The evolution of the reform process

This year the planning and investment sector celebrates its 70th anniversary, looking back on a series of momentous achievements in socio-economic development.

In the 1980s-1990s, Vietnam’s economy was bogged down in serious difficulties. Then the planning and investment sector took the lead in inventing a new development path for the economy.

The beginning of the economic recovery began as early as September 1979, when the sector provided consultancy for the Party’s Central Committee to enact Resolution 20/NQ/TW on expanding production. This laid a focus on making export-oriented goods, allowing the public to freely trade goods after they had accomplished their tasks for the state.

In 1980, the sector helped the Politburo develop and issue Resolution 26-NQ/TW on producing food, foodstuffs, and consumer goods. The public was, again, allowed to freely trade goods after they had accomplished their state-obliged tasks. Crucially, this allowed for the development of a market joined by private enterprises, which marked the turning point in the country’s economic reform.

Based on Resolution 20, the sector developed and submitted to the government the promulgation of two important decisions, which allowed state-owned companies to increase their right to develop production and business, and to use their budget.

In addition to fulfilling all duties assigned by the state, companies were encouraged to seek more input materials for the expansion of production. They could also engage in non-core business sectors, with products able to be sold to the state at both agreed and market prices. This was an initial step towards Vietnam developing a market-based economy.

The planning and investment sector also helped the party and government shift economic development away from its focus on heavy industries and towards an increased production of food and food-stuffs, consumer goods, and export-oriented goods.

However, priorities were also placed on developing specific heavy industries like electricity, coal, and oil and gas. This major policy was announced in the sixth National Party Congress in 1986.

The sector also directly compiled many important documents which were used by the Politburo to make Resolution 10-NQ/TW on renewing agricultural economic management in 1988. This resolution marked a major breakthrough in Vietnam’s agricultural development. The sector’s key agencies, including the State Planning Commission and the Central Institute for Economic Management (CIEM), played a leading role in providing consultancy for the party and the state to make a breakthrough in economic management thinking: to recognise that all sectors in the economy were important parts of the overall economic development. All individuals, teams, and foreigners were encouraged to invest and ramp up business in Vietnam. In addition to compiling many important documents on economic reforms, CIEM developed Vietnam’s first Law on Foreign Investment in 1987, creating the country’s first legal framework for attracting foreign direct investment (FDI) under the market mechanism, helping Vietnam receive more international resources for its development.

In 1988, 37 FDI projects were licensed, with a total registered capital of $366 million. In 1989, 70 projects registered at $539 million were licensed. In the 1988-2013 period, a total of 17,434 projects registered at $268.62 billion were licensed, with almost $111.7 billion disbursed. Last year, 1,588 projects registered at over $15.62 billion were licensed.

In tandem with the luring of foreign capital, the planning and investment sector also proposed strategies and policies to the government for economic development. The State Planning Commission and CIEM directly compiled the Law on Companies and the Law on Private Enterprises in 1990, the Law on Enterprise Bankruptcy in 1993, and the Law on Encouraging Local Investment in 1994. These laws recognised – for the first time – the existence of private enterprises and their legitimate rights to do business in Vietnam.

Between 1986 and 1990, Vietnam’s total development capital increased 18.6 per cent against the previous 1981-1985 period, thanks to a rise in non-state capital. Total development capital continued to rise over the successive periods, contributing hugely to the economy’s growth over the past more than 30 years.

In more recent years, improving the local investment and business climate, as well as enhancing the economy’s competitiveness have been core tasks actively undertaken by the planning and investment sector.

The Ministry of Planning and Investment (MPI) has requested its units compile and amend many business-related laws, such as the laws on State-owned Enterprises in 1995 and 2003, and the Law on Co-operatives in 1997. Notably, the laws on Enterprises in 2000, 2005, and 2014 are trailblazing ones that match international practice. They have enabled both the public and enterprises to freely conduct business within the market mechanism.

The MPI also co-operates with other ministries and agencies to develop many decrees and circulars guiding the implementation of these laws. This has contributed to improving Vietnam’s legal frameworks on business activities.

The planning and investment sector also assists the government in mobilising the international community’s financial and technical support. Over the past 30 years, official development assistance (ODA) has played a crucial role in helping Vietnam build infrastructure works and improve its production capacity. The MPI has directly worked with donors and called for ODA, the use of which has been highly commended by donors.

In recent years, Vietnam has been integrating ever deeper into the global economy, which has had clear advantages in increased trade. However, this has also opened Vietnam up to global vulnerabilities. In 2008, the global economic crisis hit Vietnam’s economy. To cope with this situation, the planning and investment sector, the key consultant for the party and government in devising socio-economic strategies and policies, proposed a major programme on economic restructuring in 2009.

So far, this programme has been a partial success, with the growth slowdown curbed and currently rebounding, and the confidence of local and foreign investors steadily recovering.

Regarding public investment, the MPI helped the prime minister enact Directive 1792/CT-TTg in October 2011 on correcting public investment activities and developing a mid-term investment framework. Thanks to this policy, the effectiveness of Vietnam’s public investment activities has been vastly improved.

Recently, the MPI compiled and submitted the laws on Public Procurement and Public Investment to the National Assembly. These laws have already been adopted, ensuring that the state budget is used appropriately.

In addition, the legislature passed the Law on Enterprises which drastically reduces procedures for enterprises. The law also allows enterprises to do business in all sectors, apart from those specifically listed as unlawful.

The MPI has assisted the government in developing and promulgating a programme to simplify administrative procedures in state management sectors for the 2007-2010 period (known as Programme 30). Implementing this programme was one of the key tasks of the government during the 2006-2010 period. The MPI’s recent publication of its set of administrative procedures has been very important, mirroring the MPI’s determination in boosting administrative reform in favour of the public and enterprises.

The MPI’s set of 503 administrative procedures include 257 for establishment and operations of enterprises, 52 for establishment and operations of co-operatives, 78 for investment in Vietnam, 10 for overseas investment, 92 for bidding, and 41 for ODA-funded investment.

The planning and investment sector has played a crucial role in the significant achievements secured by Vietnam over the last 30 years. During this time, the sector has also gone from strength to strength, evolving from its central agency status in charge of making economic plans within the centrally-planned subsidised economy, to a consulting agency for the party and the government in charge of designing, implementing, and co-coordinating economic strategies and policies within a socialist-oriented market-based economy.