phủ (Office of the Government) [2021] presents a work plan for implementation of Servicisation Strategy. Here we see development of policy thinking exposition of which is structured around particular services sub-sectors, an obvious way of presenting activities and evolving notions of entry points. The development of policy therefore, in a sense naturally, moves from a general sense of the reality and value of servicisation to a “deconstruction” of the notion of services – a look at sub-branches.

Thus, some services branches are prioritised (p. 84 et seq.): tourism, logistics and transport, information and communications services, and financial services and banking. Others are mentioned (but not prioritised): science and technology, distribution, health services, business support services and education and training. This, again naturally, leads to discussion of policy instruments [p. 84, 92].

The document discusses “solutions” (giải pháp) to the development of the services branches just enumerated. These are diverse and fascinating, and in some cases move between instruments under state control and what could also be described as outcomes, which are not. This tends, in my view, to work to the assumption that awareness of the strategy itself may lead to change, driven locally, and in effect calls for reports on “what works where and why”. For example, under tourism, there are four headings and under each a range of sub-headings (this is in the section headed “solutions” (giải pháp).

• Improvement of institutions and systems and creation of a legal environment favourable to tourism
• Development of tourism products
• A system of quality tourist production that are distinctive, diverse and systematic (đồng bộ), with high value-added, suited to domestic and international tourists …
• Plan and invest in development of tourist products that rest upon prominent strengths and that are attractive …
• Development of infrastructure and the material-technical base to serve tourism …
• Train tourist staff
• Develop the market, including advertising and trademarking
• Concentrate upon selective attraction of market segments who can pay well and stay long. Strongly develop the domestic tourist market.
• Strengthen professional marketing of tourism …
• Construct a ‘national brand’, based upon development of regional and local brands as well as tourist businesses
• Strengthen use of IT in booking of tours, rooms, payments etc. as well as tourist statistics

However, from p. 92 section C discusses the resources required for implementation of the strategy. This refers to capital of various types. This appears as a very different broad brush policy logic.

If Văn phòng Chính phủ (Office of the Government) [2021] presented a work plan and a series of options and possibilities, two years later the Ministry of Planning and Investment’s 2023 document, [Ministry of Planning and Investment 2023a] provides a substantial report on implementation of the strategy, and the other [Ministry of Planning and Investment 2023b] follows up on this.

The Report [2023a, May] contains a detailed Appendix after p. 9, which is 11 pages long and shows clear development of policy thinking compared with the 2021 document [Văn phòng Chính phủ 2021], so we can see how “post hoc” policy develops (and the pace at which it does so).

The first section of the Appendix reports on the establishment of a general environment for the development of services. This is mainly to do with the business environment and regulatory “issues”. It reports many local meetings on these general issues. In none of the six paragraphs are services specifically mentioned. However, in Section 2 the Report “changes up a gear” and supplies detailed information on the deployment of “post hoc” policy.

Under tourism, for example, the Report starts off by mentioning that many policies (general ones) supported business. It goes on to report, though, specifics:

• Greater attention to the tourist infrastructure from local authorities, especially transport direct to places of interest; mobilisation of capital into tourism projects had progressed positively, with interest and commitments from strategic and branded domestic and international investors; tourism advertising strategy had progressed in many forms, especially on the internet, with reference to Decision # 103/QD-TTg 9/10/2017 on the plan of activities itself referring to a Politburo decision (08-NQ/TW 16/1/2017) on turning tourism into a leading sector
• In 15/3/2022 Vietnam removed all restrictions on foreign entry, removing health checks, leading to a sharp recover in numbers coming into the country.
• 2022 saw a sharp increase in domestic tourism, the major support to the entire Vietnamese tourist sector with many areas reporting high occupancy rates.

It is clear from this that a clear narrative of causality is not yet that detailed or clear. But the commitment to the positive value of tourism, as an example of services, is evidently strong.

Compared to the discussion of services sub-sectors in the 2022 document the Appendix of the Report is far richer in analysis and detail. Again, to repeat, it does not refer to a formal provisional “summing-up” (a “sơ kết”).

It reports on six sectors (excluding education which is mentioned in the 2022 document). These match the services sub-sectors in the GDP data. They are tourism; food and accommodation; logistics and transport; services to information and communications technology; financial and banking services; distribution; and science and technology. The details here are very interesting, as they form the basis for the emerging policy logic. However, this still lacks coherent narrative form. This is shown by Section 3, which stresses the positive contribution of many services branches to economic growth (pp. 9–10) but has little to say about how and why this happened. Notably, section 4 which reports that there are no proposals from the localities (province and cities) relating directly to the servicisation strategy (p. 10). This fits with the idea that there is as yet no narrative that explains servicisation upon which thay could hang such ideas.

A short (one page) subsequent document [Ministry of Planning and Investment 2023b] (December) stresses that “in order to have a basis for summing-up (tổng hợp)” experiences with the strategy, relevant organs are asked to report on activities parallel to those in the Strategy and to give a general evaluation of: i – results attained; ii – difficulties; and iii – proposals for solutions (p. 2). These are to be sent to the Premier. This is, therefore, quite clearly an exercise in “post hoc” policy where (as globally – [Fforde 2018; Fforde 2024a] there are major gaps in knowledge, and where we can expect, if they are successful, very interesting Vietnamese explorations of the reality of servicisation and what causes it.

The services strategy – other sources

A cursory search for references to services throws up a range of sources that confirm the above basic picture: services are as a whole the fastest growing sector (faster than industry and agriculture, forestry and fishing), but there is no clear idea just why. GSO [2024b] does not compare services with other parts of the economy. Nguyễn Hương [2023] explores fundamental differences between services and other tradables, stressing, for example, their invisibility and indivisibility, and their highly differentiated nature. This discussion is highly developed but does not advance to consider why services as a share of GDP are rising, so that GVA/worker is relatively high (higher, for example, than in manufacturing). Space limits going further into this interesting area of Vietnamese discussion. But it is striking that one of the most interesting aspects of the notion of services is that the sector is in some ways a residual – it is what is left after activities have been labelled as part of industry or agriculture, forestry and fishing; this may, or may not, suggest that services sectors have, in themselves, relatively little in common. Therefore, given the historical importance to much discussion of “industrialisation”, the notion is in the main to do with explaining abandonment of that set of ideas and policy objectives, and limited to that. Time will tell.

Conclusion

The policy record suggests that the Vietnamese servicisation strategy is an example of “post hoc” policy. An existing aspect of reality – here the trend for services GDP to rise faster than other sectors, so the services share of GDP increases – is identified – rather, noted – and policy then supports this, but without at the start a clear idea of either valid causes of it or what policies (other than general ones that are not sector-specific) might work. Policy deployment is then carried out and agencies, such as Ministries and localities – asked to report on activities and possible explanations. This is not a process of policy implementation as such but can be seen as a process of trial and error based upon engagement with a positive phenomenon (here “servicisation”). This of course implies a confidence that at some stage clearer ideas and narratives will emerge. It also can be seen as a structured learning process, where agencies are requested to report on their experiences, not whether they have done what they have been ordered to do [Ministry of Planning and Investment 2023b]. As such the policy’s overall stance appears effective and innovative.

¹For example, URL: https://mof.gov.vn/webcenter/portal/btcvn/pages_r/l/tin-bo-tai-chinh?dDocName=MOFUCM090266

² We can note that the very high gross values of manufactures exports, which are widely praised and referenced, do not seem to be generating high levels of domestic value-added.

³ Note that the trend has not always been continuous through the period, and there are certain questions regarding the accuracy of the official data: see next footnote.

⁴ We may note that, showing the limited accuracy of the official data, GVA in manufacturing was revised upwards by over 80% for various years in [GSO 2022] (for the years 2018 and 2019 respectively, GVA in manufacturing was reported as 886,580 and 995,126 bn dong in GSO 2019, 2020 and 2021 (Table 72 for all), but then as 1,637,815 and 1,833,290 bn dong in GSO 2022 (Table 87). The revised data implies that GVA in manufacturing was equivalent to about 30% of the value of manufactures exports [GSO 2024a], tables 87, 12 and 275.

⁵ See, for an early mention of the term ‘post-hoc’ in the context of Vietnamese change processes and policy [Fforde 2000: 127].

⁶ [Fforde 2017] attempts to discuss these and related issues.

About the authors

Adam Fforde

Author for correspondence.
Email: adam@aduki.com.au
ORCID iD: 0000-0001-6088-8310

Honorary Professorial Fellow, Asia Institute; Adjunct Professor, Victoria Institute of Strategic Economic Studies

References

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