Challenging the Investment Climate Paradigm: governance, investment and poverty reduction in Vietnam

This project examines a key assumption which underlies one of the main approaches to poverty reduction currently advocated and practised by many international development agencies.
Enormous energies and resources are devoted to institutional reform in order to improve the investment climate and thus promote economic growth. The assumption is that institutional reform comes first and investment follows.
The project investigates whether this widely assumed sequence applies in the real world or whether, in fact, investment and growth provide the impetus for institutional reform.
The project suggests a new way of examining this issue by drawing on comparative intra-country evidence and by combining quantitative and qualitative methods. Vietnam has data on growth, investment and the quality of governance, disaggregated by province and component of governance reform, for five consecutive years. The availability of such panel data makes it possible to examine the sequencing and dynamics of reform.
Complementary qualitative research methods will be used to check the quantitative results and explore political dynamics at work. The project was designed and will be executed jointly by a team of IDS Fellows and Vietnamese collaborators.