MPI chief makes rallying call for reform

Minister Vinh stressed that political renovation is crucial to maintaining the country’s upward trajectory

Today we are here to attend the 12th National Party Congress, an important political event marking the 85th anniversary of the Party’s establishment, more than 40 years since national reunification, and 30 years since Doi moi was initiated which has developed Vietnam from one of the world’s poorest countries to a middle-income nation.

Since 1986, Vietnam’s per capita income has almost quadrupled, and the poverty rate has reduced from over 50 per cent to less than 5 per cent.

The achievements obtained throughout the Doi moi process are irrefutable and they are the cause that has helped Vietnam overcome a lot of challenges in the past 30 years. However, Vietnam remains a poor nation. We are not yet satisfied with what we have achieved, especially compared to other regional nations who have the same conditions as Vietnam.

It is not widely known that in the 1820s, Vietnam claimed a very significant position in the region in views of its sizes of both population and economy, which was stronger than that of the Philippines and Myanmar combined, and 1.5 times bigger than Thailand’s. At that time, Vietnam’s per capita income was almost equal to the world’s average. However, in 2014, Vietnam’s per capita income was $2,052, roughly one sixth of the world’s average (almost $12,000), and one third of Thailand’s ($5,519).

However, comparisons are always unfair, as Vietnam had to conduct wars against foreign invasions. We have had more than 40 years of peace since the national reunification [in 1975] including more than 30 years of Doi moi. This has been a long period of time, equivalent to the time that was used by several nations like South Korea and Japan to turn themselves from poor agricultural nations into developed ones.

Moreover, at present, now more than ever, it is imperative that Vietnam boost its Doi moi and development:

Vietnam is currently in a short timeframe of a “golden” population (1970-2025), meaning that we only have about maximum 10 years left to capitalise upon our country being full of working age people.

The momentum of Doi moi in the past has become less effective, while Vietnam’s growth catalysts such as investment capital, cheap labour, and exploitation of natural resources, are also becoming less favourable.

Vietnam has been increasingly integrating into the world’s economy. Integration means we have to accept competition. As such, improving the economy’s competitiveness is a vital task.

Because of those three reasons, we need to continue strongly renewing the country in a more effective manner; otherwise we will lag behind other nations, our economy will continue being backward and fall into a lower middle income trap.

Five years ago, in January 2011, the 11th National Party Congress adopted a resolution on the 2011-2020 Socioeconomic Development Strategy, which stated that “Doi moi must be conducted persistently and drastically. Political renovation must be conducted in tandem with economic renovation under a suitable roadmap. There should be a focus on improving the socialist-oriented market-based economy, renewing the Party’s leadership method, building up the socialist-oriented law-governed state, and expanding democracy within the Party and in the society.” The resolution also noted that “It is necessary to use this target as the highest standard to assess the effectiveness of national renovation and development.”

In fact, over the past five years, we have been actively renovating the economy, with some positive results achieved. However, we have done almost nothing in terms of political renovation.

That’s why the Doi moi over the past five years has failed to achieve the desired results.

Over the past 30 years, Vietnam’s biggest achievement in Doi moi is that the concentrated planning economy has been transformed into a market-based economy, which has remarkably changed our lives and developed the country.

Nevertheless, over the past 70 years, the organisational structure and the operational method of the Party, the state, and organisations in the political system have remained almost unchanged. A political system which was suitable for the previous concentrated planning economy, especially during wars, has become unsuitable for the current market-based economy conditions. It has even become a hurdle for development.

Thus, it is quite urgent to renew the political system and the economy synchronously in the coming period. The Party, as the country’s highest leadership body, needs to take the initiative by reviewing itself and implementing the resolutions that the National Party Congress has made. The organisational structure, functions, duties and and operations of the Party, the state, and political organisations must be radically renewed for more effective operations.

This would be the most important factor for the next Doi moi. If it does this well, the Party will restore people’s confidence in it by its example in self-renovation and effective leadership.

Regarding economic renovation, the focus of economic institutional renovation for the upcoming period must rely on the three pillars:

Pillar 1: Economic prosperity must be in line with environmental sustainability:

- Vietnam must continuously have high and stable growth for the next 20 years, with an average 7 per cent rise in per capita income (equivalent to an annual 8 per cent growth rate), so that in 2035, the average per capita income will be $15,000-$18,000. To reach this target, the best way is to increase labour productivity.

In respect to the role of labour productivity, Paul Krugman, the Nobel prize-winning economist, said that “Productivity isn’t everything, but in the long run it’s almost everything,” and that whether a nation capable of raising its long-term living standards or not would almost depend on the capability of raising its output per capita.

Vietnam’s labour productivity increase has continously slowed down since the late 1990s. Productivity currently remains very low as compared with regional peers. Notably, the productivity of Vietnam’s private sector has also been declining and currently stays at a very low level. The main reasons include:

(i) Vietnam’s economic and labour structures remain quite backward. The rate of labourers in the non-official area is much higher than that in the official area. Over 44 per cent of labourers are working in agriculture, which creates low added value.

(ii) The foundation for the market-based economy is slow to be improved, harming asset ownership and stunting competitiveness in the goods market.

(iii) The market for production factors like capital, land, and natural resources are not allocated under the market mechanism. They are now being allocated by state orders.

-High priority must be placed on developing local enterprises, especially private ones, qualitatively and quantitatively. This must be considered a task for the state apparatus at all levels. Enterprises’ health is the lifeblood of the economy. Enterprises’ competitiveness and efficiency must be improved via the strengthening of the foundation of the market economy, especially the right to own assets.

Policies must be made to create a level playing field for them, in terms of access to capital, land, information, and natural resources.

-An impetus for enhancing local enterprises’ startup spirit is needed. The state must create a favourable environment for start-ups, via the construction of centres in charge of instructing and training start-ups. The state also needs to provide knowledge and capital for such enterprises via the establishment of venture investment funds and venture investment banks. This is aimed to trigger a new wave of start-ups and entrepreneurial spirit in the society. The position of enterprises must be considered that of the nation’s.

-To sustain high growth over a long period of time, it is also necessary to increase reform, studies, and creative renovation. Enterprises and scientific research organisations currently have no impetus to pursue a productivity promotion programme. Thus, the development of a national creative renovation system is a must to improve Vietnam’s labour productivity.

Pillar 2: Equality and social integration

- In addition to quick development under the market mechanism and law, fierce competition will widen the gap between the rich and the poor, and opportunities in access to basic social services. To this end, in addition to policies for developing the economy quickly and strongly, we must have policies in place to ensure equality for all in access to basic social services, especially for the vulnerable and the poor. This is the socialism’s preeminence and the responsibility of the state in building a socialist-oriented market-based economy. This is also an action to well implement the United Nations’ action plan on Millennium Development Goals for the post-2015 period.

Pillar 3: Improving the state’s capacity and accountability

- Current low labour productivity and an unfavourable environment for the private sector can be ascribed to the state’s lack of effective operations. Due to Vietnam’s historical conditions, the public institutions have been commercialised, disconnected and lacked public supervision.

- The state’s efficiency consists in three mainstays: (a) A well-organised government with disciplined and talented officers. Problems must be tackled to create a closer state structure and ensure a career-real talent regime (b) The market principle should be applied more effectively in making economic policies, based on the clear determination of the public and private sectors, limited conflicting interests, strengthening the protection of asset ownership rights (especially in terms of land), implementing market competition, and the suitable participation of the state in the economy. (c) Further improving accountability via the introduction of an effective mechanism on the control and balance of the three power forces. A legal framework must be created to promote citizens’ rights. Citizens’ right to access timely and accurate information as well as the role of mass media must be strengthened.

- Vietnam’s legal framework has enabled citizens to join the state governance process. “The state of the people, by the people, and for the people” and “People are informed, people discuss, people act and people examine” are already specified in the Constitution. However, citizens have been limited from participating in this process.

In order to effectively reform the economy, which is one of the Party’s three breakthrough tasks, the Ministry of Planning and Investment has co-operated with the World Bank to rally leading economic experts at home and abroad to compile the “Vietnam Report 2035: Looking to prosperity, creativity, equality, and democracy”. The report aims to define Vietnam’s position on the world stage, its challenges and goals until 2035 and how to realise such goals. The report includes 10 chapters focused on three development pillars and six major transformations. It also proposes development strategies suitable to Vietnam’s existing conditions as a lower middle income nation, with a view to turn Vietnam into a high-income or near high-income nation by 2035.

The major transformations include: the construction of a modern law-governed state with a full market-based economy and a developed democratic society; and the boosting of economic modernisation in tandem with the enhancement of the private sector’s competitiveness.

The transformations also include the development of creative renovations that focus on the private sector; ensuring social equality for vulnerable people, and the development of middle-class society. Efforts must be made to ensure environmental sustainability and resilience against climate change; and to ensure connectivity between cities and surrounding areas.

Hopefully, the report will be helpful for the new managers and leaders, especially those who have just been elected to the 12th Central Party Committee, to devise Vietnam’s development policies.

Vietnam is witnessing a turning point in reform and development. Big opportunities also bring challenges and difficulties.

In order to build an affluent, creative, equal, and democratic Vietnam, we have no other choice but to accelerate the reforms of these issues. If we fail to conduct such reforms, we will not be able to tap into any opportunities, and surmount upcoming challenges, and we may also lag far behind and fall into a middle income trap.

We believe that the Vietnamese people will have sufficient will, spirit and capacity to successfully implement Doi moi.