Dr. Le Xuan Ba
Deputy President of CIEM

1. Characteristics of Vietnam’s socialist-oriented market economy.

Theories on models of market economies in different countries are diverse, varied and complicated. It is almost impossible to find two countries with completely similar economies and apply one country’s market economy to other country. Thus, each country must study and find an economy suitable to its conditions, its concrete economic, social, political and cultural situation and to the objective trend of the time.

Vietnam’s economic model initiated and led by the Party has changed greatly in keeping with the economic and social renovation of the country. After 20 years of renovation, the Party’s and people’s awareness of the socialist-market economy has been improved. Major principles of a theoretical system about objectives and nature of an economy operating according to the free and competitive market while ensuring a socialist orientation has been formed. The system has identified that developing the socialist-orientated market economy is to implement the objectives of building Vietnam into a country with "a prosperous people, a strong country, and an equitable, democratic and civilised society". The labour force should be tapped and constantly developed. All resources must be mobilised and utilised effectively to improve the people’s living standards. Hunger eradication and poverty alleviation must be strongly carried out. The people should be encouraged to try their best to be better off, help other people get rid of poverty and improve their conditions.

The economy develops with different forms of ownership and economic sectors. In that economy, the State sector plays the key role. The State and collective economic sectors become a firm foundation for national economy.

Social progress and equity have to be implemented in each development step and policy. Economic growth has to go hand in hand with social, cultural, health, educational development. Social issues must be settled for human development. Distribution must be made in accordance with productivity and economic efficiency, percentage of capital contribution and through social welfare channel.

The people’s right to be master of the country must be promoted. The management and economic regulation of the socialist law-governed State under the leadership of the Party must be enhanced.

A socialist-oriented market economy is a combination between this common market economy with the specific socialist orientation of Vietnam. The market economy is the driving force, the tool and the means to develop the national economy and orient the process of economic development. It is also the means to lead different stakeholders in the economy to operate for maximum socio-economic objectives not only simply for maximum interests. The selection of the socialist-oriented market economy model was stated clearly by the 9^th Party congress: "Vietnam develops a socialist-market economy, considering it a consistent strategic policy throughout the period of transition to socialism". This demonstrates Vietnam’s determination to renounce the centrally-planned, bureaucratic and subsidised system to build a modern economic market.

2. The status of Vietnam’s market economy

The renovation of the market over the past 20 years showed that Vietnam’s economy has advanced step by step and adjusted itself gradually. This has proved to be effective and helped Vietnam avoid social and economic shocks and ensure the objective of closely combining economic development with stability and law and order maintenance. During the process of economic renovation, achievements have been made in building the socialist-oriented market economy. They include the development of the three sub-groups of the economy: regulations of the economic "game", stakeholders participating in the economic game and organisations to implement the economic regulations.

As far as economic laws are concerned, Vietnam has made many law and sub-laws in recent years. Economic laws have increasingly conformed to market mechanisms and international practices. The legal framework allows changes in State economic management from direct intervention to indirect influence on production and business. Besides, improvements in drafting, appraising and promulgating laws, as well as in controlling, reviewing and systemising the legal documents and disseminating laws have helped bring the "rules of the game" to life. It is possible to say that the whole system of the economic "rules of the game" does not only create the legal framework to exercise the freedom of business, the freedom of the multi-sectoral economy, and the effective exploitation of social resources. It also helps to establish and operate more effectively important production elements such as the labour market, real asset market and the financial, science and technology market, and speed up the integration into the market economy.

Although achievements have been made in building the system of "rules of the game", the system has still fallen short of demands of the renovation process to develop the socialist - oriented market economy. Some important legal documents, particularly those relating to competition, property rights and settlement of disputes (especially disputes on administrative decisions) have not yet been built. Some others are incomplete, and inconsistent. Some laws are not concrete enough, leaving sub-laws to regulate many issues and making the laws unstable. Some laws are built with subjective, subsidy and local thinking which are no longer suitable to the market mechanisms and public interests.

Some laws’ feasibility is not high because the process of law-making was not strictly or carefully observed. Different possibilities which can crop up in the law implementation were not taken into full consideration. Time constraints did not allow sufficient public discussion of laws, particularly collection of opinions. Draft laws were built by line ministries in favour of management of State offices. Thus, some laws and sub-laws had to be revised immediately after being promulgated.

As far as stakeholders of the economic "games" are concerned, two out of three important stakeholders, namely businesses and civil social organisations, have played a great and positive role in the market economy. State-owned businesses have been renewed. Their functions of State ownership and State management have been clearly differentiated. They have competed on an equal footing with businesses of all economic sectors. Non-State businesses, especially domestic enterprises have made great contributions to national economic development. Civil social organisations have participated in providing public services, thus gradually replacing State offices.

An extremely important stakeholder - the State - which regulates and operates economic activities has also made positive changes. The State management apparatus has been renovated. Its economic function has become closer to market mechanisms. However, as the State’s role in the economy has not been clearly identified and interpreted, its functions, as well as the functions of each separate State offices, have not been clearly defined. This causes difficulties in rearranging the State apparatus during the past 20 years. The State’s intervention, thus, sometimes were made at the right time and in right places. Some implementing methods were ineffective or counter-productive.

Human resources is an important factor in any organisation. While shifting to the market economy, the State has still employed the same public servants. Changes in the way of thinking and knowledge updating were slow. Public employees’ quality is not up to requirements of the renovation process. This hampers the renovation process and national development.

As far as the organisation to implement the economic rules is concerned, in whatever place, the way of thinking of policy-making offices greatly influence the free market competition, economic management delegation, resources allocation, and coordinating, participating, reporting and explaining mechanisms. In Vietnam, bias, discrimination, local interests, responsibility avoidance, work overloads, particularly bureaucracy, have existed in some public employees. These practices have created the model "requesters - givers", requesters being businesses and the people and givers being public employees. This hampers business initiatives by the people, gives rise to illegal extra transaction payments, and affects the investment and business environment.

Meanwhile, law implementation has been loosely supervised. Loose supervision of law observation in several aspects has led to cheating and corruption, causing serious social and economic consequences. Given the limitations in quantity and qualifications of a contingent of public employees, supervision is more difficult. Meanwhile, mechanisms to encourage non-State organisations’ and community’s supervision have not yet been established. To realise this, we must make competent authorities’ policies more democratic and transparent.

Together with identifying the State’s economic tasks is management delegation. So far, the delegation has based mainly on scale criteria, rarely on characteristics of issue and work. Inappropriate delegation leads to "ask-give" practice and refference of work settlement to higher levels. This also results in inappropriateness in organisational system at all levels. Delegation effectiveness largely depends on coordination between levels as well as offices of the same level. Currently, neither coordination between level nor those on the same level is effective. As is the exchange of necessary information among them. There has not been any legal stipulation regulating obligatory information exchange or open announcement by State agencies. It is possible to say that among the three sub-systems, that of the implementing organisation is weakest.

3. Viewpoints and orientations to build Vietnam’s socialist-oriented market economy

3.1 Viewpoints:

- We must confirm that the development of a socialist-oriented market economy is historically essential because the centrally planned model which has existed for a long time has lost it vitality and capacity to develop the economy. The market economy is considered a historical production method - a product of human civilisation - not an asset of capitalism. It is used for the development and prosperity of all countries. Reviewing the 20-year-renovation process and fully aware of the imperative law of the time, in the context of globalisation, Vietnam chose to develop a socialist-oriented market economy. This decision conforms with a general objective development trend. It also absorbs traditional values and positive development factors.

- The socialist- oriented market economy’s connotation and nature must be clearly identified and confirmed through Vietnam’s system of economic institutions in the future. Although the theoretical system has been built, many concepts have not yet been clearly defined. Thus, the connotation of the socialist - oriented market economy must be clearly identified in order to built a new market economy or to continue completing the current market economy in Vietnam.

- Vietnam’s market economy development must conform to integration commitments. Integration into the world economy is currently an essential for all countries. The economy must be built and operate in such a way to boost the countries external economic activities, support its integration into the global and regional economy and enhance bilateral economic relations.

- The socialist-oriented market economy should eradicate all discrimination, effectively use resources and create an attractive, stable and competitive investment environment.

- During the stage of building Vietnam’s economy, democracy, transparency and compatibility must be ensured. Compatibility in the legal system, policies and mechanisms is a premise to effective implementation.

3.2 Solutions

- We must continue to clarify the fundamental content of the socialist-oriented market economy, especially some basic issue relating to its nature such as: tools to implement the market economy, ownership, and the State’s role.

- The legal framework for the socialist-oriented market economy must be fully set up. It includes legislation on ownership (people’s ownership, State ownership, rights of owners, rights of users, management of assets belonging to the people; the law on rights to free business to create healthy competition environment conforming to international commitments, to clarify the limitation of State intervention through administrative measures in enterprises’ operations and the laws on contracts, e-transactions, public finance, tax, resources and environment.

- Performance of stakeholders in the market economy must be improved.

+ The State must carry out stronger administrative reforms through readjustments to avoid overlapping functions and tasks of administrations at all levels, as well as offices of the same level. It should pass on to enterprises or civil organisations some public services not necessarily provided by the state administrative offices. State agencies’ management methods and work style must be improved.

- Administrative reforms in all aspects must be resolutely carried out. Unnecessary licenses, supervision, control, appraisal and quarantines must be removed.

- Personnel selection, their use and dismissal and management must also be renovated to improved the quality of public employees. They must also be educated on responsibility, and devoted to their work. This must be coupled with suitable salary payments and stringent punishment and discipline

+ Enterprises must renovate their supervisory methods be more dynamic and responsive. State enterprises must be rearranged and renovated. Mechanisms on support, activities and competition of enterprises of all economic sectors must be completed. They should attract more foreign investment and improve the marketing capacity of agricultural and rural economic subjects.

+As for social and civil organisations - an important and indispensable component of the economy- mechanisms to encourage and support their operation must be developed. They must participate in providing public services, replacing the State offices in some socio-economic functions, and exercise the role of policy supervision, appraisal and criticism and legislation building and implementation.

- Market economy mechanisms must be fully established with "free market competition’ as the key element to operate the economy. Efforts must be made to readjust market structure, regulate behaviours and control the abuse of position in the market.

- State management of the economy must be delegated. It is necessary to identify clearly what tasks should be done and what should not be done by the State, what aspects localities can decide and what aspects need consultations or decisions by central offices. Delegation of responsibility in different localities must be based on concrete conditions and capacity of different levels.

- Coordination among State offices in planning, policy implementation and public services provision should be strengthened. While defining clearly the functions and tasks of each State offices, regulations and mechanisms must be put in place to ensure their transparent operation and explaining responsibility, community participation, and clear coordinating responsibilities of offices and individuals.

- Effective mechanisms must be develop to expand the people’s participation in policy making, supervision of policy implementation, and easy access to information. Special attention must be given to improve information quality and ensure information flows to stakeholders. The people’s right to participate in the market and mechanisms to participate must be institutionalised by promulgating the Law on Opinion Poll and other documents regulating the implementation of the law.

Source: Communist Review, No.104-2006