The choice of the socialist-oriented market economy in Vietnam originated from the Party’s correct understanding that the market economy is a product of human civilization and is suitable for different forms of society and that, although the market economy has reached a high level of development under capitalism, it is not identical to capitalism or in conflict with socialism. Though not being a perfect mechanism, the market economy has proved to be the most effective one for mobilizing and distributing resources and fostering creativity and development. A country which uses the market to develop its economy may not succeed, but a country without the market economy is unlikely to develop in the long run. The market economy itself does not necessarily lead to socialism, but for successful construction of socialism, it must be developed.

The socialist-oriented market economy in Vietnam is a completely new model. It is unprecedented and has developed for 30 years. Therefore, the development of this model is a process of constant perfection, innovation and creation in terms of perception, theoretical thinking and practice. Documents of the Party’s 12^th Congress inherited, clarified and expanded on a number of important arguments including those mentioned for the first time.

Firstly, the country’s socialist-oriented market economy is the one which operates fully and consistently according to the laws of the market economy.

This argument was previously mentioned, but this time, the Party reiterated and clarified it. In fact Vietnam’s economy has been gradually recognized as a market one, and by 2018, it will have been recognized by WTO members as a full market economy. This means that the economy does not differ from the market economy but has all of its characteristics such as free business and free competition; openness and liberalization; diversification of forms of ownership; use of value laws and supply - demand relations to determine prices; emphasis of entrepreneurship; consideration of competition as a driving force behind development; distribution of development resources; and handling of inherent weaknesses of the economy according to the principles of the market. The country’s development shows that, if Vietnam do not let the laws of the market economy operate fully and consistently, we will fail to unleash production potential or develop or integrate successfully into the international community.

Secondly, the country’s socialist-oriented market economy is a modern, internationally integrating market economy.

This is an argument which the Party has mentioned for the first time in its documents, but it is very necessary and suitable for the country’s ongoing development. It reflects the country’s profound, extensive international integration at different levels. It has helped to make the Vietnamese economy part of the world market economy. Emphasis of the modern and integrating character of the economy means confirming the observance of the world’ commonly accepted standards for its development and practice of liberalization in trade, investment, finance, services and skilled labor, and more importantly, fulfillment of signed international commitments and efforts to reform internal economic institutions and meet criteria for recognition as a full market economy. This new feature of the economy has required Vietnam to continue improving its development institutions; innovate growth models; restructure the economy for higher productivity, quality and efficiency; develop fast and sustainably; participate in global value chains and production networks; develop the knowledge-based economy; pay particular attention to innovation based on modern science and technology; establish functional markets of production factors, commodities and services; develop an advanced social security and social benefit system; and foster and perfect standards of civilization in production and consumption.

Thirdly, the market plays a major role in the mobilization and effective distribution of development resources and is a main factor for tapping production potential.

Vietnam have effectively operated its economy according to this principle, but this is also an argument which was mentioned and confirmed for the first time in official documents. The recent dramatic development of the private sector, FDI businesses, equitization of State-owned enterprises, the stock market, socialization of public services, and creative application of public - private partnership in capital construction and infrastructure development has contributed to unleashing production and development potential at home and abroad. Fundamental conditions for mobilizing and effectively distributing development resources include ensuring free business and free competition; establishing and perfecting a wholesome, transparent market mechanism; fully and consistently developing various types of market and operating them smoothly; enabling market entities to engage in equal competition; especially, providing equal opportunities of investment, production and business for all economic entities, whether or not they are individuals, groups, private or State businesses. The market is also the main mechanism for distributing the fruits of economic growth including and is the place where each person’s income in created based on his or her performance and contribution of resources to the creation of social wealth. These are important preconditions for all social entities to make full use of their ability and creativity so they can enrich themselves and society.

Fourthly, the Party has been more assertive when it comes to the role of the private sector.

Previously, Vietnam considered “the private sector to be one of the driving forces of the economy”. Currently, the Party is more affirmative and resolute. It regards “the private sector as an important driving force of the economy”.

This understanding of the role of the private sector originated from the striking development of the national economy. Over the last years, thousands of private businesses have given rise to the dynamic development of the economy, have created jobs, and have increased people’s income. They have dared to pioneer in many new production and business areas. During integration, many of them have expanded their operation overseas and been able to confirm their brands on the world market. Vietnamese business people are numerous and omnipresent. They work in all forms of business and on all scales. They have played an increasingly important role in the making of policies for national development. Therefore, creating favorable conditions for the development of the private sector means facilitating the liberation of development resources in society so that the economy can make full use of its enormous potentialities. This argument is surely a source of encouragement for entrepreneurship and innovation and will create vitality and breakthroughs for national development in the new period.

It is necessary to emphasize that by giving the State sector a leading role and considering the private sector to be an important driving force of the economy does not imply discrimination at all. Rather, this means that the role of each economic sector depends on its functions. The State sector uses its resources, tools and policies to drive and regulate the economy, ensure major economic balances, control strategic resources, develop capital-intensive infrastructure and public services which do not yield high profits but are essential for the economy and society and which the private sector is not willing to undertake, for example national defense and security, and some venture investment projects. By nature, the State sector plays an important role in modern market economies such as those in the Nordic region like Norway, who has a large, powerful, efficient State sector, especially in oil and gas, maritime transport and telecommunications. Therefore, a number of world renowned economists have said that we need to increase the efficiency of the State sector but that we should not go so extreme as to deny the role of the State sector in general and State-owned enterprises in particular just because of their inefficiency in some industries or areas or at some points of time. They do not advocate State monopoly in business but have always warned that it would be extremely dangerous if this led to private monopoly. Obviously, the fact that the Party has continued to give the State sector a leading role but with a new connotation in conformity with the Platform for National Construction (revised and supplemented in 2011), and the Constitution of the Socialist Republic of Vietnam (amended in 2013), is absolutely reasonable and necessary.

Fifthly, State resources are distributed according to development strategies, planning, plans and policies in such a way as to suit the market mechanism.

In such a developing economy like Vietnam’s one, the State plays an important role in socio-economic development. The State uses its resources, tools and policies to drive and regulate the economy, boost production and business, practice social progress and equality, and protect the environment. In the current context, the distribution of State resources cannot be based on wishful thinking or disregard development planning and plans. Rather, it must take into consideration positive signs of the market, ensure transparency and be effective. This argument requires a complete abolishment of the subsidization or “ask - give” mechanism and is an important guideline for solving issues related to scattered investment or wasteful, ineffective use of development resources of the State and society. This requires sustained acceleration of the restructuring of public investment, State-owned enterprises and the State budget so that they can suit the market mechanism. Importance must be attached to the settlement of bad and public debts. The State must switch from direct intervention to support, facilitation and management of development while ensuring macro-economic stability, creating business and start-up opportunities and establish a legal framework, policies and enforcing apparatus in order ensure that various types of market keep improving, operate transparently and effectively and compete equally. It can be said that observance of, and respect for, the laws of the market economy have become a way of thinking running through the organization and administration of economic development in the country.

The socialist-oriented market economy is Vietnam’s general economic model. The socialist orientation and the market economy are combined into a single entity. Development of the market economy which is managed by the socialist law-ruled State and led by the Communist Party of Vietnam, works for the benefits of a majority of the population, aim at people, consider them to be the focus of development, and allow everyone to participate in, and benefit from, the economy, is a humanitarian feature and a unique characteristic of the socialist-oriented market economy in Vietnam.

The socialist orientation finds expression in various aspects. Firstly, it is reflected in development objectives: successfully building socialism, developing Vietnamese society and people, and achieving “a wealthy population and a strong, democratic, equitable, advanced country”. Secondly, it is shown in development methods where the economy has multiple forms of ownership and various economic sectors with the State sector playing a leading role so it can overcome limitations, weaknesses and failures of the market and ensure fulfillment of socio-economic goals. Thirdly, it is manifested in distribution methods where the State practices social progress and equality in each and every development step and policy; improves the distribution system so that it can be mainly based on economic efficiency; and, through social welfare, provides universal health insurance; and pays special attention to, and support, poor, socially disadvantaged and vulnerable people. Fourthly, the socialist orientation is expressed in the administration and management of the economy, democratization of the economic life, promotion of people’s role in socio-economic development, and ensuring of the role of the socialist rule of law in the management of the economy under the leadership of the Communist Party of Vietnam.

By emphasizing these new arguments, Vietnam can have a correct understanding and faith in the Party’s policy for continued renovation. To successfully implement the resolution by the 12^th Congress and translate it into everyday life, Vietnam needs to adopt concerted, creative solutions and especially have a strong political commitment and take drastic, specific actions which allow us to stay in close touch with the country’s extremely lively realities in different points in time, in different places, and in different areas of development. Three strategic breakthroughs and three focal points as to economic restructuring and change of the growth model which the Party put forward in its previous term of office remain relevant until now. Vietnam needs to agree that the new context is creating major development opportunities for the country, but these opportunities are only potential ones while a large number of challenges are in existence, especially given the increasingly profound, extensive international integration and existing weaknesses of the economy. To take advantage of opportunities, overcome challenges and turn challenges into opportunities for the prosperity of the country, Vietnam needs to persevere with its chosen path: developing the socialist-oriented market economy in order to successfully build a socialist Vietnam in the direction of ensuring a “wealthy people and a strong, democratic, equitable, advanced country”.

Prof., Dr. Nguyen Xuan Thang

Member of the Party Central Committee

President of Ho Chi Minh National Academy of Politics