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Perfecting the institutions to promote economic development on the basis of innovation in Vietnam
15/4/2020 10:10' Send Print
Applying science and technology into production for the enhancement of productivity, quality and competitiveness. Photo: CR

Identifying the institutions to boost economic development based on innovation

In research and development management practice in the world in recent years, there have been a number of explanations for innovation. By far and large, innovation refers to the activities manifesting the discrepancies with the existing mindsets and practice standards, aiming at creating positive impacts to release energy in each person and each organization; thereby, fostering social civilization in a more progressive way than applying the old ways of thinking and norms.

Innovation implies progress, made by human beings. When referring to innovation, therefore, it is necessary to attach the defined innovators to certain circumstances. The potential for long-term development of a socio-economy is heavily reliant on innovation. The synergistic impact of innovation will create more progressive outcomes in all walks of life, including ecology, institution in a specific social system.

A socio-economy under direct observation, it is recognizable that there are many types of various subjects intertwining and changing over time according to diverse approaches and classification criteria. However, regarding innovation activities, three basic groups are indentifiable, namely: 1- Business communities (DN); 2. Creative households, people and professional organizations (education, science and technology); 3. The national governance apparatus. These can also be considered as the three direct pillars of an innovation-based economy. In the absence of creativity, any innovation in three above-mentioned groups is likely to stagnate, undermine or decline the development potential of the entire economy. For that reason, in order to accelerate the economic development of on the basis of innovation, it is essential to execute from releasing the total innovation energy of business communities, people, professional organizations and the national governance apparatus.

Enterprises’ innovation always plays a positive and direct role in intensifying productivity and competitiveness, generating job opportunities, boosting businesses’ profits and improving the workers’ incomes. Moreover, enterprises’ innovation also contributes to a more efficient use of resources, safeguarding the environment, heightening the efficiency of integration, sustaining national interests, and strengthening national security and defense.

Households, people and professional organizations (with regard to education, science, technology, etc) have demonstrated their enormous and diverse creativity. With the requirements to sustain livelihoods and maintain the prescribed sense of identity, every citizen and household has been constantly seeking ways of thinking and optimal measures to cope with the issues posed closely relevant to daily life and generations. Similarly, due to the demands of professional functions assigned by the society, professional organizations have had very positive impacts on the entire economy through supplying knowledge, human resources with new skills, technologies and new means of labor. The innovation among households, people and professional organizations has made a contribution to the building of a common foundation for national stability.

Simutaneously, the national governance apparatus, of which the political system is the core, also requires innovation. National governance serves as a mission with special responsibilities assigned by the people. The quality of the national governance apparatus is in direct relation to the destiny, survival, existence space of the people, the political regime itself, national status, future and icon in the world. In order to take over the responsibilities entrusted by the people, the national governance apparatus also needs constant innovation. This is an indispensable requirement for all countries.

In terms of the ties of the three aforementioned groups, although it is not advisable to underestimate any creator’s innovation, of business communities’ creativity plays a prerequisite role in determining the growth momentum, and the long-term potentials for development of the whole economy, in the context of international integration and common development trends in today's world. Businesses’ innovation is prominent and entailed in demand for innovation amongst people, professional organizations and the national governance apparatus. Therefore, strengthening and improving business communities’ innovation capacity is always a breakthrough solution that can deeply penetrate the economic development based on innovation in a new context.

In terms of motivation, in the end, the benefits are the utmost goals for innovators’ creative activities. However, in fact, for benefits of each case, these activities can be delayed and eliminated step by step. These are cases that need to be phased out.

Regarding factors affecting the dynamics of innovation, there are different groups of factors correlating with each economic innovator. However, apart from the specific factors and characteristics influencing the innovation of the business communities, households, people and professional organizations or the national governance apparatus, the common factor affecting the innovation motivation of the three groups of innovators is seen as the institution. In particular, the official institutions planned and implemented by the national governance apparatus serve as one of the key factors impacting on the overall momentum of the three groups of innovators in the innovation-based economy. In such a sense, in fact, perfecting the institutions to boost economic development on the basis of innovation means improving the institutions to generate the motivation for creative activities of the major pillars, namely, the business communities, people and national governance apparatus.

As for the business sector, the institutional system to strenghthen innovation is recognizable with the manifestation of the three key components, namely, the institutions for businesses to access opportunities and resources; the institutions for dealing with the enterprises’ interests and the institutions for market access, network linkages among businesses to establish synergy in international economic integration. Specifically, for the developed economy with mainly small and medium-sized enterprises, the two institutional groups accessing to resources such as finance, information, big data, grounds, digital platform, etc. and the market such as taxes, customs, indications of origin, quality standards, market entry and exit procedures, etc. are of leading importance.

With respect to innovators such as households, and professional organizations, the institutions to guarantee property rights and opportunities for asset transfer (land, registration of property rights, access to financial resources for economic operations, information, result conversion, civil transactions, etc.) and the institutions to maintain people’s and intellectuals’ trust in the regime and political apparatus in professional organizations are absolutely significant. The State and enterprises cannot settle the entire livelihood needs of the people. People are always capable of self-innovation to surmount their own situations. Therefore, the question is that the State ought to generate favorable environments for people to thrive themselves; opportunities for them to mobilize their own creativity need to be provided with a transparent, accountable and institutional system. The national governance apparatus must not keep out its main duty of creating a stable environment for people to flourish from their own innovation.

The national governance apparatus is a specialized innovator that, on the one hand, provides active institutions to enhance the innovation capacity of other innovators in the economy; on the other hand, creates institutions for its own operations. Regarding this section, therefore, the institution of coordination and the obvious accountability of the elements in the system is of particular importance and need to be renewed due to the requirements of social development. Simultaneously, the institutions to require constant innovation in the relationship between the national governance apparatus and the people and the business community play a pivotal role in motivating innovation of the national governance apparatus itself.

Issues posed in the institutions to foster economic development on the basis of innovation in Vietnam

The actual economic growth of Vietnam over the past few years has step by step accessed to the innovation-based orientation. Vietnam’s innovation index in 2019 was ranked 42nd out of 129 observed countries by Cornell University, INSEAD Business School and The World Intellectual Property Organization (45/126 in 2018). Vietnam takes the third place thanks to the 2019 ranking results (Behind Singapore and Malaysia), which makes it obtain the first rank among 26 low-income countries. Two relevant indexes, namely science - technology and innovation are on the sharp increase, compared to 2018, of which the whole expenses of research and development account for a 5-rank rise (input); knowledge and technology-based products take up the 8-rank increase (output). Indicators of market development show a 3-level rise, 4 levels for credit and 3 levels for labour productivity. These are remarkable achievements reflecting positive impacts of the institutions on economic innovators. With the new demands of economic growth, however, the aforementioned institutions have revealed such defects as:

First, the institutions to promote innovation in the Vietnamese enterprise sector have shown no new expansion in terms of quality, compared to the old mechanism which was fairly typical of “asking-for and giving” impression. The institutions enabling enterprises to access to opportunities and resources have had no breakthrough development, nor have been explicitly transferred to the market principles. The interdiction of sub-licenses due to lack of good management is common in most economic sectors, industries and management levels. Institutions for the linkage between enterprises, in addition, are inadequate and fragile.

The guidelines and measures to motivate Vietnamese enterprises to build links with one another in market participation are frequently of general recommendations, with a few specific ones. Besides, invisible barriers and other sunk costs when Vietnamese enterprises wish to access to ground and capital resourses disrupt their development, leading to skepticalism and frustration in business, not wanting to make basic and long-term investments, declining the motivation for innovation. This defect remains a barrier for innovation-based development of Vietnamese economy. It is difficult to build a self-reliant and self-controlled innovation-based economy when Vietnamese enterprises are not growing strongly.

Alternatively, the connection between the FDI enterprise sectors and the institutions of linkage ensurance, the network establishment of FDI enterprises and Vietnamese ones has been taken notice; yet, it lacks feasibility. With the present institution system, it is almost impossible to generate direct motivation for the linkage among Vietnamese enterprises as well as between FDi enterprises and Vietnamese ones.

Second, the institutions to protect people’s property rights and build people’s trust in governments are short of uniformity between regulations and implementation. People’s transactions and property transfers have been carried out in an environment with the institutions of inflexibility, complication and overlap between relevant authorities. Fragmented and interrupted information between authorithies has been making people contact a large number of agencies at different levels. This inadequacy, therefore, has resulted in institutional gaps in implementation, undermining people’s confidence in national and local governance bodies.

For professional innovators directly relevant to innovation such as education and science-technology, they have not been offered optimal institutional environments to promote their creativity. The institutions to foster the linkage between research agencies with enterprises are just appeals which are deprived of specific measurements of binding benefits. The role of the market mechanism for strengthening connection between research and commercialization, thus, has not been performed. What is more, in relation to the State role, investment in research and growth has been inadequately noticed. The Party has always attached great importance to scientific and technological development, considered it a breakthrough and foundation for the development of production forces; in reality, however, because of subjective reasons from the national governance system (at both central and local levels), there haven been no achievements as expected. Science-technology has not become production forces which directly create a new-quality labor documentation platform for the whole economy. This is one of fundamental bottlenecks in the breakthrough development of Vietnamese economy based on current innovation.

Third, the institutions ensuring transparency, fostering coordination for the nation’s overall development for the national governance apparatus remain feeble. Since the institutions do not show the clarity of responsibilities, the transparency from planning to implementation; thus, passing the buck, contending for merits and laying the blame among the State management agencies and levels are relatively common, particularly in dealing with overall and complicated issues; there is no or less frequent coordination. The rigid and fragmented thoughts without creativity, together with the execution which is rarely considered, adjusted or renewed, have served as a barrier to the release of economic resources.

Further improving the institutions to accelerate economic growth based on innovation in Vietnam

With the requirements of the society today and on the basis of limitations pointed out, in time to come, so as to boost the economic development based on innovation in Vietnam, a number of measures are proposed as follows:

First, in terms of consciousness

Managers at all levels, industries and national governors must see the profound significance between statements and promotion of innovation. Innovation cannot just be recommendations; it needs to take action. Measures fostering innovation in business, people, professional organizations and the national governance system itself should be carried out in accordance with an actual road map and resources. The leadership willpower and the implementation of innovation should be frequent elements in the way of thinking and action of the political system at all levels. National governance innovators, of which the political system is the core, need to be leading supporters for the aspiration toward innovation of other ones. In company with that, enterprises, people and professional organizations themselves must realize their direct mission of executing innovation, contributing to national development. The combination between the leadership willpower, the consistent implementation of the political system and the confident reception of the enterprise community and social strata serves as a direct driving force for innovation of the whole Vietnamese economy in the long term.

Second, in relation to execution

First of all, levels and industries need to comprehensively review the policy system with regard to accelerating innovation in enterprises. It is determined that this is a breakthrough task which fosters innovation in businesses and boosts economic development based on innovation in Vietnam as well. On the basis of this review, courageously eliminate barriers, overlaps and conflicts among polices; adjust, complement and replace with new policies appopriate for the new situation. In the institutional group accessing to opportunities and resources, the transparency, positive stability and predictability are considered the most powerful basis to accelerate enterprises’s readiness to innovate. Therefore, improving institutions to foster economic development based on innovation with only business sector’s role means ensuring transparency, equal opportunities to access to resources, positive stability and pridictabilty of the institutional system itself. Accelerating the innovative capacity in enterprises means creating an equal and comfortable environment as soon as possible in order that enterprises independently develop based on innovation and grow under the impacts of the market and institutions. Policies to stimulate application, apply scientific advances to production - business and enterprise governance need special attention to enforce. With the current situation of Vietnamese enterprises, it needs time without volunteerism and impatience to develop the underlying and source technologies. There need to be strategies to build key businesses at breakthrough stages, particularly the elements leading to artificial intelligence, data and digital platform-based development. Thereby, it can help bring about spillover effects for the whole economy. This is a new approach, requiring determination with innovation in implementation.

Regarding the roadmap, little by little improving the national innovation system effectively in which enterprises play a central role; stimulating people’s initiatives; forming a close association between research institutes, universities and enterprises, public services to create and accumulate intellectual property; generating new resources for economic growth based on innovation, inclusiveness and sustainability.

In the long run, in order to boost the linkage in the Vietnamese business system, it is essential to improve the instutions so as to form a close association with regard to interests among innotivative and startup activities, research agencies, universities and people. The institutional system connecting the innovators’ interests needs to produce vectors of mutual benefits with pervasive and resonant influences towards the common goal: strengthening economic development in Vietnam. To make the institutional system a reality, it requires a vision and the determination of the national governance system, solidarity and consistency in persistent implementation from central to local levels.

In order to foster innovation right inside the national governance apparatus, it is necessary to concentrate on assigning clear responsibilities to each division in the system. In parallel with that, the institutions to ensure close coordination in fulfilling the duties of the subjects in the national governance system. The coordination institution currently reveals most gaps in performing functions of the national governance subjects, particularly in the State management agencies and authorities at all levels. Accordingly, the institutions of assignment, transparent coordination, responsibility, which are of obvious interests and obligation, need improving as soon as possible. Difficulties in execution, passing the buck, and embarrassment in taking responsibility for national governance normally result from not dealing with interests transparently.

Thus, in time to come, the question of interests among innovators in the national governance apparatus needs taking into serious consideration so as to automatically accelerate innovation, making a contribution to innovation-based economic development in Vietnam./.


This article was published in the Communist Review No. 927 (October 2019)

Assoc. Prof, Dr. Ngo Tuan NghiaInstitute of Political Economics, Ho Chi Minh National Academy of Politics