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1550 Virginia Law Review [Vol. 92:1517
tle disputes between private agents.
149
Vietnam’s unreformed finan-
cial sector did not serve small private businesses well; moreover,
there were no formal sources of market information, such as trade
associations or credit bureaus.
150
The country’s private sector is now
booming, however, and has been a driving force in Vietnam’s eco-
nomic growth in recent years.
To investigate this paradox, McMillan and Woodruff conducted
surveys of privately-owned manufacturing firms in Hanoi and Ho
Chi Minh City during 1995–1997. They find that business in the
private sector often was conducted through ad hoc strategies de-
vised by entrepreneurs at the ground level. While more than ninety
percent of the managers surveyed said the courts were of no use to
them in resolving disputes, many entrepreneurs had adopted sub-
stitutes for contract law and formal enforcement mechanisms.
151
The managers’ strategies for contract enforcement included the
149
John McMillan & Christopher Woodruff, Dispute Prevention Without Courts in
Vietnam, 15 J.L. Econ. & Org. 637, 637–38 (1999) [hereinafter McMillan & Woodruff,
Dispute Prevention]; see also John McMillan & Christopher Woodruff, Interfirm Re-
lationships and Informal Credit in Vietnam, 114 Q.J. Econ. 1285, 1286 (1999) [herein-
after McMillan & Woodruff, Interfirm Relationships]. Although Vietnam did enact a
Civil Code and a Commercial Code in the late 1990s, and subsequently made
amendments to these enactments in 2005 to facilitate market activities and clarify
property and contractual rights, these legislative reforms have yet to bring any signifi-
cant impact on Vietnamese commercial life. According to a recent qualitative survey
of sixty Vietnamese private companies operating in the construction, wood process-
ing, copper wire trading, electric batteries sales, and computer sales and service indus-
tries, conducted during 2004–2006, informal contract enforcement and dispute resolu-
tion mechanisms based on family connections, friendship, and more recently, self-
regulatory commercial networks, are still overwhelmingly used by private entrepre-
neurs. In contrast, formal state enforcement mechanisms, such as commercial litiga-
tion, are still a rare practice among private entrepreneurs, partly due to the extremely
slow pace of court proceedings—as of January 2005, the average time required to en-
force a contract through Vietnamese courts was 343 days, involving thirty-seven pro-
cedures, according to the World Bank. Not surprisingly, the vast majority of entre-
preneurs surveyed preferred to rely on family and relational practices to enforce
contracts and collect debts. Vietnamese private companies that are most likely to in-
crease their use of the reforming rights-based and market-facilitating formal legal
rules to address contract enforcement issues are those doing business with foreign
partners, but they are still in small numbers. See John Gillespie, Regulating Business
Networks in Vietnam 1 n.1, 4, 7–8 (Sep. 2006) (unpublished manuscript, on file with
the Virginia Law Review Association); World Bank, World Development Indicators
2006, http://devdata.worldbank.org/wdi2006/contents/Section5.htm.
150
McMillan & Woodruff, Dispute Prevention, supra note 149, at 639–41; McMillan
& Woodruff, Interfirm Relationships, supra note 149, at 1286–88.
151
McMillan & Woodruff, Dispute Prevention, supra note 149, at 653.