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Contributing to perfecting the socialist-oriented market economy in the context of international integration in Vietnam
6/7/2017 10:29' Send Print
The workshop "Completing the socialist-oriented market economy institution in the new context" co-organized by the Central Theoretical Council and the Vietnam Academy of Social Sciences in February 2017

Although there have been significant advances in theory and lines, reality shows that Vietnam has not yet developed a strong theoretical framework for market-oriented socialist institution. Awareness of the socialist-oriented market economy is not sufficient, especially of the state economy, state-owned enterprises, collective economy, resource allocation mechanism, land ownership, mechanisms and prices of some essential public goods and services. Therefore, sometimes we have not fully and consistently respected market economy principles in construction, operation and management of problems of the economy. We have not yet identified and reached high consensus on characteristics of the socialist-oriented market economy, especially the structure and the relationship between components of the socialist-oriented market economy; slowly clarified theory and practice between the two components: market economy and socialist orientation, on combining them to form a new way of addressing development issues of Vietnam.

Theoretical understanding of the socialist-oriented market economy is still slow compared with practice; many practical issues have not been generalized and resolved in time. As a result, lack of consistent and inadequate action has slowed down the development of the market economy.

Though the relationship within the mechanism "Party leads, State manages and People are the masters" has been attached importance to and developed, it has not been effectively implemented in practice, reducing effective economic and social management. The relation between the State, enterprises and market, especially in terms of economic benefits, has neither been properly handled, nor brought into play the State’s dynamism, the market’s driving force, especially enterprises’ role as a shock force in international economic integration when Vietnam has been a member of the World Trade Organization (WTO) for 10 years since 2007.

Since Vietnam's accession into the WTO, Vietnam has proactively and actively integrated deeper into international economy. We have actively negotiated and signed many bilateral and multilateral Free Trade Agreements (FTAs). However, Vietnam’s international economic integration has also revealed limitations and weaknesses of the economy as well as the socialist-oriented market economy institution: the economic structure and growth quality have not fundamentally improved; bottlenecks in institutions, infrastructure and human resources have been identified in many resolutions and pointed out in several resolutions but are slowly resolved; mechanisms and policies of ministries and branches on resources, tax policy, policy on developing supporting industries and infrastructure have not been synchronized. While the world is moving towards the Fourth Industrial Revolution (4.0 revolution), Vietnam remains in the second stage - i.e. sub-contract and assembly line, industries and spearhead industries have not yet been identified and developed. Besides its achievements, the agricultural sector has many limitations, such as the slow renovation of policy institutions, and transformation into market-oriented agricultural production model in the context of deep international integration and the heavy impact of climate change; connectivity and linkage between sectors and fields are not high, coordination between ministries, branches, central agencies and localities, enterprises in international integration is poor; capacity of forecast and trend assessment, situation projection, and early warning of impacts on the areas of economic integration in the context of Vietnam's deep integration into the global and regional economies is limited; although market economy institutions, including the legal system and policies of the State, have gradually taken shape they have been slowly formed and proved to be inconsistent and not synchronous, and in many aspects not suitable, thus have hindered and distorted market mechanism operation; despite recent improvements and changes the legal and business environment have generally failed to meet integration requirements, and enterprises’ market entry costs remain high as compared with the region; institutional reform is slow, especially administrative procedures; economic development has not paid adequate attention to solving social problems, unemployment, social evils have been on the rise, the gap between rich and poor has widened rapidly, affecting development stability; the ecological environment is at risk of deterioration, causing long-term impacts on national socio-economic development.

Solutions and recommendations

In the coming time, on the basis of summing up practices, it is necessary to continue to renovate the thinking in building and perfecting the socialist-oriented market economy in Vietnam.

First, unanimity of perception and thought.

The development of the socialist-oriented market economy in Vietnam must respect the principles of a market economy for sustainable development on the basis of attaching importance to combining economic growth, and addressing social issues with environment conservation and protection. At the same time, uphold the leadership role of the Party, strengthen the effective management of the State, promote people's mastery, and ensure socialist orientation in developing market economy.

Market economy is just a mode of economic development based on the principles of the market with the regulation of the State. It can not determine the nature and direction of development of a social regime. The nature of a socio-political regime determines the nature of the market economy. It can be affirmed that only effective development of the socialist-oriented market economy can lead to successful shortened-industrialization process in Vietnam to "strive to turn our country basically into a modern industrialized country."(1) The market economy must be a sustainable internal factor in the socialist-oriented overall economic model in Vietnam.

Maintain socialist orientation in the transition to a market economy to achieve the goal of "a prosperous people, a strong country, and a democratic, equitable and civilized society." In the implementation of socio-economic development strategies, only effective and sustainable development of the market economy can create an economic base which ensures socialist-oriented development in Vietnam. Only the strength of mixed forms of ownership, and economic sectors in the market economy can create an economic basis for socialist-oriented development.

Second, build and enhance the role the State of integrity and action that enables development.

It is necessary to change thinking and approach when defining the role of the State and the relation between the State and the market in the direction of shifting the State from economy management and operation to facilitate development. The main function of the State is to develop strategies, plans and development programs in a scientific manner in accordance with the requirements of the market economy and the process of international economic integration, and ensure political stability, macroeconomy and safety of the social security system.

The Government of Vietnam has identified the key task to build a government of integrity and action, which facilitates development, serves the people and businesses, strives to achieve, in 2017, major targets of a favourable business environment equal to the average of some leading ASEAN countries, such as Singapore, Malaysia, Thailand, among others. Following this direction, the Government has concentrated all resources and ability to address institutional issues in accordance with international practices and market economy development in all areas, especially finance, banking, intellectual property, environmental protection, and dispute resolution. “Those institutional foundations must be comprehensive, inclusive, giving every citizen the opportunity to contribute to the success of economic growth and gain worthy benefit from it."(2) Accordingly, the State needs to focus on the following main contents: 1. Orient development through strategies, planning, plans and mechanisms and policies on the basis of respecting market principles. 2. Create favorable legal environment, mechanisms, and policies to mobilize social resources for development. 3. Support development, care for building important socio-economic infrastructure system, and social security system. 4. Ensure sustainable and positive macroeconomic balances; minimize risks and negative effects of the market mechanism.

The transition of Vietnam's economy to a socialist-oriented market economy in the context of international integration is imperative, necessitating the renewal of the role of the State. This means the state intervention must be consistent with market principles, respect the essentiality objective economic rules (i.e. harnessing the strength of the market economy to effectively use resources, promote economic development, and solve social problems). The State manages through the legal system, and reduces administrative interference in the operation of the market and enterprises. To carry out this task, the following orientations should be identified: 1. Separate the State administrative management function from the function of business management of enterprises. 2. Remove "the regime of line agencies"; separate public administration offices from public service agencies; strongly develop public services (education and training, science and technology, healthcare, culture, physical training and sports). 3. Excercise delegation, coordination and control among state agencies in the field of legislative, executive and judicial powers; avoid overlapping, neglection and reduction of the State apparatus’ management effectiveness for socio-economic development of the country. Renovate the law making process, overcome rampant and nominal planning for budget allocation to reduced waste. Sector plans should not be developed by specialised ministries (as this likely leads to the fact that the implementer and whistle blower are the same agency or results in group interests), but by independent committees of well-qualified experts who are experienced in plan development to ensure objectivity and feasibility while having a rigorous appraisal mechanism.

The State should regulate, control and guide competition, creates equal competition opportunities for enterprises of all economic sectors. Quickly overcome merger or formation of state-owned enterprises through subjective administrative orders, not from essential economic and technical requirements.

Third, continue to synchronously develop and effectively manage the operation of basic markets following a healthy competition mechanism.

First, continue to boost the process of ownership diversification, develop the economy with different forms of production and business, and create both supply and demand for the market. Theoretically, one of the foundations of developing a market economy is the existence of a variety of production material ownership. Therefore, in order to develop market economy institutions in general, and forms of market in particular, it is necessary to diversify forms of ownership, develop of a multi-ownership and multi-sector market economy including the private sector. Firmly step up the equitization of state-owned enterprises, and develop state capitalist economic, private capitalist economic, collective economic and new style cooperative economic forms.

Second, set up a strategy of industrialization and modernization suitable to each stage of national development and the common development trend of the world; attach importance to the development of agriculture, farmers and rural areas, science and technology, application of scientific advances and technological innovation in production. Accelerate delegation and cooperation between branches, regions, economic sectors, as well as increasing international cooperation. Some main solutions to this problem are: 1. Speed up re-division of social labor, paying attention to the development of commodity economy in rural and mountainous areas. 2. Adjust the structure of training human resources, branches and trades according to the requirements of production and labor structure development; realize objectives of industrialization and modernization and international economic integration in plan period for Vietnam to early establish a labour structure of a new industrialized country. 3. Speed up technology transfer in order to create appropriate and advanced production technologies and increase the competitiveness of Vietnamese goods on the international market.

Third, improve the institutional environment, respect for competition and control monopoly. The socialist-oriented market economy in Vietnam is a mixed economy, made up of various forms of ownership, economic sectors coexisting in a unified form, in which public ownership should increasingly become a solid foundation of the growing national economy and equitized economy, a popular form of economic organization, promoting the socialization of production and ownership. Improve institutional environment, first, the legal environment so that the market operates in an enable and transparent legal corridor is an urgent task to encourage development of markets in Vietnam in the context of international economic integration and economic globalization. In order to create an institutional environment for the development of markets, first and foremost, it is necessary to revise the legal system to overcome inconsistencies among legal documents and constraints in the legal and policy system, which affect the common business environment and international economic integration. Legal documents must be highly enforceable, consistent with practice, and relatively stable. Continue to improve the capacity of agencies, which draft and promulgate legal documents while at the same time improve people's knowledge, awareness and sense of law observance. Continue to perfect laws relating to market economy.

Fourth, increase investment in the development of technical infrastructure for different forms of markets in the direction of integration, with due attention given to strengthening the building and development of market information systems, building technical infrastructure, creating favorable conditions for the formation and development of various types of markets; establishing and developing market support services, and early establishing institutions for the official launch and development of electronic transactions, and e-commerce. Concentrate on building social infrastructure and modernize material foundation for education, healthcare and sports.

Fourth, strongly develop economic sectors, and types of organizations in business.

It is necessary to thoroughly grasp and concretize the Party's points of view, confirm that all economic sectors operating under law are integral part of the socialist-oriented market economy and equal before law for long-term development, cooperation and healthy competition. To that end, the returning subsidy trend and prolonged protection to state-owned enterprises should be abolished; enterprise monopoly should be removed and the Law on Competition should be effectively implemented. Continue to innovate and develop forms of collective economy. Joint-stock enterprises must become the popular economic organization, promoting the socialization of production, business and ownership.

It is necessary to amend, supplement and perfect the system of policies and laws in the direction of transparency, create a fair business and competition environment for all market stakeholders, pay attention to create a psychological enabling environment for private sector development. Foreign-invested economy must be considered an integral part of the socialist-oriented market economy in Vietnam and encouraged to develop in a sustainable and equal manner with other economic sectors.

Eliminate all forms of ownership discrimination. The State only provides preferential treatment or development assistance to some product branches or sectors or targets (such as export, job creation, hunger elimination and poverty reduction, and risk reduction), some areas, small- and medium-sized enterprises. Exercise real equality among enterprises of all economic sectors.


(1) Document of the 12th National Party Congress, Central Party Office, Hanoi, 2016, p. 272

(2) Speech of Prime Minister Nguyen Xuan Phuc at the 47th World Economic Forum (WEF) held in Darfur on 17-21 January 2017, see: Vietnam Economic News, No. 19, 23 January 2017

This article was published on Communist Review No. 895 (May 2017)

Assoc. Prof. Tran Nguyen Tuyen, PhDCentral Theoretical Council