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Official Gazette

Monday, July 22, 2019

Completing socialist-oriented market economy institutions in Vietnam: Some issues to be further clarified

Updated: 11:53’ - 20/03/2015

Nguyen Xuan Phuc
Politburo Member, Deputy Prime Minister

The market economy is a product of human civilization, but there is no single common market economy model for all countries. The application of the objective laws of the market in economic development depends on the development level of the production forces, the political system, cultural traditions and customs of each country. Therefore, in each social regime, the market economy model has its own characteristics. Nevertheless, history and practice have shown that there is no country in the world that yearns for rapid and effective economic development, modernization and a prosperous society but does not apply the market economy model.

In Vietnam, the idea about developing a market economy in socialist construction was initially touched upon at the sixth National Party Congress in 1986, recognizing commodity production in socialism. The objective role of the market economy was perceived more clearly at the two subsequent National Party Congresses. The ninth National Party Congress affirmed: Developing a socialist-oriented market economy is a consistent strategic line and the general economic model throughout the period of transition to socialism in Vietnam. Later on, the tenth and eleventh National Party Congresses continued to step by step clarify the core issues on completing the market economy institutions, on handling the relationship between the State and the market, between economic development in the spirit of independence and self-reliance and international integration, etc.

On the theoretical plane, the socialist-oriented market economy of our country both abides by the market economy rules and is based, led and governed by the principles and nature of socialism, in which the institutions, tools and principles of operation of the market economy are created and used to liberalize the production force, mobilize every resource for national development, industrialization and modernization, raise the people’s living standards and ensure social security toward the goal of “a prosperous people and a strong, democratic, equitable and civilized country.”  This is the outcome of many years’ research, exploration and practical review; and is a new step of development of the Party’s theoretical thinking in the economic aspect.

After nearly 30 years of renewal, the basic components of the socialist-oriented market economy in Vietnam have been established and put into operation with incremental improvements. The achievements recorded in the economic renewal together with the political renewal have brought about a new democratic atmosphere in the society and created new momentum enabling our country to not only escape the socio-economic crisis but also rise up to the group of countries with an average development level thanks to a relatively high economic growth rate compared to the average level in the region and the world. The structure of our economy has seen positive changes; the socio-economic infrastructure has been improved synchronously; and the scientific and educational foundations have fairly well developed. The foundations of the market economy and its institutions have become a mode for us to push forward the national industrialization and modernization and successfully attain the goals of socialism. As a result, the material and spiritual lives of the people have been markedly improved; hunger eradication and poverty reduction activities have achieved great results which are highly valued by the international community. National defense and security have been firmly maintained. Foreign relation and international integration activities have been implemented proactively, deeply, widely and effectively, making our country integrate more comprehensively, deeply and widely in the region and the world, creating a peaceful and stable environment, thereby increasing the position and strength for the national economic development. The combined strength of the nation has been markedly augmented compared to the pre-renewal period.

However, if globally the market economy has a history of several centuries, the socialist-oriented market economy in Vietnam is a totally new, unprecedented economic model in history, with a development period of just nearly 30 years. Therefore, in the development process, we have encountered not a few obstacles and difficulties as well as mistakes. The process of transition to the market economy in our country has not yet completed; there remain very big challenges and barriers in the thinking, awareness, mechanisms, policies and implementation. The institution building, ownership regime, management and distribution have not yet met the requirements and demands of the cause of comprehensive renewal and international integration. The market elements and new types of markets still develop slowly, asynchronously and on a small scale and operate unsmoothly. National resources such as land, natural resources, labor and capital, particularly state budget, have not been managed, allocated and used rationally, economically and effectively. Public assets are scattered, localized and wasted in the absence of effective and efficient supervisory mechanisms. The economic growth still largely relies on extensive development factors, mostly based on capital investment and credit growth, while slowly changing to intensive development - a mode of development based on total factor productivity (TFP) with the fundamental pillars of science and technology, knowledge and skilled workers. Therefore, the economy, though growing, remains unsustainable, the growth quality is not high and productivity, effectiveness and competitiveness are low; the macro-economic balances are not really solid; and the financial system is revealing many problems and risks.

On the other hand, over the past ten years, the global, regional and domestic situations have seen significant developments, particularly the impacts of the global and regional financial crisis and economic decline associated with the latent socio-geopolitical instabilities and sovereignty threats. The growth rate and development impetus of the state economy, private economy, agriculture and household economy are declining in the face of numerous challenges and obstacles. The financial-banking system is operating with many difficulties, including non-performing loans, cross ownership, high average lending rates, which has negatively affected production and business. The bottlenecks that are hindering the national development but have not yet been removed are institutions, human resources quality and infrastructure.

Over the past nearly 30 years of renewal, the domestic and international contexts have seen many changes and the impacts of globalization on each nation have become more and more profound. In order to determine the national development path in the coming period, we should make clearer the theoretical and practical grounds on the market economy development in conformity with Vietnam’s practical conditions and on the core elements that ensure the socialist orientation in the market economy development. Specifically as follows:

1. It is necessary to deepen and make clear the direction for adjustment in the general model of development of the socialist-oriented market economy in our country in line with the country’s full integration in the global economy by 2018.

2. To identify the universal characteristics of a modern market economy for reference and application to the national construction and development in the coming period in conformity with the international context and new conditions of the country.

3. To apply the market rules in the current national development conditions, can it be affirmed that the market and competitiveness are the mechanisms for mobilizing and distributing effectively development resources, thoroughly liberalizing the productive capacity, renewing the growth model and restructuring the economy?

4. To establish more specifically the role of the State in the socialist-oriented market economy for the State to direct and facilitate the development of the market, form an environment conducive to investment and business and encouraging competitiveness, while promoting integration and development and ensuring that all people benefit the fruits of growth and prosperity. The State must not do what the market can do, but when the negative impacts of the market, especially market failures, appear, the State will have institutions and regulatory and controlling tools to remedy these problems and limitations.

5. To determine more clearly the role of the private economy as the engine of growth in the future so as to complete institutions to encourage all economic sectors to develop and compete on an equal footing, encourage the people to enrich themselves, thereby synchronously achieving the goal of “a rich people and a strong, democratic, equitable and civilized country.”

 It can be affirmed that forging ahead the economic reform under the market mechanism is the only path leading our country to prosperous development. However, specific designs that can make the market economy model operate effectively in conformity with the country’s transition to socialism remain a great challenge to the Party, the State and our people. There is no other way, we must unswervingly follow the goal and path we have selected, learn lessons as we go along in order to find out the optimal solutions in our own conditions, considering sustainable development, assurance of the interests of the laboring people and social equity in the development process as the most important norms to be taken account in devising national development policies.-


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