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Social embedding as a solution to a control problem? Evidence from Vietnamese small business* - page 17 / 52





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least 1979 which alternately speeds and slows (e.g., Porter 1993). Property laws have been

amended; the credit system revamped; and regulations revised (Tanaka 1992; World Bank

1993). Between 1988 and 1991 state-owned enterprises shed nearly 800,000 employees and

possibly one million members of the armed forces were demobilized. Beginning in 1989,

laws regulating private enterprise were liberalized prompting some (e.g., Fforde and de

Velder 1996) to claim that Vietnam possessed the essential characteristics of a market

economy by that time. Few state-owned enterprises have been privatized and despite

nominal legal reforms, state capacity to enforce laws is questionable and observers note a

continuing need for legal and administrative reform (e.g., Dollar 1999). However desirable,

the high level of government legitimacy necessary make the completion of the recommended

legal and administrative reforms are unlikely in the near future.

The combination of lack of state capacity and rapid economic growth suggest that

“private orderings,” such as those implied by the term social capital would be very much in

evidence. Property rights appear to be enforced via a system of patron-client relationships

(Gainsborough 2002). Vietnamese small business owners sometimes report a desire to avoid

state scrutiny and, as are business owners everywhere, are reluctant to have their activities

known to officials, suggesting an expectation of little support from the state.

Vietnamese official statistics most probably under-report the private sector in general

and small scale enterprises in particular (Kimura 1992, p. 53 fn; McCarty 1992, p. 73). The

Vietnam Living Standards Surveys are among the few broad-based sources of information

about small businesses in Vietnam (Viverberg 1998).4 Our concerns complement those of the

VNLSS and we compare our results to theirs at critical points.

4 Other surveys of Vietnamese small businesses include Appold et al, (1996) and Ronnas and Ramamurthy (2001).


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