Restructuring Economy from A Perspective of Development Engines in New Era

Nội dung text: Restructuring Economy from A Perspective of Development Engines in New Era

1. Restructuring Economy from A Perspective of Development Engines in New Era Tran Dinh Thien1 1 Vietnam Institute of Economics, Vietnam Academy of Social Sciences. Email: trandinhthien09@gmail.com Received on 13 May 2019. Revised on 12 June 2019. Accepted on 13 September 2019. Abstract: The cause of economic renovation in Vietnam over the past more than 30 years has an important content of renovating the mode of development, helping the economy to revive quickly and achieve spectacular development. However, in the context of increasing globalisation, and the Fourth Industrial Revolution, the country needs a new approach to development. It must actively seek both new resources and engines of development in new ways, combining them with traditional development engines and modes of development, and move towards sustainable development. Keywords: Engines of development, economy, restructuring, Vietnam. Subject classification: Economics 1. Introduction economy being accepted). Changing the mode of development, adopting the market Over the past 30 years of renovation, mechanism, embarking on new growth, and Vietnam's achievements in economic development trajectory, have brought about growth and development are very positive. many positive results. Most important is the transition of the mode However, looking deeply into the nature of development from a centrally planned of development, especially into some subsidised economy to a socialist-oriented indicators reflecting the quality of growth market economy, creating a strong new and development such as changes in the development engine, helping the economy technological level or economic structure escape from the "loss of growth engine" that lasted many years. level (i.e. manual or mechanical, sub- The foundation of the new engine is the contracting assembly or manufacturing, change from the old ownership structure, imitating or creating technology), it is easy and the "total state ownership" economy to see that there are serious problems in the (with a dominance of state ownership and Vietnamese economy today. These include collective ownership) to a multi-ownership unsteady growth, the trend of a declining economy (with multi-sectors and the private GDP growth rate, the quality and level of 31
2. Vietnam Social Sciences, No. 1 (195) - 2020 economic development (i.e. technological growth and development. The severity is level, labour quality, institutional level) even more obvious when one considers the which is only slowly changing, Vietnamese "problematic status" of Vietnamese enterprises' capacities being low and slowly enterprises' capacities from the perspective of improved, and the remaining bottlenecks of international competition. Box 1: Vietnam's GDP growth Starting from a poor, backward country, whose production hardly met domestic demand, after nearly 30 years of implementing the renovation process, Vietnam has gained many important achievements in economic development. The Gross Domestic Product (GDP) was always maintained at a good growth with an average annual growth rate in the period 1990-2014 recorded at 6.9%, bringing Vietnam from one of the poorest countries in the world to a middle-income country with a GDP per capita in 2014 recorded at USD 2,052 - 21 times higher than the average rate in 1990. From a country with a GDP in 1990 only recorded at about USD 6.4 billion, ranked 90th in the world, after nearly 25 years of development, Vietnam's economic scale has improved significantly, with the GDP in 2014 reaching USD 186.2 billion, ranked 55th in the world [3]. The remarkable achievements in rethink the issue of "drivers of growth and economic growth and development in the development" in a fundamental, systematic past period were basically associated with and serious manner - like more than 30 the exploitation of available resources years ago at the time of "the eve of ("static" resources) in the traditional "fully renovation", when the issue of exploited" way (i.e. exploiting and "development drivers", and the situation of exporting raw resources for sale was a key "declining labour motivation" became so basis for growth), and not reliant on critical, signalling the revolutionary structural changes. Even efforts of opening renovation (which actually started from the up and integrating into the global economy, 6th Congress of the Communist Party of and quickly closing the gap with advanced Vietnam in 1986). Currently, after more countries also relied mainly on the than 30 years of renovation, Vietnam's foundation of "fully exploiting" resources, development situation has changed cheap labour, low skills and a large number fundamentally, and the world has moved of small and micro enterprises with poor into the era of the Fourth Industrial and weak capacities. Meanwhile, the Revolution. Development conditions have serious situation of development stems changed, and there is a need to approach the from the fact that the development drivers issue of “development drivers” on a (i.e. "dynamic" resources) of the economy different level, i.e. seeking new were not promoted, even diminished fast. development drivers and new ways of This is the intrinsic reason that forces us to promoting development drivers combined 32
3. Tran Dinh Thien with traditional ones. This article2 deals most dynamic and has the highest level of with the perception of "development development, which governs the structure drivers", analysing the situation and and operating principles of all other solutions to enhance development drivers resources, and plays a leading role in for the new period in Vietnam. development in the new era. Resources that arise later chronologically and follow the development logic are 2. Perception of development drivers always more "dynamic", playing a dominant and leading role in development. If Vietnam Resources are required for economic prioritises the development of these (leading) resources, strong development drivers will development. In the era of the agricultural be created in the form of breakthroughs and economy (characterised with subsistence the historical journey of Vietnam will be and self-sufficiency), the two basic shortened. Resources must be combined in resources are land and labour (i.e. low- defined ways to create wealth. The skilled labour), basically envisioned as rationality of the mode of integration, also natural and static resources, as shown in meaning the way of allocating development function (F) for economic development resources, is a determinant of the efficiency with two main variables: land and labour. of the economy. In the industrial-market era, the The principle that "productive relations development function is expanded, with the fit production forces" is the most important addition of the "capital" element (i.e. driving force for the development of resources of social nature and high human history (i.e. one of the most mobility). In this development function, of important principles of Marxism stemming the three variables of this era, land, labour, from this relationship). and capital, the capital factor is the This principle implies "the decisive role determinant of the "higher level" of a new of institutions in development"3. Modern production mode, which plays a leading institutions, in accordance with the role in development. conditions and capacity of development, Nowadays, humanity is moving into a will be the driving force and the most new era of development, with the important development drivers. On the participation of two additional new contrary, those backward institutions that resources, which is substantially different chain the capabilities will inhibit development. from traditional resources. It is technology Institutions, in their specific form, are the (high technology) and human intelligence. "system of development mechanisms and The development function, accordingly, policies", and the core of which is the also changes, including land, labour, benefit-incentive mechanism. This is the capital, and technology. According to the driver that motivates people to act, the type established logic, the new resource that of driver that plays a decisive role in the joins the development function (i.e. system of drivers. The transformation of the technology and human intelligence) is the economy from a central planning 33
4. Vietnam Social Sciences, No. 1 (195) - 2020 mechanism to a market mechanism created achieve breakthrough advances. For the a strong development impetus as seen in the Communist Party of Vietnam (CPV), the first ten years of renovation. This is a approach and perception of development typical example of the thesis on drivers are constantly changing, renewed institutions’ role of development drivers. and developed through the CPV "Drivers", different from "static forces", Congresses. Considering the general flow are identified as "dynamic forces", which of cognitive development, the specific are the development forces and entities, connotation of the concept of "resources" generally understood as the "human and the "driving force" of economic growth element". In economy, entities' forces exist and development, basically covers the in the form of economic sectors (i.e. state above contents. The addition of arguments sector, private sector, household sector, and and guidelines on "the cultural foundation sector of foreign-invested enterprises). of development", "the cultural driving force These entities' forces, in the era of door- of development", and "the private sector is opening, can be accessed in a different an important driving force of economic structure, including indigenous forces development" into the paradigm of national (Vietnamese enterprises) and foreign ones and economic development drivers in the (foreign-invested enterprises). recent CPV Congresses which demonstrate Expanding the concept of "human the efforts of the CPV and State to explore, driving force", at a more specific level, discover, and promote the strength of there are the lines of "cultural driving growth and development forces. force", "economic driving force", and "political driving force". These specific types of driving force are associated with 3. Current situation of promoting defined benefit structures. In the process of development drivers in the renovation modern development, science, technology, period and the creativity of humans are "dynamic" sources of endless potential. Development mechanisms and policies towards the future The economic reform over the past 30 years of every country must, in principle, pay the has the core content of changing the mode utmost attention to promoting the of development - from the "traditional" development and maximising the effects of socialist institutional system and the these resources and driving forces. socialist production relation with two main Countries with developed economies axes, namely (1) the regime of total public under the Organisation for Economic Co- ownership (actually meaning total ownership operation and Development (OECD) and of resources), and (2) centralised planning the less developed countries are trying to mechanism (i.e. resource allocation establish a pioneering role of development mechanism) to market institutions with two in the new era, such as the Republic of core axes, namely (1) multi-ownership Korea (South Korea) and China, which are regime (i.e. multiple sectors), and (2) market implementing this strategic orientation and competition mechanisms. The newly 34
5. Tran Dinh Thien established mode of development has However, in parallel with these spectacular helped the economy previously exhausted achievements, certain development obstacles by the crises revive rapidly, giving it a new have been emerging in the economy, development momentum and spectacular suppressing or "deflecting" newly established economic growth and development results development driving forces and becoming (Figure 1). increasingly difficult to overcome. Figure 1: GDP Growth and Per Capita Income in the Period 1985-2018 Source: PCAP.KD. 3.1. Actual status of operation of economic of the third ten-year span dropped by 0.6%. growth and development drivers Such a trend of "steadily" declining GDP growth was against the highest priority goal In order to identify the current situation of the throughout the period striving to achieve operation of economic growth and "higher growth rates, year after year". It was development drivers, it is necessary to analyse not that Vietnam's economy is so large that the trend of short-term and long-term growth the GDP growth tends to decrease compared and economic development (Figure 2). to the period when Vietnam's economy was at Figure 2 shows the trend of the declining a small scale. This is because there is another GDP growth rate in the period 1991-2018, growth situation, reflecting the nature of over each ten-year span. After the first ten- Vietnam's lagging trend compared to the year span, the annual growth rate of the world, especially with other countries in the second ten-year span decreased by 0.8%, and region (Figure 3). 35
6. Vietnam Social Sciences, No. 1 (195) - 2020 Figure 2: Average Annual GDP Growth Rate During 1991-2018 Source: PCAP.KD. Figure 3: Vietnam's GDP Per Capita Compared to That of Other Economies in the Region Source: World Development Indicators. Figure 3 shows that Vietnam's lagging strong enough to help the economy rise, situation is far worse than that of the main go ahead and keep up with the world. This competitors. This fact implies that is a big problem for Vietnam, in the Vietnam's growth performance is not good context of going behind, engaging in fast enough to shorten and narrow the gap of and deep international integration, as the development lag and that growth and whole world moves quickly into the era of development drivers of Vietnam are not high technology. 36
7. Tran Dinh Thien The cause of this condition cannot be more than 30 years of renovation (1986- explained by external effects, or by random 2018), 15 years of which saw Vietnam's and short-term causes. The key issue is that economy in crisis and efforts for crisis Vietnam's economic growth drivers have management. That was from 1986-1990, been steadily declining after a spectacular 1997-1999 and 2008-2015. period of start-up renovation. The long- Experiencing ups and downs, until now, term trend of the continuous decline of the economy has not yet fully recovered. growth shows that the cause belongs to the Achievements of the period 1990-1996 internal structure of the economy, not thanks to the momentum of opening-up because of temporary policy errors or reform, and of the period 2000-2007 (i.e. certain individual weaknesses of the the driving forces of reform and managerial apparatus. That is, there is a integration), have been significantly eroded question of the continuing weakening of the growth engine of the transitional economy, during the financial-monetary crisis in East although it is of a systemic character, Asia (1997-1999) and the post-WTO associated with changing the mode of accession crisis period (2008-2015). development, not merely specific driving This situation reflects the uncertainty of forces associated with individual solutions. the growth and development process and This observation is complemented by a the unstable trend of development drivers "different" development situation: over (Figure 4). Figure 4: Annual GDP Growth, by Quarter, Period 2010-2018 Source: Author's compilation from the General Statistics Office's quarterly Socio-Economic Reports over the years. 37
8. Vietnam Social Sciences, No. 1 (195) - 2020 The graph’s shape shows abnormal GDP even obstructing the achieving of the goals growth dynamics: The "growth of the of structure and quality of development) subsequent quarter was higher than that of with efforts to achieve long-term goals. It the previous quarter" and the annual growth caused a distorted mechanism and retained plan has always been fulfilled. The graph’s an economic growth model which was no shape also reflects the abnormal state of the longer appropriate, reflecting the growth drivers: efforts were always inconsistency, even a conflict between the "maximised" to achieve short-term growth, engine and goal of economic development. while Figure 2 above shows the The "problematic" general situation of "problematic" state of the long-term growth. the aforementioned development drivers is It can be said that "achievementism" was a reflected in the division and dispersion very strong engine of growth of the status in the economy (i.e. dividing and Vietnamese economy, at least for a long splitting of enterprises and territories, time until 2017. Due to its short-term discrimination against certain sectors and motivation, this growth engine did not aim for fundamental and long-term goals and entities). Structure of key economic forces achievements, such as changing the level of and economic sectors were "anomalous": industry structure, upgrading technology, Most of the GDP was produced by the improving labour productivity and improving weakest forces (i.e. the private individual the quality of growth. In essence, this short- economy) and by the least efficient forces term motivation had a different effect (i.e. the state sector) while the foreign direct (promoting the "quantity" side of growth) investment (FDI) sector tended to “dominate” and the opposite direction (discouraging, the domestic sector (Figure 5). Figure 5: Structure of Economy by Sector and Entity Source: The 2011-2018 National Year Book Data. 38
9. Tran Dinh Thien Many studies show that: (1) After 30 years entities is identified through the concept of of developing a market economy, Vietnam's a "2-in-1 economy" (implying the division private enterprise sector contributes less than between the domestic economic sector and 10% of GDP; (2) only in 2017 was the private the foreign investment sector). The concept sector officially recognised by the CPV and of "Vietnamese business force" lacks the the State as an "important development "standard" connotation, focusing only on driving force"; (3) of the four current the number of businesses, but neglecting economic growth drivers, three "internal" the structure of connectivity. The result is a drivers (namely state-owned enterprises, small, fragmented enterprise sector, which Vietnam's private sector, and the household "grows slowly, is difficult to grow and does sector) have been seriously weakened. not want to grow", shows a lack of linkage The lack of linkages and development to lead development (namely, strong private cooperation among sectors and economic economic groups) (Table 1). Table 1: Structure of the Vietnamese Business "Forces" Type of ownership Total State Non-State FDI Quantity 90 319.097 3.049 322.236 Micro Rate by row (%) 0,03 99,03 0,95 72,83 Rate by column (%) 3,17 74,61 25,62 Quantity 1.139 97.105 5.509 103.753 Small Rate by row (%) 1,10 93,59 5,31 23,45 Rate by column (%) 40,18 22,70 46,29 Size by capital Quantity 407 6.304 934 7.645 Medium Rate by row (%) 5,32 82,46 12,22 1,73 Rate by column (%) 14,36 1,47 7,85 Quantity 1.199 5.203 2.410 8.812 Large Rate by row (%) 13,61 59,04 27,35 1,99 Rate by column (%) 42,29 1,22 20,25 Quantity 2.835 427.709 11.902 442.446 Total Rate (%) 0,64 96,67 2,69 Source: Compiled from the 2017 Enterprise Survey Data. In terms of space, the division between of enterprises, the spatial division of local economies, and between the local development shows that the economy lacks economy and the national economy is a fact the motivation to connect. Therefore, it is that deserves analysis and clearly identifies impossible to converge, link, and resonate the mechanism. Together with the division power, thereby creating development 39
10. Vietnam Social Sciences, No. 1 (195) - 2020 diffusion. The most important type of growth drivers, namely foreign direct development driving force of the market investment and export growth. economy (namely competition and However, after the start-up period of development linkage) has not been brought renovation, many factors hindered and into full play in Vietnam's economy. weakened the drivers for economic The situation of "horizontal development. Vietnam did not solve the development", a lack of focus, and key relationship between "developing a market points, without spearheads and true economy" and "maintaining a socialist "locomotives" has existed for many years. orientation" well. The failure to focus on A "jackfruit-shaped development strategy" developing input markets of the economy4 is a term that accurately and vividly associated with the tendency to curb the describes this developmental state. The development of the private economy is a State apparatus operates and directs the practical trend that has lasted for many economy with cumbersome payrolls, years. This trend itself reflects the overlapping laws, policies, and procedures, "problematic situation" in the theoretical complex business conditions, an awareness and perception of basic concepts ineffective and inefficient civil service, of the market economy and their coupled with high transaction costs. This is relationship to Vietnam's innovative one of the main causes of the situation of development formula (i.e. socialist "having no need to grow, and being orientation). This situation means the difficult to grow" of Vietnamese enterprises. absence of a competitive environment and the absence of healthy competition, which 3.2. Cause of decline of growth and is always the basic driving force of development driving forces development in the market economy. The trend of restraining and delaying the In the first phase of renovation, efforts to development of markets also explains shift to a market economy mechanism why the restructuring of the economy and created a double driving force for the renewal of growth models in the past development in the economy: (1) Changing ten years have been almost "at a the ownership structure, creating a driving standstill" despite enormous efforts of the force for market competition; (2) State and the whole economy. There are Regulation by the State, implementing a grounds to affirm that this is the main distribution regime that both complies with source of awareness, perception, and market rules (namely, distributing practice of the trend of weakening according to labour and asset contribution), economic development driving forces in and ensuring social equity (namely, poverty Vietnam in the recent period. reduction, social policies) have helped the Preserving too long the "discrimination" economy quickly escape from the crisis, mechanism, followed by a system of “asking establishing new momentum of growth and and giving”, the direct source of corruption, development. The effort to open up has also and the formation of opposing interest given the economy two types of strong new groups that conflict with the overall 40
11. Tran Dinh Thien development interests are key factors A "reverse" incentive system has been suppressing incentives in the spirit of "fair designed and maintained for too long, market competition". The cumbersome, including policies and measures to complicated, and ineffective status of the encourage "achievementism". Efforts to State's regulation system and business achieve short-term quantitative conditions have increased business costs and achievements are being preferred rather weakened the competitiveness of enterprises. than encouraging the promotion of A "permissive" growth model is based innovation capacity, quality improvement, on exploiting available resources, unskilled and high added value5. Talented people are labour resources, and the "pumping" of less appreciated. The mechanism to attract cheap credit. This has caused the talented people is too rudimentary, focusing consequences of eliminating the motivation, on "small benefits" (i.e. salary increase, trading-off growth with the environment, a bonus, housing) to attract them but not low-wage economy, high inflation trends, paying due attention to creating favourable and more. Integrating those "negative" conditions for them to bring their capacity factors inevitably leads to a highly into full play. A typical example of a speculative economy. For many years, the reverse incentive system is the situation in number of real estate enterprises, centres which the "choosing the winner" principle for real estate, and securities brokerages, as is applied instead of the "rewarding the well as consultancy services, often account winner" principle. for an overwhelming proportion of the total The way of selecting a contractor number of newly registered enterprises. without going through bidding, or For many years, the growth model of organising bidding according to the Vietnam has been designed in the direction deployment of "blue troops, red troops", in of encouraging imports (both inputs and which a bidder will surely win as the others, ordinary consumer goods), not encouraging called “blue troops”, are fake competitors, domestic production and exports. The who compete in a way that they will mechanism of budget allocation and certainly lose; or setting up the so-called investment capital allocation based on the "backyards", or cronyist companies are principles of “asking-giving”, exchange rate also specific manifestations of this policy, import and export taxation, have mechanism of operation. As a result, many become a strong driving force to promote truly capable entities were excluded from the tendency of imported input dependence, the race. In fact, such "reverse incentive" to encourage the development of industries policy system carries many risks both for of processing, assembly, and exploitation of those entities doing business in good faith natural resources, and restraining the and the "selected" winners. development of supporting industries. This With this way of creating non-market growth model discourages innovation, development drivers, in Vietnam after more eliminates chain linkage capacity and fair than 30 years of embarking on a socialist- competition among the Vietnamese oriented market economy, only a few business community. private enterprises have been able to rise to 41
12. Vietnam Social Sciences, No. 1 (195) - 2020 become big economic groups, especially in situation among domestic enterprises, industry, or if they have managed to rise, especially private enterprises, and foreign- they have to face very high risks. invested enterprises (FIE); and national Meanwhile, state-owned economic groups, development interests suffer while FIEs which were promoted to develop under the enjoy benefits as a result. mechanism of "choosing the winner", could The competition to attract foreign not grow normally, doing business investment among localities takes place on ineffectively, and posing high risks. the way of "a race to the bottom", both Recently, a series of economic corporations harming the interests of the localities and and state-owned enterprises, which were causing the domestic enterprises - which are once "illustrious and famous", have been already weak and prone to face plunged into in a state of lack of disadvantages - to suffer losses in many competitiveness, business losses, and faced aspects, and causing development drivers the risk of bankruptcy and dissolution; and to decline. This is one of the important many "illustrious and elite" leaders of this reasons why the majority of foreign sector have been faced with legal enterprises investing in Vietnam use low proceedings and/or imprisonment. technologies risky of major environmental The mechanism and policies to attract pollution, pay low wages, and are not and utilise FDI capital were biased and interested in developing linkages with discriminatory towards the local economic local businesses. A large part of foreign forces, applied for a too long time, enterprises (up to 60%) submit their distorting the business environment and its reports on continuous losses for many consequences on long-term development years but they are constantly expanding strategy. To attract foreign investment, the their business. This kind of "reverse" system of policies and solutions was not incentive, ironically, helps the foreign only based on the most attractive factors of investment sector become an increasingly Vietnam, namely the "available advantages" important development driving force for (i.e. advantages of latecomers, well- the Vietnamese economy. endowed, geo-economic location advantages, abundant natural resources, low labour costs, hard-working labour, and a stable 4. New context and solutions to enhance socio-political environment) but also placed development drivers for the new period special emphasis on policy incentives such as tax incentives, incentives of access to 4.1. New era contexts and new requirements land, preferential input prices (including for the system of development drivers low energy prices, low environmental costs), preferential access to workforce, The world is entering a new era of being less affected by domestic inflation, development, fundamentally different in and high interest rates, as well as level, structure, and logic of development guaranteed exchange rates stability. Such from previous stages. The era transition this incentives created an unfair competition time, therefore, is also completely different 42
13. Tran Dinh Thien from the previous transitions. It is possible Shaping the era with the four contents to describe the era with the following four above cannot cover the current and ongoing basic contents: global trends, but it is provisionally enough First, the trend of globalisation will to assert that a new approach to development vigorously continue, but with different and is needed. This requirement is fierce and conflicting solutions (e.g. the trend of urgent when the above processes and trends "protectionism"). In this era, international are taking place with unprecedented speed integration and competition will still be the and uncertainty. The implication of this environment and one of the basic drivers statement is that improving and upgrading of development. the efficiency of traditional resources and Second, the Fourth Industrial Revolution driving forces is not enough. Efforts must be will be a key orientation for humanity to action oriented to seek both new resources enter a high-tech economy as an integration and new growth drivers in new ways. of the physical economy (i.e. high-tech with The factors that shape the era mentioned the digital economy). High technology and above suggest a new approach to the digital economy will be the basis of development drivers. Those development the new development of humanity. The drivers associated with the economic Fourth Industrial Revolution will be a transition will continue to be effective in strong breakthrough taking place with an unprecedented speed. From both angles, the coming period. innovation and creativity will play the role The 4.0 era economy requires that of the strongest development forces and Vietnam cannot stop at overcoming the will have endless potential of the world in development and growth "bottlenecks" that the coming period6. the economy is being plunged into. As a Third, as the world development highly open and integrated economy, situation changes, a global conflict with the Vietnam must create a new structural dominant axis based on the US-China foundation and modern development relations tends to increase. The conflict drivers compatible with the era of the between the United States and China (the Fourth Industrial Revolution. two leading powers of the world) is creating First, the Fourth Industrial Revolution is unprecedented development opportunities creating a distinctly logical development 7 and challenges for the whole world . structure: on the basis of high technology Because these are the two most important and digitalisation, humankind is being economic and political partners of Vietnam, provided with very new development tools the way to handle this relationship contains to build a new economic system, which is potential capabilities for promotion or the integration of the analogue (traditional) curbing of development for Vietnam. and digital economies. This economy Fourth, Vietnam is one of the countries operates with fundamentally new qualitative most affected by climate change. This sets resources, a new linkage structure and new requirements and demands on Vietnam's operational mechanism, oriented to satisfy a capacity and solutions to respond to it. new demand paradigm. To build and 43
14. Vietnam Social Sciences, No. 1 (195) - 2020 operate that economy, new capacities and developing input resource markets, new driving forces are needed. especially the land market, is the most Second, participation in international important content to create motivation for economic integration by new-generation the development of the economy in the free trade agreements implies compliance coming period. with economic institutional requirements, Third, it is necessary to build a state that technical standards, and regulations of enables and facilitates development in the products and services at a very high level. spirit of serving the market, serving In this case, international integration not businesses, designing a modern institutional only brings about enormous opportunities framework for development governance, in but also creates unprecedented development accordance with integration commitments. pressures. Both opportunities and pressures Fourth, the principle that "internal forces of development have become a driving are decisive and external forces are force for reform, improving labour important" must be followed in developing productivity and pushing the economy to a Vietnam's contingent of enterprises and in new level of development. implementing the strategy for FDI attraction Transforming development pressures into and utilisation in the coming period. driving forces for reform must be considered Fifth, the implementation of international a new development approach in the era of integration commitments is the pressure (to open international integration for Vietnam. be the most powerful driving force for reform and development). 4.2. New approach and a new orientation of Sixth, it is important to make full use of solutions the advantages pertaining to being a latecomer, to strive for good institutions, to 4.2.1. Approach encourage innovation and creativity, to consider science, technology, and human First, the principle of Marxism-Leninism intelligence as the most important must be followed. This means building development drivers in the coming period. appropriate production relations, paving the way for production forces to develop 4.2.2. Orientation for solutions to enhance on the basis of innovation to increase the development drivers proactive pioneering of the superstructure systems, especially the political First, it is necessary to formulate strategies superstructure. At present, the innovative for synchronous development of input pioneering of the political system is a markets and to pay special attention to land prerequisite for reforming economic market development strategies in the spirit institutions, thereby creating a new system of acknowledging the multi-ownership of development driving forces to accelerate regime, as well as to build a legal system reform and development. recognising, respecting, and protecting the Second, developing synchronously all property rights of economic entities. It is kinds of markets, paying special attention to important to consider the development of 44
15. Tran Dinh Thien input markets as a foundation for incentives, paying attention to building successful economic restructuring and good institutions", creating the most growth model renovation. favourable conditions to establish and to Second, it is necessary to formulate and to develop production chains with the active implement the national programme participation of strategic foreign investors. "Developing Vietnam's contingent of It is important to design a consistent and enterprises" in accordance with the market long-term policy system, to limit input principles. This implies that entities who are imports for assembly work, causing equal in status but functionally different will environmental pollution (with low be encouraged to develop as per the principle technology and low added value) and the of "encouraging the winner”. It is important trend of promoting speculation activities. to pay special attention to promoting the It is necessary to abandon the establishment of Vietnam's production chains, mechanism of capital distribution and to create favourable conditions for the allocation in an asking-giving manner, to development of strong economic groups of focus on the development of growth axes the country to lead the process of formation and development centres for them to be and development of chains and pillars of sufficiently capable of international private economic groups. competition, and to quickly develop smart Third, it is necessary to actively reform the cities, first of all "leading" cities such as state with two major contents: (1) building a Hanoi, Ho Chi Minh City, Hai Phong, Da state for development, and (2) building a Nang, Can Tho, Nha Trang, Vinh, and smart state including the building of a "digital Buon Ma Thuot. government" and "smart cities". Specific measures include the following: The State needs to actively support the - Building the state apparatus on the establishment of National Innovation principle of (1) "function-based organisation", Centres, to create focal points to promote and (2) professionalism of civil service the "national start-ups" work in the spirit of (including selection and recruitment of innovation and creativity, and to adopt public officials and civil servants, and job special policies to support science and competency profiles). technology enterprises for innovation so - Reforming the salary and wage system that science and technology can become the in the public sector on the following most powerful development driving forces principles: (1) full monetisation of salaries in the coming period. and wages, (2) performance-based and function-based payment, and (3) payment of salaries and wages according to the job 5. Conclusion contract (according to the level of completion of the committed work). Vietnam's economy is at a turning point. It is necessary to implement a new The strong driving forces for the strategy of attracting and utilising foreign development of a transition economy have investment on the principle of "limiting been stimulated by the renovation efforts' 45
16. Vietnam Social Sciences, No. 1 (195) - 2020 reduced impacts. In order for the economy driving forces, not just the "renovated" old to recover its growth momentum, the issue ones. It is not enough to just renovate the is not to modify, improve, and upgrade the old existing system of driving forces which old driving force system. Vietnam cannot means that if so, the economy will be solve the problem of "lagging behind in plunged into a farther-lagging situation. The development" - rather "lagging behind task set for the economy at the time is not farther in development" by continuing to new in terms of name, but highly maintain the old development driving challenging: renovation of development forces system. The reality of ten years of drivers and engines at a new higher level economic restructuring and renovation of compared to those of 30 years ago. growth model proves such arguments. The way to solve the problem is to change the system of growth and development drivers Notes and engines. But that is only one side of the development task that is being laid out 1 The paper was published in Vietnamese in: Khoa for Vietnam, stemming from the intrinsic học xã hội Việt Nam, số 8, 2019. Translated by needs of the economy. The world is Luong Quang Luyen, edited by Etienne Mahler. changing profoundly. Structural changes 2 The article was presented within the framework of under the impact of the Fourth Industrial the NAFOSTED Project: "Restructuring Vietnam's Revolution - a revolution that has the economy in the period 2011-2010 towards power of "reversing development logic" - sustainable development”. were unprecedented in the previous three 3 Why nations fail? The answer of Daron Acemoglu industrial revolutions. The correlation of and James A. Robinson is: “Institutions, institutions, global power and development changes institutions!” [6]. with an unprecedented strong rise of China 4 Markets for land, currency - finance, energy, and and India followed by a series of late- labour. coming economies. The US-China conflict 5 A common phenomenon in the economy is that is an inevitable consequence of responding subordinates have to ask their superiors to "allow" to such a rise. "Deformed" globalisation is for renovation. They must "ask for permission" to associated with the rise of protectionism. avoid the risk of being "deviated", to be granted with These factors resonate, creating another resources for implementation thereof. The approval new era of development in terms of process for being "renovated" is very complicated, structure and logic of development. not associated with the responsibility of the Vietnam is an economy with high openness, approving level (i.e. superiors), so it often meaning that it is "natural" for it to enter discourages those who want to really renovate and such a new era. Brand new opportunities are willing to take risks to promote development. and totally new challenges are arising. In 6 This trend is associated with a situation where the order to "step in" without being "dragged" comparative advantage of "low-wage labour" and along with the era, Vietnam needs a new resource exploitation in Vietnam is declining. The paradigm and system of development structure of resources and the drivers of 46
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