SUMMARY

THE COMPLETION OF THESOCIALISM-ORIENTED MARKET ECONOMIC INSTITUTION

So far, managing and completing the socialism-oriented market economic institution have been daily works and efforts of Vietnamese people, enterprises, business households, authorities of different levels, and organizations in the political system, depending o­n their functions and tasks. As a matter of fact, by examining and assessing policies and legal documents o­n daily basis, adopting proper parts of these policies and legal documents to normal life, shortcomings and weaknesses of policies and legal documents have been exposed, while new sound and creative points have beenfigured out, resulting to the gradual completion of the socialism-oriented market economy institution.

I- Common conceptions o­n institution, market economy, and market economic institution

1 - Institution: A general definition of institution covers three aspects. First, “rules of the game” – including state institution, i.e. legal documents, and non-state institution, i.e. customs, traditions, and social standards. Second, “organizations”, of which, any single organization is a group of people getting together in a certain way, responsible for establishing and implementing a certain form of institution. And third, “implementation mechanism”, i.e. means and measures employed by people to implement institution.

A major role of institution is to minimize uncertainty of transactions by setting up a stable mechanism for interaction among different agents. Stability makes agents confident to set up transaction relationship and make investment for future. Institution is not immutable but evolving and developing along with developments of human society.

2 - Market economy and market economic institution: The most important discovery in political thought of Vietnam’s Communist Party is that market economy should not be seen as a product of capitalism o­nly but of all human society.

A distinguished feature of market economy is competition. No market economy can exist without competition. Competition results in better distributing and using of resources in an economy. Competition promotes innovation and technology improvement, rationalizes production processes, saves costs, decreases prices, and increases product quality. Thus, competition means both pressure and motivation for development of market economy. To maintain competition, private ownership must be established and protected. In market economy institutions, private ownership right and economic free right become the most important o­nes.

However, market economy possesses an inherent character that is spontaneous. This feature results from market’s operational mechanism which could lead to big losses such as inflation, unemployment, recession,… o­n the other hand, in market economy, it’s hardly to achieve perfect competition. This situation results in monopoly and the comsumers will be losers and resources will be allocated ineffectively.

Market economy is so diversified that it is hardly possible to find two market economies in two nations that are the same. Some researchers divided market economy into 5 types: (i) liberal market economy (the United States), (ii) social market economy (Germany), (iii) market economy of welfare state (Sweden), (iv) Asia-liked market economy (Japan and 4 dragons) and, (v) market economy transformed from planned non-market economy with different names, depending o­n each country (China, Vietnam, Russia, and some Eastern countries).

Modern market economy has witnessed many fundamental and profound developments. In the economic term, modern market economy is called with different names presenting its different characteristics, such as: globalization economy, real and virtual monetary economy, industrial economy, high technology economy, service economy, informatics economy, and internet economy, etc. In the social term, modern market economy reflects interconnection among the economy and politics, culture, and the society, and also called with different names, such as: sustainable development economy, intellectual economy, living market economy, caring (of people) economy, etc.

3 – The socialism-oriented market economy institution in Vietnam

In April 2001, the IXth Congress of Vietnam Communist Party defined the socialism-oriented market economy as a comprehensive economic model that Vietnam would adoptduring the transition period striving to the socialism. Its major characteristics are as follows:

1.Goals: wealth people, strong nation, and equal, democratic, and civilized society.

2.To develop a modern production force

3.To establish production relationship with various ownership, and different economic sectors, in which, the state economic sector plays a core role, state economy cooperates with private economy making up a sound basis.

4.Distribution is made o­n basis of labour efficiency and economic effectiveness, meanwhile, distribution also depends o­n contribution of capital and other resources for production, business, and social welfares.

5.Economic growth associates with social advancement, social justice, and environmental protection.

6.Economic growth associates with cultural and education development.

7.The state tries to tap self-control of people in accordance with leadership of the Party, manage the socialism-oriented market economy in aproper way.

In April 2006, the X^th Congress of Vietnam Communist Party redefined and confirmed o­nce again the 7 points of goals and characteristics of the socialism-oriented market economy in Vietnam.

II-To further complete socialism-oriented market economy institution in Vietnam

1. To enhance roles, management enforcement and effectiveness of the State

The State management should focus o­n what really necessary and belong to the State’s functions, while let the society carry out what they can do. It is important that functions and tasks of the State must be fulfilled well.

First, the State needs to direct development by management tools, such as: strategies, planning, plans, mechanisms, and policies. Intervention measures of the State should change from direct to indirect management tools, and strictly follow market principles.

Second, the State is required to create favourable legal and policy environment to tap almost all social sources. The legal environment should be transparent and open for fair competition between business entities.

Third, the State plays a role of development aid through building important socio-economic infrastructures and social security system.

Fourth, the State ensures sustainability and activeness of macro-economic balances, minimizing risks and adverse impacts of market economy.

Fifth, the State influences markets mainly through economic policies and tools; meanwhile using administrative measures when necessary to make markets operate effectively, and/or when big changes happen with world markets.

Sixth, the State controls must base o­n legal system, minimizing administrative interferes into activities of markets and enterprises.

Seventh, the State continues reforms of financial and monetary policies, ensuring stability and sustainability of national finance.

2. To complete economic institutions

First of all, it is important to establish and complete legal system o­n ownership with a view to institutionalizing development path of socialism-oriented market economy.

Regarding investment policies, it is required to review, and adjust regulations that have discrimination against enterprises of different economic sectors.

To ensure a fair credit environment for all economic sectors with a transparent, consistent legal framework that in line with international standards. To complete policies to protect business freedom and fair competition via implementation of Laws o­n Enterprises, Investment, and Competition.

To define limits for State interventions with administrative measures into enterprises’ activities. To remove irrational regulations o­n licensing and approving.

To further institutionalize land use rights in accordance with laws, and to supplement sanctions against cases of using land for wrong/ ineffective purposes.

3. To complete State institutions to match with and promote the socialism-oriented market economy and administrative reforms

The completion of state institution is required to ensure 4 principle conditions: (i) transparency, (ii) public participation, (iii) empowered people, and (iv) accountability to the public.

Thus, it is necessary to adjust functions and tasks of the Government, ministries, ministry-leveled agencies, governmental bodies, and local authorities of different levels, so as to make them in consistence with requirements of state management in market economy. Particularly, the Government should focus o­n tasks of establishing, promulgating, providing guidance, and checking the implementation of macroeconomic management institutions

4. To complete civil society and relationship between the State and civil society

Civil society institutions should be built with a view to facilitating civil participation into activities, such as: (i) information supply and citizen education; (ii) capacity enhancement for collective activities, tapping resources and cooperation to deal with common issues, including: poverty and environment, etc. increasing right and power for vulnerable group, e.g. handicap people, women, and children; (iii) building “social capital” through relation network among members of communities.

III-Synchronous development and effective management of markets’ operation o­n a basis of fair competition

1. To develop goods and services markets

The State gradually removes business monopoly, even with fields that are sensitive to the economy, like petroleum and electricity and accelerates trade liberalization in accordance with Vietnamese commitments o­n international economic integration to develop service sector, particularly high-end services with high intellectual contents and added value.

2. To develop a sound financial market

Independence and self-governance of the State bank should be extended, making it have functions of a central bank managing monetary policies, minimizing interventions of related authorities into activities of the State bank. Fundamentally, it needs to reform state management mechanism to state-owned commercial banks and other credit organizations towards financially self-control, and self-responsible for personnel and operational results.

Accelerating equitization process of state-owned commercial banks; further completing and enhancing enforcement of laws and regulations o­n monetary and credit issues; implementing commitments o­n international integration, ensuring effectiveness of banking system as integrating in to WTO.

Creating legal framework for safe, healthy, and sustainable development of securities market as a channel for medium and long-term capital mobilizing and distributing.

3. To develop real estate market

Land is an actual development source. Domestic real estate market should be competitive in comparison with other regional markets. o­ne note-worthy point is that land (and/or land use right) is a kind of goods strictly following market principles. To make land use right a real kind of goods, it is necessary to fulfill steps as follows:

(i)To carry out land planning and land-use plans in a proper manner

(ii)To establish a register and supervision system o­n changes regarding land and real estate

(iii)To complete financial institutions related to land

4. To develop labour market

The key to success here is to reform salary mechanism towards market orientation, making salary/wages an incentive for labourers to increase their working efficiency; and vice versa, working efficiency – to it turn – decides salary/ wages.

Given requirements of labour market, mapping out proper vocational training policies. Vocational training facilities will operate in form of for-profit enterprises. The state will provide support for trainees when required.

Focusing o­n labour exporting, particularly skilled and agricultural labourers. Setting up a legal system o­n labour and labour markets.

Renewing functions of labour insurance, separating two different functions of insurance and redistritution that current insurance system is responsible for.

5. To develop science and technology products market

First, strictly implementing Laws o­n Intellectual Right and o­n Technology Transfer with a principle that all participants of science and technology markets have to follow rules of market economy. Research and development organizations will be transformed into enterprise form. Meanwhile, the State must increase information supply and create a competitive environment to facilitate science and technology products trading in the markets.

IV-Bonus development of economic sectors, and organizational forms of business and production

1. To further reform, develop, and enhance effectiveness of State-owned enterprises (SOEs)

The first thing to do is SOEs restructure. There will be some SOEs just focus o­n some fields of infrastructures, producing important production materials and services, and some public fields. The rest of current SOEs will be reforms through equitization, or transforming into private enterprises. Thereby, the role of SOEs will not be reduced but promoted in a proper way.

All SOEs are required to operate in a fair, open, and transparent competition environment. Monopoly and production privileges to SOEs will be removed. SOEs will be granted self-control and seft-responsible, in market and legal terms, like others. Thus, operational effectiveness of SOEs will be much improved.

2. To further reform and develop cooperative economic forms. Cooperatives are built o­n a voluntary basis with capital contribution of individual members, and operating o­n non-profit basis. To encourage development of this model, it is required to seen cooperatives as a form of enterprises, following laws and regulations o­n enterprises with accounts taken for non-profit feature. Thus, legal framework for cooperative operation should encourage capital raising from individual members for working capital, development investment, assets, and fixed funds in cooperatives.

3. To develop household business and private enterprises. In the socialism-oriented market economy, private economic sector makes up an important force of national economic development. Private economic sector consists of individual/ household businesses and private enterprises. It is necessary to make a change in adverse preconceptions against private economic sector, and to create favourable institutions encouraging development of private sector while practicing required intervention to ensure fair national income distribution.


Source: Center for Information and Documentation - CIEM,
              VNEP,