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Guideline and solution orientation for continued completing the socialist-oriented market economy of Viet Nam
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The Party Politburo meets on the five-year review of the implementation of the Resolution of the Party Central Committee 6th Plenum, 10th Tenure on continuing to complete the socialist-oriented market mechanism. Photo: Vietnam News Agency

Major achievements and constraints after Resolution 21-NQ/TW was issued

Since the 7th Party Congress, the Party and State of Viet Nam has set great store by studying to renew awareness and theories, mapped out several guidelines, policies and measures to develop and complete the socialist-oriented market economy mechanism, considering it the primary important task in the renovation and national development. The 10th Party Congress continued to confirm that continuing to complete the socialist-oriented market economy mechanism was an important and urgent task to: “promote the national strength, comprehensively put forward the renovation cause and early bring Viet Nam out of less-development status.” Implementing this guideline, the Party Central Committee 6th Plenum, 10th Tenure issued Resolution 21-NQ/TW dated 30 January 2008 on continuing to complete the socialist-oriented market economy mechanism (Resolution 21-NQ/TW). This is a strategic and breakthrough resolution which has been implemented relatively synchronously, strictly, deeply and widely with active participation of the whole political system.

Five years after the implementation of the Resolution, remarkable achievements have been made by Viet Nam. Awareness on objectives, characteristics and operation mechanism of the socialist-oriented market economy has been improved. The legal system and policies on the socialist-oriented market economy has been gradually completed, creating important legal framework for market operation. Several important laws have been revised, supplemented or newly promulgated such as the 2013 Constitution, the Law on Land (revised), the Law on Public Investment, The Law on Enterprises (revised) and the Law on Investment (revised) among others to complete the socialist-oriented market economy and facilitate the shift of growth model and economic restructuring.

Important achievements have been made in the implementation of legislation, mechanism and policies. The role, efficiency, and competitiveness of subjects and enterprises in the economy have been enhanced. Investment and business environment has been improved and economic sectors and enterprises are more equal, contributing to raising production force of society, generating more jobs and heightening national competitiveness. Laws on prices have been finalized, most of prices have been regulated by the market principles. Prices of some essential commodities such as electricity, oil, coal, services, education and health among others have been regulated by the marker mechanism under the management of the State while assistance has been given to entitled individuals, poor households and social security.

Market elements and different forms of markets have gradually been established, operated smoothly and closely linked to regional and international markets. The commodity and service market has developed and completed in terms of scope, domestic and external commodity-market structures, and infrastructure for trade, service, management mechanism and competitive levels. The financial-monetary market has developed rather strongly and dynamically. The labor market has been developed as a relatively abundant labor source with increasingly widened market. The real estate market has developed in both scope and scale, changing urban landscape, improving people’s living conditions, and contributing to the state budget. The science and technology market is taking shape and develop with remarkably increasing number of technological transactions and value in recent years. The market of some essential public services particularly health and education has made new development, mobilizing non-state budget resources. Some other types of market have also emerged and developed.

The social security and social welfare systems have synchronously grown, making many important achievements, linking more harmoniously economic growth with social progress and equity, and resource and environment protection.

The State’s role in the economy has been adjusted to be more suitable to the market mechanism. the State regulates the market mainly by legal and economic tools. Democracy in socio-economic life has been promoted. Foreign and domestic resources have been better mobilized for socio-economic development. Progress has been made in mobilizing and distributing resources in association with strategies, plans on socio-economic development and market mechanism. Administration reform has been vigorously rolled out, particularly in the areas of tax, customs, construction, land management, resources and environment and made positive results. The mechanism of public employees and public service have been improved. Information technology has been applied in state management.

International economic integration has been deepened, widened and diversified in keeping with global market principles and standards in different levels, especially in establishing economic strategic partnership to build an independent and sovereign economy. Positive efforts have been made to build the ASEAN Community and complete the full market according to the World Trade Organization’s norms. By now, Viet Nam’s economy has been recognized as a market economy by 50 countries including big trade partners. Export market has extended to 230 countries and territories with export turnover reached an average of 22.58% per year during the 2011-2013 period. Viet Nam signed and expedited 8 trade agreements and is negotiating 7 next-generation bilateral and multilateral free trade agreements.

However, 5 years after the implementation of Resolution 21-NQ/TW, there remain weaknesses and limitations, including:

Awareness on the socialist-oriented market economy in some issues is not complete, particularly on state economy, state-owned enterprises, collective economy, and resource allocation mechanism. State subsidy has remained in development and implementation of some economic mechanism and policies.

Economic institution quality has not yet met requirement for a strong shift to market economy. The system of laws, mechanism and policies has not been completed and synchronous and have been promulgated slowly. They have neither created any breakthrough in efficiently mobilizing, allocating and using development resources nor become a driving force to boost economic growth, and raise national, commodity and enterprises’ competitiveness.

There are also constraints and limitations in realizing the market economy mechanism:

- Right to free business has not been fully respected; business environment has not facilitated equal and healthy competition among enterprises and economic sectors. There remain several barriers to join in, operate and withdraw from the market, cost for accession to the market is high, and procedures on bankruptcy are complicated and difficult.

- Prices of some commodities and services have not yet been regulated by the market economy principles and law. Elements which make up prices have not been fully accounted for. Price subsidy and compensation have remained. There are constraints and confusion in management and execution.

- Limitations have also found in development and efficiency of subjects in the economy. In reality, state-owned enterprises have not yet lived up to their role. Most of the private businesses are small- and supersmall-sized enterprises with unstable contribution to growth. The collective economy’s weaknesses have prolonged. Objectives to attract high and source technologies, transfer of technology, administration and plan compatibility in attracting enterprises with foreign direct investment (FDI) have not been achieved. Lack of linkage in FDI remains. Changes of prices, tax evasion and frauds have been complicated. Reform in public service sector and mobilization of public service provision have been slow as compared with demands and potential.

- There are limitations and constraints in the development of scope, structure and levels of different markets. Though there have been comparatively strong changes in the commodity and service market, quality of commodities and their competitiveness are low. The labor market has not yet equally developed. It is of small scale with limited labor quality, inappropriate structure, and shortage of highly-qualified labors. It has fallen short of requirements for supply and demand of labor. The labor restructuring has not corresponded to the economic restructuring. Labor disputes, layoff and strikes have occurred complicatedly. The real estate market has operated without effective management of the State and transparency. Spontaneous development of some part of the market and speculation have distorted market relations. In the financial market, there is no balance between the capital and monetary markets as well as within each market. The capital and security markets are of small scale at low level. The science and technology market is still in primary stage and there remain constraints in connecting supply and demands.

- Social security policies are not systematic, and synchronous and are overlapping in terms of content, target groups and delegation of responsibilities to implementing agencies, scattered resources and low efficiency.

- Efficiency and effectiveness of State management are low; order and discipline are not strict. The State has still made heavy and direct intervention in the economy in capacities as public investor and enterprise owner. There remain constraints in delegation of responsibilities and coordination among ministries, branches, sectors and localities. Institutions for regional economy and inter-regional economy have not been established. Respect for the law and law abidance are low. Administration reform has not lived up to expectations. Transparency and accountability are low. Result-based performance management system of state administrative agencies has not been set up.

- There are drawbacks in monitoring the economy and state management performance by people-elected agencies of political-social, and social-professional organizations and people.

Major causes to the above-mentioned limitations and constraints include:

- Completing the socialist-oriented market economy mechanism is a difficult, and complicated issues in both theory and practice. Due to low awareness in some issues, inconsistency in completing institutions, mechanism, policies and implementation remains and thus no breakthrough has been made for development.

- During the five years when Resolution 21-NQ/TW was implemented, the country was subject to negative impacts of the monetary crisis and world economy recession while there were limitations and constraints in the level and internal capability of the economy as well as the capacity to develop and implement economic institution. There has been no essential breakthrough in resource investment in institution development.

- There are limitations in efficiency and effectiveness of state management, institutionalization, and implementation of the Resolution. Implementation mechanism and coordination among ministries, branches and localities in studying and implementing the Resolution’s guidelines and solutions are of low efficiency and effectiveness.

- Limitations are also found in control, monitoring, handling of violations, reviewing of experience, and capacity in analyzing, forecasting and policy adjusting.

The 5-year implementation review showed that basically objectives, viewpoints, guidelines and solutions on continuing to complete the socialist-oriented market economy mechanism remain appropriate and are of full values. It is necessary to identify concrete objectives with timeline (Resolution 21-NQ/TW identified concrete objectives to 2010 only), and requirements for the completion of institutions and supplement and concretization of guidelines and measures to build up strong points and overcome limitations and weaknesses to continue fine-tune the socialist-oriented market economy mechanism.

- On objectives: Improve quality, efficiency and effectiveness of economic institutions to, by 2020, establish a synchronous system of socialist-oriented market economy institutions which will effectively and smoothly operate in line with the Constitution and nature of the socialist-oriented market economy model as well as of Viet Nam’s socio-economic development conditions. The system of socialist-oriented market economy institutions constitutes a big driving force, facilitating the implementation of the three strategic breakthroughs, ensuring the process of industrialization and modernization, prompting growth model transformation in close association with economy restructuring and rapid and suitable development of the country.

- On requirements: 1. Meet common standards of a modern market economy and international integration, promote democracy, self-reliance, self-responsibility of economic subjects and sectors; guarantee socialist orientation and the Party’s leadership, the State’s management and the people’s mastership; 2. Ensure synchronization among integral components of market institution, among market elements and market types, among economic and political institutions, and between the State and market. Closely link economic growth to development of culture, man, social progress, equity, and security, environment protection and socially sustainable development; 3. Selectively inherit achievements of humankind’s market economy and lessons learnt from Viet Nam’s renovation process; be proactively and actively in international integration, focusing on international economic integration while building an independent and self-reliant economy; 4. Ensure transparency and projection in developing and implementing economic institution to create stable conditions for socio-economic development.

Major solutions to bring into play achievements and overcome weaknesses

To realize the above-mentioned objectives and requirements, the following guidelines and solutions should be implemented:

First, continue renewing the way of thinking and awareness on the market economy institution and develop the socialist-oriented market economy.

Continue studying to clarify the overall economic model’s contents on developing the socialist-oriented market economy. Inherit the Party’s Platforms and documents of the 11th Congress, based on the review of the 30-year renovation, some major contents are suggested for continued studying:

- The socialist-oriented market economy of Viet Nam operates according to the law of the market economy, under the management of the rule-of-law socialist State and the leadership of the Communist Party of Viet Nam to achieve the objective of “prosperous people, strong country, democracy, equity and civilization.” This is a modern market economy which is expediting international integration, developing a complete and synchronous system of market categories, where market subjects compete within the law; prices are determined by demand-supply and the law of value; the market has increasingly played the key role in mobilizing and allocating development resources and constituted an integral component of the world market. The State creates legal framework, supports and manages development of the economy, respect the market economy’s principles and laws. The State’s resources are allocated according to strategies, plans, programs and the market mechanism.

The socialist-oriented market economy places people at the center, works for people and by people, people are objectives and the driving force of development. It has progressive production relations in par with the development level of the production force. It links economic growth to development of culture and man, achieves progress, social equity, environment protection and sustainable social development.

Develop the socialist-oriented market economy with different forms of ownership and economic sectors which are important integral components of the national economy. Subjects of all economic sectors are equal, and cooperative and compete according to law. The State economic sector plays the leading role, providing orientations and other tools and policies to regulate the economy for sustainable development. The private economic sector is an important motive force for development.

- In designing and operating the socialist-oriented market economy institution, it is necessary to continue completing synchronously the three organically-related integral components of economic institution, they are:

1. The legal system, regulations, social norms to regulates behaviors and economic transaction; 2. Institutions on subjects and elements, market categories in the economy; 3. Mechanisms of implementation, control, supervision, adjustment and handling of violations in the economy.

Second, continue completing institution on ownership, development of economic sectors and different forms of enterprises.

- Institution on ownership: Institutionalize property rights (including ownership right, the right to use, the right to decide and the right to earn income from the property) of the State, organizations and individuals stipulated in the 2013 Constitution. Ensure transparency on obligations and responsibilities in state administration procedures and public services for smooth transaction of property rights. Ensure the State’s right to manage and benefit from public property and right to equal access to public property of all subjects in the economy. Continue completing the mechanism to solve disputes and enhancing capacities of institutions involving in settling civil disputes, and economic disputes in protecting property rights.

- Continue renovating distribution regime in line with market principles under the regulation of the State: Allocate and use of resources and finance in line with the market mechanism, principle of equality and transparency in resource access of economic sectors. The State allocates resources according to plans, programmes and market mechanism. Complete making laws on state budget, and public investment; draw up state budget estimate for medium-term financial-monetary plans, medium-term investment plans and exercise result-based budgeting. Complete legislation on management of concentrated financial funds of the State. Review and complete mechanisms, policies on budget revenue to encourage investment, production, and business; protect resources; rationally mobilize revenue and honor international integration commitments. Complete institution to step up investment restructuring, focusing on public investment to ensure big investment of the economy, and priorities in public and social investment.

- Continue renovating and enhancing efficiency of subjects in the economy: On the right to free business and equality among businesses, businesses of all economic sectors should operate in keeping with market mechanism. Complete legislation, mechanisms and policies on the right to free business of business subjects, especially in procedures to accede to and withdraw from market, and other regulations on operation in market. Annul mechanisms and policies which result in inequality in business opportunities, access to resources and in observation of administrative processes and procedures. Develop synchronous and effective post control mechanisms, ensure the right to free business without detriment to public interests and legitimate interests of other organizations and individuals. Continue completing legislation on competition, strengthen transparency towards state and business monopoly, and control over business monopoly.

On state-owned businesses, continue restructuring state-owned businesses so that they can assume the core role in the state economic sector. State-owned businesses will be maintained in key and essential fields, important areas, national defense and security. Accelerate equitization, sell out capital that the State does not need to hold including businesses which are faring well following market principles; complete institution on fixing prices of land, visible and invisible properties. Separate production and business task from political tasks and public service. Separate the State ownership of property and capital from state-owned enterprises’ business administration; bridge the gap and then withdraw the function as state ownership representatives of ministries and people’s committees towards state property and capital in businesses having state property and capital. Consider the establishment of a ministerial office as the ownership representative of state-owned businesses. Foster the contingent of cadres and managers and enhance administration capacity of state-owned enterprises. Strengthen owners’ management, monitoring and control. Carry out strict control and supervision, transparency on investment, finance and activities of state-owned businesses.

On public establishments, complete institution to mobilize investment resources and revamp management mechanism of the State to facilitate their strong and effective development. Expand their financial autonomy, self-responsibility in organization, number of staff, personnel and finance. Apply enterprise’s financial mechanism to public establishment if so required and conditions permit.

On collective economic sector, continue renovating cooperative economy and cooperative sector in terms of content, operation methods, step up linkage, support and cooperation for mutual interests and apply advanced management methods. The State develops policies to increase the sector’s access to capital, capacity building, technological transfer, and market development. Organize the implementation of the Law on Cooperatives.

On private enterprises, complete mechanisms and policies to enable the private economic sector become an important driving force of the economy. Strengthen private economic categories in almost all branches and economic areas. Complete policies to support small- and medium-sized enterprises and newly started businesses. Facilitate the establishment of private economic groups and private businesses’ capital contribution in state-owned enterprises.

On foreign-invested enterprises, develop policies to attract external resources, proactively select and provide preferential treatment to foreign-invested projects with high management capacity and modern technology, and high positions in the global value chain, step up linkage among foreign-invested enterprises and between foreign-invested enterprises and domestic enterprises to develop support industries, gradually and proactively enter into regional and global values chains, capitalize on technological advantages and improve productivity. Build mechanism, consolidate supervision and control, and limit “price transfer” of foreign-invested enterprises.

Third, develop synchronous and modern market system.

- Complete institution on prices, fees, competition and monopoly control in business: Be consistent in the market price mechanism; ensure accurate, sufficient and transparent account of elements that constitutes prices of essential commodities and public services while implementing relevant policies in support of poor and entitled people. Prices do not include elements of social policies. Complete legislation on fees and tolls, review and change policies to apply service prices on some public services. Expand the mechanism on tender, bidding, and price evaluation. Complete institution to protect consumers’ rights, bring to full play the role as subjects of consumers and consumers’ protection associations in the economy.

- Synchronously develop different types of markets:

Diversify and modernize commodity and service market, pay attention to developing the legal framework and establish new markets. Strongly develop modern market transaction methods, especially for agricultural products and raw materials. Set up and implement standards of commodity qualities, food security and hygiene and environment. Study, develop and apply technical measures to step up export. Develop and implement measures to manage imports which are in conformity with international commitments to protect domestic market. Apply policies to support the establishment of a national system of wholesale and retail for effective control and stabilization of market as outlet for domestic commodities. Complete the system of policies on commodity smuggling and fake goods and support Vietnamese commodities.

Restructure the financial market for better balance between capital and monetary markets as well as for each of these markets. Develop debt market, secondary market and property lending. Accelerate restructuring of commercial banks and bad debts by merging banks, reducing the number of bank, improving bank efficiency and competitiveness of commercial banks. Prevent “dollarization” and “goldization” of the economy. Complete institution and strengthen restructuring of the security market, and ensure healthy and effective development of the market as an important channel in medium- and long-term capital mobilization. Develop strongly consulting organizations, accounting services, auditing, price evaluation, national and business credibility ratings to promote financial market. Diversify and improve the quality of insurance products and restructure insurance businesses and market.

Attach importance to developing science and technology market in keeping with market mechanism with support policies to encourage organizations, individuals and businesses to invest in research, development and transfer of technologies, apply scientific and technological advances in production and business. Assist science and technology enterprises to start businesses, and participate in the science and technology market. Continue to renovate rapidly and synchronously the mechanism of financial management, science and technology organization and activities, consolidate intellectual property right protection, complete institution on intellectual property evaluation and strictly punish violations of the Law on Intellectual Property.

Continue completing the legal framework, policies and mechanisms to facilitate smooth operation of the real estate market in line with supply and demand. Build institutions with relevant models to link industrialization to modernization and building new rural areas. Develop institution for primary and secondary markets on land use right, including agricultural land, ensure transparent, and orderly operation of the land market, create favorable conditions for agricultural and forestry land accumulation according to the market mechanism. Apply policies on effective mobilization of financial resources from land and infrastructure asset on land.

Complete mechanisms, policies to develop synchronously the labor market in both scope and scale, labor quality and job structure, step up labor transition, increase the percentage of trained labor; pay attention to reform policies on salary and wage; and increase labor export. Establish harmonious, stable and progressive labor relations. Provide transparent information on labor market and renovate labor and employment statistics collection and analysis.

Fourth, complete institution linking economic growth with social progress and equity in each program and project, each step and each development and environment protection policy.

Set store by research and synchronously promulgate policies to support groups needing social assistance. Develop diversified, multilayer and unified system of social security with increasing share among the State, society and people. Study to promulgate social security policy framework to each region in each period.

Ensure sustainability and feasibility of the financial system with social security policies to identify priority, avoid scattered and overlapping allocation of resources and implementation. Diversify humanitarian activities, promote the movement “All people assist disadvantaged groups.” Implement comprehensively the rights of the child, renovate approaches and heighten responsibilities of authorities at all levels on woman advancement and gender equality.

Complete institution and laws on environment protection, apply preferential policies on investment in environment and environment protection. Develop green economy, and study to implement the low-carbon growth model. Accelerate environment industry. Protect and develop resources and ecology. Conserve biodiversity, reduce climate change impacts and adapt to climate change.

Fifth, complete institution on key economic regions, regional linkage, planning and assignment and delegation of management between the Central and local levels.

Develop plan on regional economic development based on competitive advantages of each region, and overcome economic space separation due to administrative boundary. Set up preferential economic institution for key economic areas to turn them into real “pace-setters” and a driver for scale-up in surrounding areas and the whole country. Develop modern economic institution for economic zones especially special economic zone so that they can be able of competing in the region and the world to create growth and experiment new institution.

Complete institution on assignment and delegation between the Central and local levels to ensure concentration and unity of the economy while promoting local proactivity and creativity. Renew the national and local system of socio-economic norms.

Sixth, develop and complete institution on the socialist-oriented market mechanism while promoting deep and broad international integration.

Continue study, negotiate, sign and accede to international conventions in the fields of economy, trade and investment; and nominate representatives to work at international trade, investment and arbitration organizations. Implement proactive international integration, participate and effectively capitalize on economic benefits from accession to bilateral and multilateral free economic agreements, build an independent and self-reliant economy and avoid dependence on one market and one partner. Complete institutions (legislation, apparatus, resources) on prevention and mitigation of international disputes, particularly international trade and investment. Be well prepared for implementing the 2015 ASEAN Economic Community. Complete legislation on judicial mutual assistance in conformity with international law.

Seven, continue the administration reform, especially administrative procedures; raising the role, efficiency and effective management of the State.

Improve transparency of State offices. Complete institution on state apparatus in accordance with the 2013 Constitution. The State should become a service state which fulfill is function as a creator, developer and a manager of economic development; concentrate on building institution, legislation, strategies, programs, and plan on socio-economic development, invest in building socio-economic infrastructure, develop human resources; ensure national defense, security, and social progress and equity. Build capacity on overall design and supervision of the implementation of economic institution reform. Enhance capacity of legal sectors of ministries and branches. Complete the Criminal Law as a tool to lead the market economy development while removing irrelevant punishment activities, identify and supplement activities that hamper economic development. Step up inspection, control, supervision and improve efficiently and effectiveness of law and policy enforcement.

Eighth, continue renovate the Party’s leadership in socio-economic development.

Continue renovate the way of thinking on economy, heighten economic leadership capacity of party organizations, build capacity and enhance efficiency advisory work on socio-economic development of the Party Central Committee and Provincial and City Party Committees. Attach importance to reviews of the implementation of Party’s resolutions, ensure discipline and order in implementation of Party’s resolutions. Guarantee freedom and democracy in economic activities of people in accordance with Constitution and legislation. Ensure effective participation of political, social, social and professional organizations in building economic institution and socio-economic development.

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This article was published in Communist Review No 866 (December 2014)

Prof. Vuong Dinh Hue, PhD,Member of the Party Central Committee, Head of the Central Committee on Economy