The core economic philosophy expressed in the documents adopted by the 11th
National Congress of the Communist Party of Viet Nam is that the economy must be
restructured and the model of growth shifted in order to ensure rapid but
|Prime Minister Nguyen Tan Dung outlines the government’s economic strategy for 2012.|
Three strategic breakthroughs are a precondition to implementing this
philosophy, with the accomplishment of institutions necessary for a
socialist-oriented market economy the key breakthrough that directly affects the
process of shifting the model of growth. Doing so does not necessarily require
an enormous investment of financial resources and therefore could be
accomplished in a rather short time with determination and the proper
After more than 20 years of pursuing the policy of doi moi (renewal), our
country has recorded important achievements in building the institutions of a
socialist-oriented market economy. Thanks to these achievements, we have been
able to mobilise various resources for development, ensuring high growth,
creating jobs and improving people’s quality of life.
However, our market institutions remain uncompatible with elements of the market
economy yet being fully formed. Many difficulties are still found in the
property market. The unbalanced development of the financial market, the
prematurity of the bond market, and the stock market’s lack of depth and
inability to become an important channel for raising capital are putting a
burden on the credit market, making it all the more vulnerable. The market in
science and technology has been slow to develop. The labour market is fairly
complete, but the low quality of human resources combined with irrational wage
structures among economic sectors are major barriers to the movement of labour
to essential areas and the supply of public services. The prices of some goods
and services are also not yet able to compensate for their costs as required
under a market system.
A market economy includes various institutions operating in an integrated
manner. Just one that does not operate completely will prevent the functioning
of others and block the entire system. Against that backdrop, it would not be
difficult to foresee the need for certain administrative interventions in the
economic process. Such interventions might be useful to help overcome immediate
difficulties but costs would surpass the opportunities created, and interfere
with the course of development. And, at the end of the day, the fundamental
issues would remain. This is a paradox that regulators must understand in order
to formulate correct and consistent responses.
In light of this, it is necessary for us to focus our strength on further
accomplishing the institutions of a market economy in 2012 as defined by the
11th National Party Congress.
In the context of globalisation and tough competition, our country can only
accelerate growth and narrow the gap with other countries in the region if we
develop a modern set of institutions for a market economy that facilitate the
movement of resources across sectors and regions of the country according to
signals from the market, along an average profit axis in order to ensure the
harmonious and balanced development of the economy. This would in turn encourage
enterprises to develop their human resources, as well as apply innovative
management and production technologies, thereby creating a dynamic competitive
advantage against other business entities in pursuit of superior profits. The
process would encourage a continual refinement in investment structures, forging
an economy that offers a high degree of innovation and ensuring the efficiency
and competitiveness of the economy itself. These are the dialectics of
It is necessary to take the features of modern market institutions as the
standards for our own institutions.
First, we need to have integrated development of all elements of the market
economy so that they are fully formed and functioning in harmony, one supporting
the other in a perfect whole. This is the very condition for the economy to
function smoothly, allowing all resources to move freely and be allocated
rationally and effectively.
In 2012 and the years beyond, it will be necessary to further amend the Land
Law, establishing conditions to promote healthy development of the property
market. We also need to develop the bond market, expand the insurance market and
advance the science and technology market. It is also important to give a boost
to human resources development, especially high-quality manpower, and continue
to pursue wage reform to facilitate the smooth functioning of the labour market.
We should also persevere in applying market prices to products which are still
under State price control.
Second, a modern market economy requires the establishment of an equal
competitive environment for all players on the market. Competition is a feature
of a market economy and a criterion to measure the market nature of an economy.
A highly competitive market will also help control prices much better than a
State price control regime. The important thing is competition forces businesses
to cut costs and improve productivity to ensure efficiency.
The Government will review and evaluate the competitiveness of each sector to
eliminate the discrimination experienced among enterprises of different economic
sectors. It will also improve legislation on competition, monitor natural
monopolies, and build the capacity to protect intellectual property as well as
that of regulators to handle cases of unhealthy competition or abuse of market
Third, it is necessary to highlight transparency and accountability in the
implementation of management policies and development projects as well as in the
operation of businesses. The impact of opening and integrating our markets are
closely linked to the formation of multiple ownership structures that lead to
the emergence of certain ’interest groups.’ Objectively speaking, these interest
groups might affect the policymaking process. Transparency not only helps create
equal opportunities for access to information, but, more importantly, the
transparency and accountability also allow public oversight of decisions made by
regulators. They provide the fundamental measure to prevent corruption and the
possible impacts that interest groups might have on the policymaking process,
ensuring that decisions made are in line with common values and in the interest
of the nation. Transparency also helps limit speculation, reduce costs and
enhance market efficiency.
In the past, thanks to the Law on the Promulgation of Laws and Regulations, as
well as question hours during National Assembly sessions and meetings of
People’s Councils, our State administrative agencies have made great progress in
terms of transparency and accountability. However, what we have achieved still
falls short of ideal.
Most goods on sale at the Pham Hung Satra Supermarket in Binh Chanh District, Ho
Chi Minh City are made in Viet Nam. Plans to further promote domestic goods in
the Vietnamese market aim to help stimulate the economy.
The guiding political position of our Party and State is to ensure the people’s
right to access to information and to voice social criticism, and the Government
will therefore study ways to improve its regulations on publication of
information and the freedom of access to information while simultaneously
increasing the dialogue among administrative agencies,
independent experts and the public on policies and development projects, not
only at the current “post-decision” phase but in the more important
“pre-decision” phase. Furthering the cause of renewal and improving the quality
of question hours with a focus on responding to issues related to development
policies and their impacts on different strata of the population.
Fourth, creating modern market institutions in an era of globalisation and
all-out international integration requires us to redefine the relationship
between the State and the market. Accordingly, the State should shift from
direct intervention into economic processes to performing an innovative function
to ensure economic stability and a favourable climate for business and
investment, thereby forming a setting for the development and improvement of
A challenge to State administration in the time of globalisation are global
impacts on the domestic market. This requires the State to boost its capacity to
forecast and formulate policy responses to mitigate negative impacts on the
economy. Globalisation also places a segment of the population in a more
vulnerable position with regards to the increasing gap between the rich and the
poor. The State therefore needs to have proper policies and apply regulatory
tools to address these negative aspects of the market economy and of
globalisation, thus ensuring economic growth goes hand-in-hand with progress and
It is necessary to reiterate that the market operates according to its own rules
- first and foremost the rules on competition and profit. Its development along
a socialist orientation is the State’s aim. The State needs to bring into full
play the market’s “self-regulating power” while it also has to “dispel” the
negative impacts of the market.
From that perspective, we can see that the role of the State is not weakened but
strengthened with new powers and new ways of influencing the markets.
We should base ourselves on the basic concepts of building a socialist state
ruled by law, set by the 11th National Party Congress to further improve the
State apparatus at all levels with regard to functions, organisational
structures, decentralisation and the proper relationship between the State and
Fifth, a modern market economic institution must focus on consumers. It is
necessary to continuously improve regimes to protect consumer rights and,
develop consumer protection centres. The Government will focus on the
development and improvement of technical and food safety standards and increase
inspections of imported goods as well as of goods distributed on the domestic
market. It will review and improve regulations under the Law on Consumer
Protection to effectively enforce it, thus creating a legal foundation to
encourage the development of non-governmental organisations dedicated to the
protection of consumer rights.
The modern institutions of a market economy would, all told, create conditions
for our country to better grasp opportunities and overcome challenges it faces
in fiercer competition in a rapidly globalising economy.
A new growth model
When talking of the strategic breakthroughs that are the preconditions for
economic restructuring, we should understand that it is not necessary to have
these done before shifting our growth model. The preconditions are being
formulated and will be perfected throughout the course of development.
Restructuring must take place on an ongoing basis under the influence of the
scientific and technological revolutions and the shift in competitive advantages
among enterprises and across borders. It is from this standpoint and according
to the vision set forth in the Strategy for Socio-economic Development for
2011-20 adopted by the Third Meeting of the Party Central Committee of the 11th
National Party Congress that sets forth the requirements for economic
restructuring and for a change in the growth model as part of the five-year plan
The goal is to enhance productivity, product quality, efficiency and competency
on both domestic and international markets so that we can participate in high
value-added stages of regional and global production supply chains. Accordingly,
the course of economic restructuring would be comprehensively pursued along the
First, restructuring of industries and services. This would mean a shift from
assembly industries with low scientific and technological content and added
value to the development of manufacturing and processing industries having a
high level of added value, with a focus on support industries and some high-tech
products for which our country has advantages and capacity.
To improve the quality of services, particularly with regard to the “arteries”
of the economy such as financial services, it is necessary to improve management
capacity to prevent and avoid risks and ensure system safety.
We need to develop services offering high added value, services supporting
business and reform our system for encouraging the development and improvement
of service quality.
In the agricultural sector, we need to develop an agriculture based on
production of major cash crops with high yield, quality and efficiency. This
would be attached to the development of a new rural life and the improvement of
farmers’ lives. Agricultural industries and all stages of agricultural
production from farming to processing and distribution must be restructed. It is
also necessary to link the stages of the production process along the value
chain to ensure a harmonious distribution of profit across the stages of that
value chain. This is fundamental to the development of sustainable agriculture.
Second, it is necessary to restructure enterprises. The course of economic
restructuring starts from macro-economic policies but must also be conducted in
each and every enterprise. Enterprise restructuring provides the foundation for
the creation of a new face for the economy. To restructure enterprises, it is
necessary to apply the latest scientific and technological advance in the fields
of management and production, reforming corporate governance and organisation in
line with the advance of production technology and the development of the market
in order to improve business competitiveness.
Third, it is necessary to adjust market strategy. Globalisation and
international integration open up a vast market for enterprises, enabling them
to make full use of the advantages arising out of their investment projects.
However, globalisation also increases the interdependency of economies,
especially those with a high level of exposure like ours. This might also lead
to certain uncertainties beyond our forecasts. It is therefore necessary to
diversify our products and export markets, limiting dependency on a handful of
markets while at the same time promoting the domestic market, especially in
rural areas. To the export markets, the important thing is not an increase in
exports into one country or territory but penetration into the value chain in
the context of increasing development of global production and value chains.
Such a situation requires the formation of a supply chain here in the domestic
market. This is the way towards sustainable trade development.
Investment in infrastructure must also be restructed according to a roadmap and
under a decentralised system closely monitored according to long-term vision and
with an inter-regional perspective. It is necessary to eliminate scattered and
unfocused investments and channel funds to essential projects to facilitate the
movement of production elements to regions with strong potential for
development, thus reducing transportation costs and improving competitiveness.
It is also necessary to decrease public spending overall and boost incentives to
attract investment from the private sector and foreign enterprises, designing
new forms of investment, particularly the public-private partnership (PPP).
Economic restructuring must begin with the most urgent areas, such as
restructuring of the financial market with a focus on the commercial banking
system, and the restructuring of State-owned enterprises with a focus on State
corporations and economic groups. This is necessary since these areas are those
in which efficiency remains low and incommensurate with the resources dedicated
to them. They also present risks that could lead to economic instability and
negatively affect sustainable development of the entire economy.
The Government is carefully planning the restructuring of each sector,
establishing tight procedures at each step in order for each sector to meet
specific targets in a manner that can be evaluated in accordance with clearly
defined criteria. It is a must to ensure the integrity of the restructuring
process since so many sectors are interrelated. It is also important to enhance
oversight of the process by ministries, local governments and enterprises to
maintain stability and avoid major disruptions to the economy – or, in other
words, to “pull the string” without “disturbing the woods”.
Economic restructuring also demands a shift in the model for growth. The shift
in the model is a key component in restructuring, providing the conditions to
enhance capital efficiency, improving the effectiveness and competitiveness of
enterprises, and strongly affecting the structure of investments and financial
markets, contributing to the mitigation of restructuring costs. It is necessary
to shift strongly from extensive capital investment, the exploitation and
exhaustion of natural resources, and low-quality manpower to a growth model
based on the application of scientific and technological advances and
high-quality human resources. We should increase the contribution of the
elements in total factor productivity (TFP) to economic growth. It is necessary
to develop manufacturing and processing industries, but especially the high-tech
ones that offer high added value, while decreasing the ratio of assembly
industries in total industrial production value.
The process of changing the model for growth is both urgent and long-term,
linked closely to human resources development and the reform of production
technology and governance. To accelerate the shift, this year the Government
will introduce incentives for the renewal of technology by enterprises and
define technological standards in the Law on Public Investment and the Law on
Tendering, in addition to encouraging development of the science and technology
market, which would give strong incentives to projects applying new technologies
or facilitating the establishment of research and development centres. We will
enhance public-private cooperation in the establishment of venture capital funds
and draft legislation to facilitate development of support industries.
This year, along with economic restructuring and shifting the model for growth,
we must develop a fuller understanding of the guiding viewpoints in Politburo
Conclusion 2 and Government Resolution 11 to strengthen economic stability,
control inflation, maintain a reasonable growth rate, and ensure social
security. These are difficult tasks, particularly against the backdrop of the
complex developments in the global economy, which continues to face the
possibility of another recession. Therefore, all must make their greatest
efforts. The State will have an important role to play in determining the path,
developing the policies and guiding the implementation. However, what is to be
achieved will depend on each sector and business entity. Enterprises are key
players with a decisive role.
We enjoy a fundamental advantage in having achieved high consensus within the
political system as well as the firm determination of the business community and
State adminstrative agencies from central to local levels. Now it is the time to
turn such advantages into resolute actions to overcome inertia and begin a new
phase to put our country into a new trajectory of sustainable development.