What Vietnam’s gifting culture sustains

By Nguyen Khac Giang   January 3, 2019 | 06:53 pm PT
Giving gifts to people in authority has become normal, but we have to be aware it institutionalizes an 'underworld.'
Nguyen Khac Giang, a researcher

Researcher Nguyen Khac Giang

As the Lunar New Year draws near, a common topic among my entrepreneur friends is the recurrent visits of government officials to their businesses. They come for various reasons; either a random inspection for fire and food safety, or simply to "keep themselves in the loop."

But one thing stays the same every year. Most businesses would give these officials some gifts as for the Lunar New Year.

There’s no extortion involved. Most of the gifts are given voluntarily. A 2016 report by the Vietnam Chamber of Commerce and Industry (VCCI) said 45 percent of surveyed Foreign Direct Investment (FDI) businesses in Vietnam admitted to giving gifts to inspectors. Eight percent said inspectors asked for the "gifts" directly.

I have experienced this firsthand. A few years ago, when I tried to open a small café in Cau Giay District in Hanoi, my team and I had to "gift" some cash to the local administration every month. These people didn't miss a beat; they always knew exactly how well the shops in the district did, and often gave ‘suggestions’ on what would be the appropriate amount of cash to gift them on each occasion. For example, each month, a typical small café would have to give them VND500,000 ($21); if it does well then VND700,000 ($30). A pho shop would typically give around VND1 million ($42) monthly, while an offal shop would contribute around VND2 million ($85).

And that’s not all. There are gifts for the higher-ups as well, given once every quarter or once every year. Personally, I think these officials would make amazing salesmen.

Since it’s all voluntary, the practice doesn’t violate anti-corruption laws in Vietnam.

On paper, these gifts are often donated for innocuous purposes: a little extra vacation funds, a little bit more pension for elderly officials, or some presents for their children and grandchildren during special celebrations. It’s all done in good spirit.

But what would happen if someone refuses to hand out these gifts? Not too difficult a question to answer, I reckon.

This gift giving does not have to wait for an occasion, of course. Legal procedures got too complicated? A "package of appreciation" would do the trick. Traffic police stops you for speeding? A little cash would make the situation more "flexible."

This practice, rooted firmly in our daily lives, has created an "underworld" that hides itself in plain sight.

Why it's systemic

Governmental officials in Vietnam have abysmal salaries. A government worker makes between VND2 million and VND18.6 million every month.

But despite this low income, working for the government remains a lucrative career choice for many people. Why? Because these positions often entail special, invisible perks.

No one in their right mind would pay billions of dong (tens of thousands of dollars) to get a job as a nurse at a state hospital for VND2 million a month. Hardly anyone believes customs officers, even ones who work for major ports, make less than VND10 million a month. And almost everyone knows that these people, despite their meager pay, gain something much more valuable: power. And everyone knows power begets wealth when used correctly.

To be fair, many members of the public do not see this "underworld" as a bad thing. For them, if a little extra cash means they would get what they want more easily and more quickly, it makes sense to part with the money. A VND20,000 bill for a quick shot at the hospital? Deal. An extra VND2 million to get your passport faster? Fair enough.

But any public-spirited citizen would see a problem with this system, as it breeds ambiguity, legal limbos, and most importantly, a chance for corruption to thrive. Its existence, in fact, could be placing a huge burden on the economy already.

A VCCI report last year said 59 percent of surveyed businesses had to pay unwarranted fees due to this gifting culture, while 9.8 percent of these businesses claimed they had to spend more than 10 percent of their revenue just to make such gifts.

The situation has been left for so long that it has become normal. And when this happens, people’s trust in the system is undermined, even as they go with it.

We have the option of eliminating this system entirely by refining our legal and administrative procedures to make them more transparent, more accessible to the public. In the long run, we would also need to learn how to spend the national budget more efficiently and more effectively. That way, not only can we reduce financial burden on our businesses, people can also see that their tax money is put to good use.

On a side note: did you know that as many as 90,000 businesses in Vietnam went bankrupt last year, a 50 percent increase compared to 2017? That happens despite how the country's GDP grew by over 7 percent last year, the highest in a decade.

While that might signal a competitive economy where only the cream of the crop survives, I sometimes wonder how many of these businesses went bankrupt not because of their poor performance, but because of something else? You should also be asking that question, and so do policymakers.

*Nguyen Khac Giang is a Vietnamese researcher at the Vietnam Institute for Economic and Policy Research. The opinions expressed are his own.

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