VRDF 2019: Institutional reform key for modern market economy

Experts at VRDF 2019 highlighted Vietnam's need for institutional reform

This was widely agreed by panellists of the first discussion session of the Vietnam Reform and Development Forum 2019 (VRDF) organised in Hanoi today.

Developing and improving the market economy is a strategic task which plays a significant role in driving rapid and sustainable development, promoting economic restructuring in connection with the renovation of the growth model. This way, institutional reform is closely tied to the industrialisation and modernisation process, and to lifting Vietnam from the lower-middle-income countries into the upper-middle-income bracket.

Being aware of the importance of an integrated market economy, the state has made great efforts to create an institutional framework and enforcement apparatus that can ensure the clarity and transparency of ownership rights and effectively protect property rights, while simultaneously ensuring the freedom of contract and contract enforcement. Besides, the state ensures fair competition and the regulation of monopolies and maintains social order and safety.

In addition, the state has been completing the legal system in order to create a fairer and more transparent business environment for local and foreign investors. Notably, gaps in all levels of regulations have been steadily filled, especially in relation to investment, doing business, enterprise development, small- and medium-sized enterprise (SME) support, environmental protection, technology transfer, competition and monopoly regulations, and consumer protection.

According to David Dollar, former country director off the World Bank in China, compared to other countries that have similar per capita income, Vietnam has quite good rule of law, which is clearly one of the reasons of its success and its appeal to foreign investment. However, while foreign investment is very high, domestically financed investment is surprisingly low and the private sector seems to consist mostly of SMEs.

In addition, Cao Viet Sinh, former Deputy Minister of Planning and Investment, pointed out that Vietnam still falls short of several international practices. Notably, market economy institutions are not sufficient and comprehensive enough to ensure the smooth operation of the market and do not meet the requirements of a modern, internationally-integrated market economy.

The market for science and technology is relatively small and limited in supply-demand linkages.

Hence, in order to deal with other problems, it is imperative to complete the transition to an internationally-integrated, modern market economy in line with international practices. The market for science and technology should be developed in connection with building a the national databases on science and technology.