Do Quoc Sam

Communist Review, No.108/2006

The industrialisation and modernisation process implemented over the last 10 years according to resolutions of the Party’s 8^th and 9^th National Congresses has brought about important socio-economic changes to the country. However, the process has still been delayed and inconsistent in comparison to its strategic objectives. We have not defined suitable steps and a specific roadmap for a complete industrialisation and modernisation strategy to realise Party guidelines and policies. This can be attributed to many reasons, particularly theories of industrialisation and modernisation which need to be further clarified.

1- The concept of industrialisation and modernisation

In a narrow context, industrialisation is seen as a process of transition from an agricultural economy to an industrial economy. In the broader sense, industrialisation is the transition from an agricultural (or pre-industrial) society to an industrial society. There are differences between the British and European industrial revolutions of two centuries ago and modern industrialisation, which is combined with computerisation, economic globalisation and the knowledge-based economy.

According to current thought, modernisation is a process of transition from traditional ways to advanced knowledge and modernity. In terms of economy, modernisation is explained as a major transition from a traditional society to a modern society, which has been taking place in countries across the world since the 17^th century. Some theorists divide the modernisation process into two stages: the first modernisation stage corresponded with the classical industrialisation period, and the second stage corresponded with the intellectualisation period.

Curently we, in Vietnam, often use the phrases "industrialisation and modernisation process" to mean "industrialisation and modernisation being combined in a process from the beginning and through all development periods". In this context, industrialisation should be understood in a larger meaning, not limited in economy, but including social and cultural areas. Modernisation should have a popular meaning and time is only comparative. In other words, Vietnam is in its industrialisation process, but not the classical industrialisation process. We do not focus only on industrial development to increase the industrial ratio in GNP, but also the development of technology including IT, and gradually develop a knowledge-based economy. It means Vietnam is realising the "new-styled industrialisation process", or as the 9^th National Party Congress said in its resolutions, "industrialisation in the trend of modernisation".

Following Party and State guidelines, we have combined industrialisation with modernisation in all stages of development. This is the process of socio-economic industrialisation and technological modernisation at the corresponding level. Vietnam is taking a short cut in its industrialisation and modernisation process to keep up with the region and the world. This process has a socialist orientation, realises social equality, and maintains a balance between economic and social development. In the sustainable industrialisation and modernisation process, we pay attention to environmental protection and improvement, and consider education, training, science and technology the foundation of development. We are concerned about agricultural and rural industrialisation and modernisation, particularly in the initial stage of the process.

Proceeding from these orientations and characteristics, we can develop a compatible industrialisation model and define quantitative criteria to assess its level and compare it with other countries.

2 – Industrialisation criteria

In its resolutions, the 9^th National Party Congress set an objective to make Vietnam mainly an industrialised country with the modernisation process by 2020. However, although it had quantitative criteria, it did not develop qualitative criteria to define what an industrialised country is, what a modernising industrialised country is, and what is becoming an industrialised country in the main.

Currently, global researchers are using diverse criteria to identify and evaluate development. Each criterion shows the weight and level of development. Each country uses different sets of criteria in each development stage. Criteria selected for Vietnam’s industrialisation in the trend of modernisation (new-styled industrialisation), should clearly show Vietnam’s industrialisation orientations and special characters, and be compatible with criteria currently used by other countries to enable comparison and evaluation. We should ensure there are sufficient Vietnamese and global statistics to calculate quantitative indicators. The indicators should be simple, convenient and have clear-cut definitions.

It is impossible, or very difficult to evaluate things with a single criterion, as specific characteristics may be quite different in nature. However, the number of criteria should not be too large to make data gathering and analysis easy. To compare, we should divide criteria into groups, each group representing a development aspect that corresponds with Vietnam’s industrialisation process. For example, criteria should be grouped accordingly: economy, science and technology, social policies, environmental improvement, and quality of life.

From these industrialisation criteria, we can develop quantitative indicators and select the level of each indicator corresponding with the industrialisation level. The experiences of other countries show that the industrialisation level should be equivalent to the average level of the 18 most developed countries (in World Bank order) in the 1960s. We can also refer to some indicators relating to modernisation set about one or two decades later. After research, we can propose a list of criteria and indicators as follow:

Economic indicators: GDP per capita by PPP (Purchasing Power Parity); the ratio of agriculture contributing to GDP; the ratio of farmers in the entire workforce; average labour productivity; energy consumption per capita; the ratio of export in GDP; and the international competition index.

Social and life quality indicators: Human development index (HDI); the urbanisation rate; the urban and rural gap; and the GINI index ¹.

Environment indicators: the rate of people having access to safe water; the costs of environmental protection and improvement in GDP; the rate of treated waste; and the country’s rate of tree coverage.

Indicators of computerisation and knowledge-based economy: the rate of households having PCs and access to the Internet; the rate of research and development (R&D) in GDP; the number of certificates for inventions and improvements per 10,000 people; the ratio of new and high-tech products in industrial and export outputs.

These scientifically selected socio-economic indicators will allow us to see where we are on the industrialisation and modernisation road, how far we are from the target, and what aspects we should focus on to soon become an industrialised country, or what can be "basically" be considered an industrial country.

3- Short-cuts in industrialisation and how to keep up with other countries

There are many reasons to believe that Vietnam can take short cuts in its industrialisation process, in comparison to European countries in the past. Combining industrialisation and modernisation will allow us to avoid overlap in the transitional period. Our industrialisation process is not spontaneous and self-adjusted but is consistently and strategically regulated with logical and careful steps. In addition, we are also learning many lessons from our predecessors.

With Vietnam’s current rapid development rate, we expect to obtain an annual GDP per capita of US$2,000 by 2020. With that income level, it will be difficult to reach other development indicators at a high level and sustain the quality of development. Therefore, the safety of sustainable and short-cut development can be based on two factors. Firstly, we should quickly develop new and sophisticated technologies to increase and retain the development rate. Secondly, we should prepare the best preconditions for industrialisation and modernisation, namely education, training, science, technology, infrastructure and management to take advantages of all opportunities. This content was mentioned in resolutions of the 9^th Party Congress, from the experiences of newly industrialised countries (NICs).

It is also necessary to clarify that whether Vietnam can catch up with other industrialised countries in a reasonable timeframe. To catch up with some regional countries it will take us rather a long time. For example, the current per capita income of Thailand and China is three to four times larger than Vietnam, but their rate of income increase is approximately or even higher than ours. If Vietnam can retain its current development rate, we still cannot catch up with them in 30 years in term of per capita income. This shows that it is not feasible to catch up with these two countries in the medium term.

However, if we compare Vietnam to other targeted groups of countries, such as developing countries, Asian countries, or average global level, the answer to the problem is completely different. For example, it would take Vietnam 20 years to catch up with and begin to surpass other developing countries. It will take Vietnam 30 years to attain the average global income level. It is even possible for Vietnam to keep up with developed countries, which often have a continuously low growth rate.

Moreover, these estimations are considering only the economic growth and per capita income, not the impact of exchange rates favouring the growth rate of countries such as Vietnam and the possibility to take sudden leaps in development when there are opportunities as predicted by our socio-economic development strategy. Foreign researchers have estimated that China has completed 73 per cent of its industrialisation process, and Vietnam, 61 per cent. This shows there is a foundation to realise our objective, "to make Vietnam basically become an industrial country by 2020".

4 - Agricultural and rural industrialisation and modernisation

a- Vietnam should prepare a suitable environment to implement specific policies and solutions in the agricultural and rural industrialisation and modernisation process. Priority should be given to the following three assignments:

- Quickly complete the rural poverty reduction programme to equalise socio-economic levels across urban and rural areas. Poverty criteria applied in rural Vietnam should be closer to international criteria to enable evaluation and comparison. Attention must be paid to sustainable development to prevent the return of poverty which will deform the rural environment.

- A commodity economy should be built immediately to accelerate agricultural diversification and help rural people get rid of the self-sufficient economy. To reach this goal, it is insufficient to develop rural infrastructure including electricity supply, roads, schools, health centers and markets and provide primary loans. It is necessary to form a network of medium, small and even micro-sized businesses by mobilising the participation of businesses from industrial areas and armed forces and State funding resources.

- Food safety and rural environmental protection should be planned. The land and water surface should be logically managed and efforts should be taken to prevent natural disasters.

b- Applying industrial and advanced management methods to agriculture, forestry and fishing industries to increase their output and improve the quality of their products to meet domestic and overseas needs will help raise farmers’ incomes to the average level. To reach this goal investment should firstly be sunk into technical foundations such as irrigation, mechanisation, biology and electrification. Meanwhile, production should be reorganised. It is impossible to industrialise agricultural production on small and scattered rice fields, or with too small organisations that are always in a passive position when selling their products and applying new technologies. Modern agricultural cooperatives in the plains and farms in the midlands, mountains or the coast should increase their size to make the application of new technologies more effective. It is now time to develop high-tech agricultural areas, renew agricultural production techniques and management methods, and restructure the rural lifestyle.

c- In the agricultural and rural industrialisation and modernisation process, it is important to develop rural industries or, in other words, restructure the rural economy and workforce. According to official statistics, the agricultural workforce currently contributes 20 per cent of the nation’s GDP. This ratio is estimated to fall to less than 10 per cent after 2020 (although the absolute value will still increase). Therefore, to raise farmers’ income to the national average level, it is necessary to reduce the agricultural workforce to increase the cultivable land area per farmer. As a result, more farmers will become redundant. Job generation will become an urgent task, which will continue throughout the industrialisation and modernisation process.

As a matter of course, industrial and service sectors will account for 80 to 90 per cent of the economy and be responsible for generating jobs for those made redundant. However, the best solution will not be to move all of them to big cities and industrial parks. This solution might help accelerate the urbanisation process, but it will be difficult to meet the needs of resident land and infrastructure and overcome environmental risks, let alone fund the generation of jobs in modern industries. The best solution will be to develop rural industries and services by forming a network of medium, small and micro-sized industrial and trade businesses close to raw materials areas to generate jobs for the agricultural redundancies, protect the environment and accelerate the urbanisation process.

In addition to large industrial parks being built on hundreds of hectares, development master planning should include a network of "sub-industrial parks" or medium and small-sized industrial areas in all provinces, including traditional craft villages. This will help reduce the pressure on industrial and urban areas, which in fact cannot provide sufficient social services and solve environmental issues.

d- The development of new rural infrastructure is a major issue. In the initial stage, attention should be paid to rural road, electricity and water supply. It will take more time to relocate people to suit the re-division of labour and improve the environment to maintain the rural natural scenery while helping rural people enjoy modern urban facilities.

To reach these objectives, the best way is to establish small townships where industrial and service businesses are concentrated, and which will become new rural technical and cultural centres. The townships should be widely distributed across the entire country, and connect new industrial centers and existing urban areas by accessible roads, an information network and other infrastructure facilities, will ensure harmonious national economic, cultural and social development.

In addition to developing technical infrastructure, we also need to implement a programme to educate and train rural human resources and foster the development of talented people, to meet the needs of the new situation.

5- Science and technology development

The Government policy on socialisation, which mobilizes all types of resources for the renewal of management in science, technology and tertiary education, has clarified the way to make science and technology, including education and training, become the real foundation of the industrialisation and modernisation process.

The current management method fails to directly connect researchers with those who use research findings. The State acts as an intermediary between the supplier and user, and provides the budget for science and technology research and application. Meanwhile, businesses, particularly State-owned businesses, are not bound, or more correctly, not motivated to access scientific advances. Most major science and technology agencies are State-owned, and their research activities depend heavily on the bureaucratic administrative mechanism and mainly subsidised by the State budget. As a result, scientists’ efforts and labour are not correctly evaluated.

To overcome these weaknesses, the State should issue policies on managing and encouraging of scientific and technological research and application, and to identify priorities for each period that are compatible with socio-economic development policies. The State should place orders by selecting agencies or organise bids to do research on State governance and fundamental sciences. Meanwhile, science and technology assistance funds and "venture" funds should be established to partially support research projects.

Policies and mechanisms should be developed to encourage and bind businesses to place direct orders to research institutions, to be supported and prioritised to establish science and technology assistance funds, and to use findings of domestic research projects. Under new policies and mechanisms, science and technology institutions will have the same right to sovereignty and self-responsibility for their operation, personnel organization and financing, whether they are State-owned, provincially-owned, public or private. They will differ only according to their level of knowledge and scientific and professional capacity, or, in other words, their capacity for competitiveness. Scientists will be paid according to their work outcome, which might be very high if their research is effectively applied in reality, or average if their research is not applied. In addition to this, concrete penalties should be issued to protect copyright royalties and other intellectual property.