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Completing a socialist - oriented market economy mechanism, boosting economic restructuring and shifting economic growth
30/7/2013 21:40' Send Print

After more than 20 years of implementing the renewal process, Vietnam has mademajor strides in developing the mechanism of a socialist-oriented market economy. As a result, resources have been mobilized towards development, the promise of high economic growth, the generation of further jobs, and the general raising of people’s living standards.

However, the market economy mechanism has not yet been made uniform. Market economic factors are not completely in place. The Real estate market still faces difficulties. The financial market has developed in an unbalanced way, with the fledgling bond and securities market -which has not yet become a channel for proper capital mobilization of the economy and burdened the credit market - making it vulnerable to risk. The science and technology market is underdeveloped. Although the labour market is burgeoning, the low quality of the workforce plus salary irrationalities between sectors are big hurdles to shifting the labour force towards essential state management areas and public service provision. The prices of some commodities and services have failed to cover expenditure, in conflict with the market economy mechanism. thus hindering the attraction of resources and high-tech for development.

The market-economy mechanism is an entity comprised of various kinds of markets operating uniformly inside the whole entity. Such a market,not yet fully-developed, will obstruct the operation of other markets and hinder common evolution.

In this context, it is more likely to lead to more administrative interference in the economic process. This interference may resolve short-term difficulties, but the cost will be higher than the opportunities created and could derail the development process. In a nutshell, fundamental problems remain unsolved. This can lead toconflicting ideas that managers should be aware of, in order to take appropriate and consistent action.

This situation was the reality in 2012, and Vietnam now needs to focus on completingthe development of the market economy, as identified by the 11th National Party Congress.

In the face of globalization and fierce competition, if Vietnam is going to catch up with other regional countries, it is necessary to build a modern market economy and create the conditions for resources to move between the various sectors and regions of the country by following signs from the market and around the pivot of average profit. This will ensure the harmonious and balanced development of the economy. It will also encourage businesses to develop their human resources as well as the application of innovative technologies in production and management. It will also encourage companies to seek a competitive edge over other businesses, thus boosting the relatively-uninterrupted movement of the investment and production structures, generating a highly creativity economy, creating new products and ensuring the effectiveness and competitiveness of the economy. This is known as the dialectics of development.

The characteristics of the modern market economy mechanism should be set as a standard for institutional completion. The specific characteristics are as follows:

First, as uniform marketsdevelop, the factors of the market economy are shaped, operatingand supporting each other, interacting in an uniform way. These are the conditions for the smooth operation of the market, making the distribution of resources more convenient, rational and effective.

Since 2012, Vietnam has been concentrating on revising the Land Law, creating conditions for the establishment of this type of market, and accelerate the healthy development of the real-estate market. It is also developing bond market, expanding the insurance market, and boosting its science and technology sector. Efforts should be made to strengthen human-resource development, particularly its high-quality resources, combined with salary reform, and facilitate the smooth operation of the labour market. A roadmap should be mapped out for market pricing of products whose prices are being set by the State...

Second, a modern market economy requires the establishment of a fair competitive environment between market actors. Competitiveness is the main attribute of any market economy, and one of the measurements of the market characteristics of an economy. A highly-competitive market helps curb inflation better than state control of prices. It is more important that competitiveness forces businesses to reduce costs, enhance productivity and ensure effectiveness. The Vietnamese government will lead the review and evaluation of competitiveness in each production or service sector, removing the existing discrimination among businesses of different economic sectors. Vietnam should complete its laws on competitiveness, control natural monopolies, and strengthen the capacity forintellectual property protection and competitive management agencies in dealing with cases of unhealthy competition or abusing the market in order to be in a dominant position to limit competitiveness.

Third, transparency, publicity and accountability should be ensured with regards to management policies and development projects as well as the operation of businesses. The market economy mechanism plus the impact of the open-door and international integration process combined with the formation of multi-structure and multi-ownership has led to the formation of “interest groups”. Objectively, these “interest groups” may affect the decision-making process. Transparency and publicity not only creates equal opportunities for information access, but also creates the conditions for citizens to supervise the decisions of management agencies, and is a fundamental measure to protect against the intervention of “interest groups” into decision-making, making sure that decisions are made in accordance with “common norms” and the national interest. Transparency and publicity also limits speculation, reduces business costs and increases market efficiency.

In recent years, thanks to the enforcement of the Law on the issuance of normative legal acts and the Q&A sessions of the National Assembly and People’s Councils at all levels, Vietnam has made substantial progress in exercising transparency, publicity and the accountability of the state agencies. But this result has not yet fully-met demands.

From the leading political stance that the Party and State should ensure the citizens’ rights to information access and social criticism, the Government will finalize regulations on information publicity and access-rights, while encouraging dialogues on policies and development projects between State agencies, independent experts and the citizens, not just after a decision is made as we are doing now, but before making a decision. It is necessary to continue reforming and improving the quality of Q&A sessions, focusing on the content related to development policies and their impact on the people.

Fourth, the modern market economy mechanism - in the context of globalization and greater international integration - requires the repositioning of the relationship between the State and market. Therefore, the State must move away from direct intervention in economic processes and start to function as a development facilitator: ensuring macro-economic stability, creating favourable conditions for businesses, generating the development mechanisms and improving public services.

A challenge facing State management during globalization is that every fluctuation in the world market can quickly have a strong impact on the domestic market. This requires the State to enhance its capacity for forecasting and creating policy responses to minimize any adverse impacts on the economy. The market economy and globalization also make parts of the population vulnerable and widen the gap between the rich and the poor. The State needs to adopt the right policies, using regulatory tools to overcome the negative aspects of the market economy and globalization and ensure that economic growth goes hand in hand with social progress and fairness. Notably, the market operates in accordance with its rules, first of all the rule on competitiveness and profit. The socialist-oriented development is a function ofthe State. The State, on the one hand, needs to uphold the “self-adjusting function” of the market; on the other hand, it must also dispel adverse market impacts and ensure the correct orientation for social development. As a result, the role of State is not reduced, but strengthened in this new context, in accordance with its new methods of influence.

Vietnam should affirm its basic stance of building a Socialist State governed by law as set out by the 11th National Party Congress, to bolster the State apparatus at all levels with regards to functions, organizational structure, regulations on decentralization and the correct resolution of the relationship between the State and market.

Fifth, a modern market economy should turn to consumers and position them as subjects. It is to constantly improve institutions and develop centers for consumer rights protection. The Government will concentrate on steering the improvement of technical and food hygiene standards; strengthen the inspection of imported goods and goods circulating in the domestic market; and introduce additional sanctions against violators. Efforts should be made to review and finalize documents on guiding of the Law on Consumer Protection so as to enforce this law, and establish legal foundations to encourage the development of non-governmental organizations for consumer protection.

A modern market economy mechanism with the above-mentioned characteristics will create the conditions for Vietnam to take advantage of opportunities and overcome challenges in an ever-expanding and fiercely-competitive globalized world.


Talking about strategic breakthroughs as the premise of economic restructuring, shifting the growth-model does not mean that this process would only be carried out after breakthroughs have been achieved. Premises have been formulated and will be perfected through the development process. Restructuring is a continuous process, a result of the impact of the science and technology revolution and the shifting of competitive leads from country to country and from company to company. Based on this, and the vision of the 2011-2020 socio-economic development Strategy, the 3rd plenum of the 11th Central Committee of the Communist Party of Vietnam set out the requirements for restructuring the economy and shifting the growth-model in the 2011-2015 plan.

The aim of economic restructuring and altering the growth-model is to speed up the transfer of the economic structure, as well as the structure of production and service, to meet the demands of higher productivity, quality, effectiveness and competitiveness domestically and globally, in order the join the regional and global high-value-added production networks and supply-chains. To achieve this goal, economic restructuring will be implemented comprehensively in the following contexts:

First, the restructuring of the production and service industries. In industry, this means shifting from an outsourcing sector with low added value and low science and technology content to new forms of manufacturing and processing with high added value, focusing on the development of supportive industry products and the hi-tech products of Vietnam’s competitive edge.

It is necessary to enhance the quality of services, particularly the “artery” sectors of the economy such as financial services, and strengthen management capacity and ensure risk-prevention and the safety of the system. We should develop high-value-added services and services that support business, while reforming the mechanisms that encourage the development of public services and enhance their quality.

In agriculture, it means developing larger volumes of commodities of high quality and efficiency; combining agricultural development with building new rural areas and improving the living standards of farmers.  The economic restructuring in agriculture and rural areas should be bolstered. Efforts should be made to introduce industrial science and technology in all stages of agriculture from cultivation, tending, harvesting, preserving, and processing to distribution. The application of science and technology should be incorporated into production organization, gradually forming hi-tech agro-industrial complexes; linking stages of the reproduction process in a value chain to ensure the harmonious distribution of benefits between the stages of that chain. This is the basic path to the sustainable development of agriculture.

Second, restructuring enterprises. The macro-economic policies have paved the way for the process of economic restructuring, which should be implemented in every enterprise. The restructuring of enterprises serves as a basis for the economy’s new look. To restructure enterprise, it is necessary to apply the latest scientific and technological advances in production and management, to reform the organizational model and methods of corporate management appropriate to the changes brought by new production technologies and market developments in order to enhance corporate competitiveness.

Third, adjusting market strategies. Globalization and integration into the world economy have opened vast markets and enterprisesare able to take advantage of increased investment projects and the larger international consumer market. However, globalization also increases inter-dependence between economies, particularly those with wider openness, such as Vietnam’s. This may easily lead to uncertainty and unpredictability. Therefore, it is necessary to diversify products and export markets, and limit dependence on just a few markets, while paying close attention to the domestic market, particularly in the rural areas. Regarding the export markets, it is more important to penetrate the value-chain in the context of developing global production networksvalue-chain rather than simply by increasing exports to other countries and territories. This situation requires the formation of a supply chain right in the domestic market. This is the path for sustainable trade development.

In parallel with restructuring the above-mentioned areas is the restructuring of investment in the socio-economic infrastructure development, in accordance with a plan and a decentralized system which is under a close review for the longer-term vision and inter-regional orientation. Efforts should be made to avoid all-round or scattered investment, but concentrate on essential projects and quickly utilize and facilitate the smooth transfer of production factors to regions with development potential, helping to reduce transportation costs and enhance the competitive edge of the economy. The proportion of public investment in total social investment should be reduced; incentives should be adopted to attract greater investment from the private sector and foreign-invested enterprises. Investment methods also need to be developed, especially the Public-Private-Partnership (PPP), and investment efficiency should be enhanced.

Economic restructuring should be implemented throughout the process of industrialization and modernization, but it should begin in the most urgent fields, namely investment restructuring focused on public investment, restructuring of the financial market with a focus on the commercial bank system and the restructuring of state-owned enterprises, particularly the state-owned economic groups and corporations. This selection is correct and necessary because these are fields of low efficiency. They do not match up to the resources allocated to them and face the threat of macro-economic instability, adversely affecting the sustainable development of the economy. The restructuring of these fields will help accelerate the restructuring process in line with the above-mentioned content. The Vietnamese government closely directs the formulation of restructuring projects in each field so that the process can be implemented step by step, with concrete goals for each step, andmeasurement criteria and result-evaluation should be clarified. Efforts should be made to ensure uniformity while restructuring the above-mentioned fields due to their inter-relationship. In addition, we should enhance the supervision of implementation in every ministry, sector, locality and business, maintain macro-economic stability and refrain from causing economic turmoil.

Economic restructuring is set to shift the growth-model. Shifting growth-models are the basic content of enterprise restructuring, creating conditions to increase the efficient use of capital, improve the effectiveness and competitiveness of the economy, have a strong impact on the restructuring of the investment and financial markets, and contributing to reducing the costs of the restructuring process. It is vital to shift from horizontal growth based on increased investment, exploitation of depleted natural resources and low-quality human resources to a growth model based on the application of science and technology, high-quality human resources and advanced management methods, raising the contributions made by general productivity factors to growth. We should develop manufacturing and processing industries, particularly hi-tech industries with high added value, and reduce the proportion of outsourcing industry in the total industrial production-value chain.

A shifting growth model is both an urgent demand and a long-term task, and is closely connected to human resources development, technology and management reform. To boost the shifting growth model, in 2012, in addition to the prompt approval of a project on technological market development, the government issued policies encouraging technological renewal in enterprise; set technological standards in the Law on Public Investment and projects for bidding; prioritize projects that apply new technologies and establish centers for technology-development studies; cement public-private cooperation in the form of venture funds for science and technology… Higher legal documents should be built to develop the necessary support industries.

Besides economic restructuring and shifting growth models, it is necessary to continue to thoroughly absorb the Politburo’s conclusion No2 and Government resolution No 11, strengthen macro-economic stability, curb inflation, maintain reasonable growth and ensure social welfare. These are large and challenging tasks amidst complicated global developments which affect all economies, and the risk of another recession requires strenuous efforts by all sectors and branches. The State’s role is that ofa ‘pathfinder’, creating mechanisms and policies and directing the task of implementation. But,because the results will have an impact on the production and business sectors, these enterprises should therefore be subjects and have a decisive role.

Our basic advantage is that we have reached a firm consensus and heightened awareness throughout the whole political system. There is a sense of firm determination in the state management agencies, from central to local level and among the business community. It is important to turn awareness and determination into action, to act aggressively to conquer any sense ofholding back or resistanceat these initial stages, and pivot the process of national development in a new orbit - the orbit of long-term, sustainable development./.


Nguyen Tan DungPolitburo member, Prime Minister of the Socialist Republic of Vietnam