Institutional Reform: One Step Ahead

 

Mr Bui Quang Vinh, Minister of Planning and Investment, said Vietnam is determined to create new breakthroughs in building and reform institutions in 2014. However, the question is what solutions Vietnam will take to have the highest efficiency in every field. Vietnam cannot delay reform any further. If we do not change our thinking and standpoint of development, the economy only grows at low rate and the formation of so-called market economy will be on paper only.

 

Minister Vinh said the research project on Vietnam economic institutional reform in the 2014 - 2020 phase, with a vision to 2030, conducted by the Ministry of Planning and Investment, is expected to have five topics: (1) Vietnam’s new thinking and standpoint; (2) comprehensive economic institutional reform and shift into modern market economy with Vietnam’s conditions; (3) decentralisation reform in economic management; (4) institutional reform of financial system development; and (5) institutional reform of public services, with clear definitions for State and private involvements.

 

Sharing concerns with Minister Vinh, former Deputy Prime Minister Vu Khoan said "The time remaining is so short while our resources are scattered and unevenly distributed.”

 

Economist Pham Chi Lan added that institutional reform was recorded in the Official Document of the 11^th Party Congress but we are wasting time and intelligence debating this issue. More worryingly, we add this content into the Party Resolution but we just keep discussing it, not get it done. The inconsistency between our talks and actions is waning public confidence, she continued.

 

Minister Vinh admitted that though we chose three breakthroughs, we do not have any instructive documents for the implementation of these three breakthroughs since the Congress wrapped up. For that reason, we have not created any breakthrough. We have just created first steps, not turning point for the entire economy.

 

Market economy is the most important measure to regulate and distribute the country’s resources in the most effective way. We need to stop allocating resources based on our subjective thinking and will. Although there is a transitional period, Vietnam’s economy is a market economy by nature, Minister Vinh stressed.

State agencies at the central level tend to protect State-owned enterprises with policy instruments. Meanwhile, SOEs do not operate according to market rules and they tend to wait for the State money to survive.

 

It is time we imposed full market rules and discipline and SOEs competed equally with other economic sectors. Then, the economy will have competition and mutual development, Nguyen Dinh Cung, Acting Director of the Central Institute for Economic Management (CIEM) said. Barriers to other economic sectors will be eradicated as a result.

 

In order to give concrete solutions to Vietnam’s economic development process, David Dollar, World Bank senior specialist, said, in the same growth cycle, Vietnam’s economy expanded 5 -6 percent while the rate in South Korea, Taiwan and China was 9 percent. Giving explanations to this difference, he added that these nations are more successful than Vietnam because they have strong enough private sector. He cited that although Vietnam attracts a lot of foreign direct investment, domestic companies are too weak to form supply chains, resulting in low economic efficiency.

 

Therefore, he proposed reallocating production factors in four fields to push up Vietnam’s growth: From agriculture to manufacturing industry and service; from nonofficial small-scaled bloc to modern private bloc; from infrastructure projects with low profitability ratio to combined investment forms with high profitability ratio; from poor-performing SOEs to better-performing private sector. The WB official also put forth solutions for reform, including household registration system, land market, financial system, central - local budget relationship, and the signing of Trans-Pacific Partnership Agreement (TPP) and ASEAN Trade Agreement.