Philipines and Vietnam

by Anthony Castilo
May, 2002



Though the Philippines and Vietnam have two distinct cultures, physical similarities between the two nations make it a solid basis of comparison for differing economic systems.  Because of these outward similarities between the two, we can better understand how political and economic ideology can play a crucial role in a country’s development.  The Philippines, which runs under a free market economy, similar to the US’s economic system, contrasts Vietnam’s centrally planned economic system.  Though there have been efforts for economic transition in Vietnam, it has been a slow process under a socialist republic based government.


Basic Characteristics:

                The Philippines is an are consisting of approximately 7,100 islands.  It covers a land area of 298,170 square kilometers that is home to more than 78,425,000 Filipinos.  Its climate is classified as tropical marine, which plays a significant role in the nation’s agricultural output.  These islands are prone to natural disasters such as, earthquakes, typhoons, and extreme rainfall during monsoon season, which lasts from May to October.  The major crops of the Philippines include rice, corn, coconuts, and sugarcane.  Its natural resources provide an abundant supply of maganese, nickel, cobalt, and other minor iron ores.[1]

                Similar to the Philippines in several land aspects, is Vietnam.  Slightly larger than the Philippines, Vietnam measures 331,688 square kilometers which holds about 77,230,000 Vietnamese people.  Vietnam’s climate is also considered tropical, however it experiences a more consistent monsoon cycle, which lasts throughout the year.  Its major agricultural products are grain, sugar, tea, and coffee.[2]


Historical Background:

                Both Vietnam and the Philippines have had a long tumultuous history riddled by war, colonial rule from foreign nations, and internal conflict.  These events have in turn affected social, cultural, political, and economic facets of life in each country.  Here are some important historical dates that can better illustrate this point. 



1862: The Treaty of Saigon is signed by the Vietnamese emperor Tu Duc, which essentially gives France a strong colonial foothold over Vietnam.

1930: Ho Chi Minh organizes the Indochinese Communist Party, which opposes French occupation and power over Vietnam,

1945: Ho Chi Minh establishes the Viet Minh.  Later that year Minh voices Vietnam’s new Declaration of Independence and establishes the Democratic Republic of Vietnam.

1954: French are defeated at the battle of Dien Bien Phu.  Minh becomes president of North Vietnam.

1959: Minh begins an armed assult on South Vietnam.

1964: Congress passes the Gulf of Tonkin Resolution, which in essence was a declaration of war on North Vietnam.

1973: Paris Peace Accords are signed, which ends the US’s involvement in the Vietnam War.  Approximately 58,000 American soldiers are killed, while 1.1 million dead and 600,000-wounded North Vietnamese are estimated.

1975: South Vietnam surrenders to North Vietnam, ending the war.  Vietnam is reunified under a Communist regime.


The Philippines:

1571: Manila is founded by Miguel Lopez de Legazpe who was sent by King Philip II.  Spanish colonization of the Philippines begins and lasts for nearly three centuries.

1898: Spain cedes the Philippines to the US for twenty million dollars after it is defeated in the Spanish-American War.  US occupation of the islands begin but later gives the Philippines commonwealth status.

1942: Japanese forces invade and kill nearly 36,000 Filipinos when they take control of Manila.

1945: US invade the Philippines under the command of General Douglas MacArthur and defeats the Japanese occupying forces.  Reoccupation of the Philippines by the US begins.  The Philippines gains its independence within one year.

1972: President Ferdinand Marcos declares Martial Law in the Philippines because of concerns with Communist influence spreading throughout the islands.

1986: Marcos’ dictator-like rule over the Philippines ends when Corazon Aquino wins the presidency behind the support of the general public, thus restoring democracy in the Philippines.


                We see how vastly different these two countries are today because of the unique historical path each one has taken.  The conditions exclusive to each nation allowed for particular events to occur and for certain political agendas to succeed.             

 For example, with the French occupation of Vietnam, those Vietnamese seeking autonomy from western imperialism, looked to man like Ho Chi Minh for leadership.  Under his regime North Vietnam undertook communist/socialist ideologies that would eventually be implemented throughout all of Vietnamese government after the north unified Vietnam with its victory over the south in 1975.

Similarly, the Philippine Islands were also occupied by a foreign power.  However, the key difference is that the US played a vital role in its campaign for self-rule.  The US’s influence is evident today in the Philippine’s democratic government and privatized market economy.


National Identity:

 The Philippines has long been struggling to attain democratic state.  The ideals of its people are based on the American model of democratic government and competitive markets.  The most contemporary example of this struggle can be seen from 1965 to 1986, when Marcos declared Martial Law, giving himself dictator status over the islands.  Under his reign civil rights were ignored, the Philippine Congress suspended, and corruption drained the national economy of billions.  He had jailed or killed political enemies and gave selective raises/ promotions to friends and associates.[3] 

After Marcos’ dictatorship was overthrown in 1986 by a civilian coup led by Aquino, it was made clear that the toleration of crooked government parties were a thing of the past.  Since then Filipinos have done everything to make sure that their democratic way freedoms and way of life are preserved.  On November 29, 2000, President Joseph Estrada, a supposed friend of the poor in the Philippines, was impeached for his acceptance of more than $10 million in bribes and his role in illegal gambling organization.[4]


In Vietnam, sentiment regarding political power seems to be mixed.  By definition a Socialist state, Vietnam’s Communist Party membership is 2.4 million out of the 77 million citizens.  The growing discontent of many Vietnamese stems from the recent human rights violations the government committed when its security forces arrested several religious leaders and political dissidents in February 2001.[5]  The Vietnamese government has denied several allegations of police beating, surveillance, and movement restrictions on other ethnic minorities in Vietnam.  As a Result, many of these persecuted parties have chosen to flee to nearby Cambodia.

 There has also been tension from within: “The Vietnamese Communist Party has expelled veteran party members who have emerged over the past twelve months as the most outspoken advocate of fundamental reform in the country’s political system.”[6]  Criticisms by the people have been directed towards the stagnant pace of economic transition being implemented by the government.  These people tended to favor a democratic government over the existing government.

 However, those who support the government believe that preserving political control and stability is more important than speeding up economic transition.  Among these supporters there exists a mentality that socialism is the most justified form of organization and that the welfare of the state supercedes the welfare of the state of economy, no matter how inefficient or poor it becomes.[7]


Economic Comparison:

Though geographically close in proximity to each other, the Philippine and Vietnamese economic systems are worlds apart.  Vietnam is one of the few Communist countries that still exist today.  Its centrally based economy leaves much of the economic planning to its government, while the Philippines runs on a market economy that features privately owned businesses and corporations.

 Since 1989, Vietnam has launches a reform program called, doi moi (meaning renovation), which was intended to help boost the national economy and raise the living standards of the people.  The basis of doi moi was to introduce aspects of market economy and the allowance of market driven forces to shape agricultural and industrial sectors.  However, change has been a slow process.  There are still approximately 7,000 to 7,500 state-run enterprises and many of these state firms operate with major losses because of overall inefficiency.  They are kept solvent primarily because of “huge government support”.[8]

Under doi moi, Vietnam had a basic liberalization of prices and foreign trade/investment, which allowed it to compete with other countries a bit more competitively.  The program also attempted to tackle its problems with state enterprises.  Equitiztion planned for the privatization of some state enterprises, but largely has been a failure.  Of the more than 7,000 state firms, only “three have been successfully prepared of privatization.”[9] 


Much of Vietnam’s economic future still lies in the hands of the state; however, there have been some notable improvements in the economy under the doi moi plan.  GDP per head has increased from $362 in 1997 to $403 in 2000.  Real GDP growth for 1999 was 4.8%.  And industrial GDP has grown by 13% annually between 1995 and 1999.[10]  Despite promising improvements, the Vietnamese Politburo’s reluctance to adopt more changes in market structure stems form its political ideology.  Generally speaking, Vietnamese government views some capitalist methods as a means to achieve a better socialist state.  Like Marx, they see capitalism merely as a tool to further socialism, but never had the notion of replacing the Communist Party for a democratic one. 

Similar to the US economic structure, the Philippines is an open market economy, though the government plays a small role in economic planning.  For the most part, production and prices are left to natural market forces and private entrepenureship.


With the recent Asian financial crisis the Philippines saw inflation rise dramatically as the peso’s value decreased form 24.2 pesos to $1 US prior to the crisis, to 58.3 pesos to $1 US.[11]  With inflation at such high levels, foreign trade was depressed, falling from $5,733 million in December 2000 to $4,788 million the following year.  The instability of the peso caused much concern and panic in the Philippines, as its citizens opted to exchange their currency and started to hoard the dollar.  The result was a decrease in investment and overall spending.

An interesting aspect of the Asian financial crisis is that a free market like the Philippines was more susceptible to the strong market fluctuations as opposed to Vietnam.  With central planning the government was more easily able to soften the blow of market failures.  “Vietnam remains for more economically isolated than some of its neighbors.  At first glance that has appeared to carry some benefits as much of Asia has plunged into crisis.  There was no stock market to plunge and there were no short-term foreign loans to recall.  And the dong, which is not a convertible currency, was gradually devalued at a pace determined by the central back.”[12]  For the time being, it seems as though the Vietnamese economy is stronger than that of the Philippines’.  Central planning has proved to be better equipped in adapting to the crisis because the government was able to control market price and inflation rates.  But is this a short-run phenomenon? 



It is in my opinion that the long-run economic standing of the Philippines will outpace that of Vietnam’s.  Though the Philippines suffered a much greater blow than Vietnam during the Asian Crisis, this is only a temporary occurrence.  The market must fluctuate up and down, and sure enough, it is eventually going to rebound.  Since Vietnam does not enjoy the same trading privileges with the US as the Philippines does, it will not have the same wide range market as the latter.  Because of its political standing, Vietnam is not eligible for most favored nation status given by the US and other countries.[13] 

 I have had the privilege of traveling to the Philippines every few years and have first-hand experience with the sweeping changes taking place there.  Going into Manila and surrounding provinces, I saw many new office buildings, businesses, and heavy investment from foreign firms.  I noticed that it had become much more westernized than when I previously visited.  I believe that the potential growth of the Philippines had been stymied by corrupt governments of the past.  Marcos and crooked politicians like him set Philippine growth back by several years.  Once political and economic confidence is recaptured, it is my belief that the Philippine economy will grow at a steady, improving pace.  This however will take some time, since the current conditions in the Philippines is quite poor.  Approximately 11% of the population is unemployed and an approximate 14% are underemployed. [14]

        Historically, Communist states have seldomly survived for more than two or three generations.  With more that 41% of the current Communist Party members over the age of fifty, I expect to see political reform in Vietnam within the next generation of Vietnamese.  Vietnam will not be able to sustain or significantly improve its current economic state in the long-term future.  











[6] Vietnam: A Nation in Transition p.404, 2000

[7] New York Times, editorial in IHT 13 January 1998 p.8

[8] IHT, 15 September 1997, p.10

[9] FT Survey, 8 December 1994, p37-38



[12] Vietnam: A Nation in Transition p.426, 2000

[13] Vietnam: A Nation in Transition p404, 2000





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