This was the main theme of a recently held round-table discussion with the attendance of former Deputy Prime Minister Vu Khoan, Dr Tran Dinh Thien, director of the Vietnam Institute of Economics and Professor Vu Trong Phuc, former director of the Institute of Party History under the Ho Chi Minh National Academy of Politics.
Reform is a continuous process
Question: After 30 years of Doi Moi, what does Vietnam need to do to move the country forwards on the path of rapid and sustainable development?
VU KHOAN:
Some people say that it is time for a second round of reform. But I think reform is a continuous process - what was appropriate yesterday may not be relevant today. This is even truer with domestic and global contexts changing rapidly. The Doi Moi reform launched during the 1980s began with a breach of regulations in agriculture seen in the secret allocation of land to farmers. That act was later approved by the Central Committee, which helped change the life of farmers and transform Vietnam from a food-hungry country to one of the world’s largest rice exporters.
But now as Vietnam is pushing for industrialisation to build large-scale agriculture, is the old system of assigning small plots of land to farmers still suitable? I don’t want to equate everything as the household economy still retains its value in many regions, but in the country’s rice bowls, only vast fields can attract investment to agriculture and are where agricultural machines and advanced technologies can be employed widely.
During the national liberation revolution, the slogan “land for peasants” helped rally the peasants’ support for the revolution. We cannot carry out industrialisation by impoverishing farmers and depriving them of their land. We need to change the way we use that land. For example, farmers can rent their land to enterprises and become shareholders while they are still working on their land as agricultural workers. The new context also requires reconsideration of land limits. It is apparent that we cannot organise production under the old cooperative model because it was not very successful.
Reform in industrial production also came from a revolt against the fixed plan to create a “third plan” which allows for extra output in addition to the volume assigned by the superiors. Later private businesses were permitted and then State-owned enterprises were equitised. Unfortunately, the pilot formation of State economic group as “iron fists” was not very successful; some even failed with Vinashin a prime example. Meanwhile private enterprises are too small and weak, it’s hard for Vietnam to compete when the country becomes more deeply integrated into the regional and global economies than ever. As such, aggressive reform is needed so that new production models appropriate to a new stage of development can bring about higher efficiency and better competitiveness.
There has also been some political reform but the current situation is now much different. The economy now has many forms of ownership, Vietnam is striving to build a law-governed state, the country has become more deeply integrated into the world, the people’s intellectual standard has improved and information sources have become increasingly abundant. All these changes require the Party to reform its leadership method, the State to reform its management and regulation practices and mass organisations to reform their operations. If we do not dare to undertake bold institutional reform and instead just stand idle and complain about a cumbersome apparatus, then the apparatus can never be streamlined.
TRAN DINH THIEN:
In the 1996-1997 period, many proposed that Vietnam take a second round of Doi Moi. The past 30 years have changed the way we achieve economic development and brought about many successes, but if the old system continues in this new period, we will not succeed, especially as the old system is exposing many flaws. It is arguable that the motivation for more growth has been virtually worn out.
Economic reform is being restrained by a number of institutional issues and what we have now is not enough for integration needs. If we don’t change, it will be very difficult. Even the way we set forth restructuring and renewing the growth model reveal how problematic the economic structure is. Restructuring means changing the old structure, which is no longer effective. The old structure depends on the exploitation of natural resources, cheap labour and booming credit, but it no longer works.
A closer look shows that Vietnam’s system of enterprises is now very weak. Over time, Vietnamese enterprises have proven to be less competitive and increasingly lag behind their competitors. They have a narrow vision and rely a lot on the government. The enterprise structure is biased in favour of State-owned companies but they have failed to grow stronger, and private enterprises can’t become stronger either. The pillars to create national creativeness and competitiveness, which are strong private enterprises, are non-existent. We need to restart to have a new system of enterprises with better quality. We have achieved a tremendous success in reducing poverty and transitioning from a centrally planned economy to a market economy. But our market mechanism is incomplete.
The government named 2015 as the year for enterprises. More enterprises were established but the number was not enough in relation to development requirements. In Vietnam it takes an enterprise hundreds of hours each year to complete tax procedures but in many ASEAN countries, it only takes one hundred hours. This means domestic enterprises are being tied up. It is necessary to unbind enterprises and help them access resources. Why don’t we use market forces in place of administrative measures?
NGUYEN TRONG PHUC:
After 30 years of Doi Moi, Vietnam has recorded impressive achievements; the country has been lifted out of poverty and underdevelopment. But now we are facing numerous challenges. One of the greatest challenges is that although the economy is growing rapidly, national income has increased by 20-fold compared with 1986, per capita GDP has risen by more than ten times; productivity and economic efficiency are low, the economy’s added value is modest, Vietnam is still reliant on the exploitation of resources, the competitiveness is poor, public debt is high and the country is facing the risk of further falling behind other countries.
Vietnam must continue to reform. In my opinion, there are two major matters. First we need to make clear the model, targets, orientations and steps towards socialism. Second we need to delve into more specific issues. It is necessary to clarify the definition of a socialist-oriented market economy and the relationship between the market economy and socialist orientation.
I think industrialisation and modernisation must be tied with the knowledge economy. It is necessary to clarify the relationship between industrialisation, modernisation and developing the knowledge economy. On the other hand, reform must not be separated from contemporary issues, including international integration, globalisation and the scientific-technological revolution because a nation’s development cannot be isolated from the world’s development.
New motivations for development
Question: Many experts say that after 30 years of the Doi Moi reform, many motivations for development have been exhausted. What motivations does Vietnam need in the next stage of development?
VU KHOAN:
First we need to define what motivation is. In brief, motivation in the last 30 years has been driven by the idea of “letting the people do”. During the pre-Doi Moi period, the people were banned from doing many things, even simple things like making noodles. The Doi Moi policy set the people free - free to do business. Now it has been enshrined in the Constitution that the people are allowed to do anything not prohibited by law. It is a modern approach. But in fact the people still encounter obstacles from conditional businesses, sub-licences, fees and charges, not mentioning officialdom and bureaucracy, which have dismayed the people and enterprises. So how can we be motivated? In addition, the people’s confidence will continue to decrease if the number of corrupt officials does not fall. We need concrete actions, not just sheer statements to shore up the people’s confidence. We need to unbind everything that ties up the people and enterprises. This will create new motivation.
I would to like to emphasis one more thing: all of us must unbind ourselves from negative and bad habits in our own life. How can we integrate and become rich if we do business in an irresponsible way and lose our partners’ trust? How can we grow stronger if we do not work together in our business? How can we live in safety if everyone is trying to jostle for a place in a crowded street, drive carelessly and answer the phone, send messages and surf the web while driving?
Vietnamese people usually only want to show off their good points and conceal bad points, but how can we improve if we do not look straight at bad habits and overcome them? Recently I had a chance to travel nearly 1,500 kilometres through Laos and northeastern Thailand and during the trip I didn’t hear a single honk. Local residents only use signal lights and gently give way to each other. I saw no-one suddenly dash out from a small road to the main road. I also didn’t see any police officers or toll booths. Let’s learn behaviour on the road from them, and bigger things later. It is distressing to know that labour markets like the Republic of Korea, Japan and even Thailand have to impose strict measures on Vietnamese workers. If we dare not look at the truth, though bitter, to re-educate ourselves, how can we find motivation? Our ancestors used to say that bitter medicine can cure diseases and it still holds true today.
Never think that touching on bad habits will hurt national pride. National pride should first be demonstrated in efforts to make the country stronger and more well-mannered. What obstructs must be removed.
TRAN DINH THIEN:
On the streets out there, the goal of small restaurants is just survival not becoming rich. Now we need to change that to a motive to grow rich. We must have a fair competitive environment so that poor-performing enterprises cannot exist. We need to work towards becoming richer.
Nowadays we have become more open to the world with a much larger space for development, and stronger momentum. That momentum remains strong for now but at home if we don’t untie enterprises while the world is already a full market economy, we are binding ourselves. Since Vietnam officially joined the WTO, foreign enterprises have been booming while domestic enterprises have slumped because they are tightly bound while the foreign sector enjoys considerable incentives. Now with the same development space, we need a new motivation.
Domestic enterprises are small in size and quantity, weak in linkage and narrow in vision. A strong enterprise system needs really large companies as the pillars, not just small and medium-sized businesses. The pillars to create the foundations for better creativity and competitiveness must be private enterprises. Opening-up must be done in a way that does not tie up domestic enterprises - opening-up is not to benefit foreign companies. As we pursue a very high level of international integration, it is extremely dangerous if domestic enterprises are weak and we don’t change the internal structure.
NGUYEN TRONG PHUC:
The Doi Moi reform initiated in 1986 has been driven by economic benefits and has stimulated economic development from agriculture to industry and services. Currently, economic benefits are a motivation that we need to maintain and we must not let them decline and erode the labour force’s motivation. Now we have another goal: how to make society truly democratic and open so that everyone can actively participate in the country’s political, economic and social life. In my opinion, from the social aspect, democracy is also a goal, so we must concentrate on perfecting the socialist democracy. In addition, it is necessary to tap into Vietnamese people’s intellectual potential. That job is related to human resources training. If we are good at this, we can create strong motivations for people. When there is a lack of knowledge, working and life skills, there won’t be impetus for development. Many factors for motivation still lie dormant and have yet to be unleashed.
