Socialist-oriented market economy: The right choice for Vietnam

Keywords: Socialist-oriented market economy, Vietnam.

The plots of imperialism and hostile forces are to replace the leadership of the Communist Party and abolish the socialist regime. It is especially vivid when Vietnam is organizing Party congresses at all levels towards the 13th Party National Congress. They have boosted up their schemes of “peaceful evolution” and comprehensive promotion of “self-evolution”,” self-transformation”.

One of the prevalent claims bolstered by hostile forces, reactionaries and “democrats” is that the socialist-oriented market economy in Vietnam is a vague concept. Actually, it is aimed at distorting and disclaiming the CPV’s development guidelines. They reckoned that socialism cannot be actualized in Vietnam through the “socialist-oriented market economy”. They rely on the collapse of the Soviet Union and the socialist countries in Eastern Europe to conclude that socialism and communism are illusional. According to them, “the path of developing a market economy on the base of socialist orientation is patchy and utopian. Vietnam is currently standing at a crossroads, not knowing which way to follow. And that Vietnam will have to pay for not integrating into the current flows following the path of capitalism. Being willing to follow the path of capitalism or not, Vietnam will eventually get on with it, just either the easier or the harder way”. Recently, there has been a more cunning and malicious allegation that “the path that Vietnam wants to follow is actually the socialist-oriented capitalism, but it cannot be successful due to the impossibility to compromise between the two opposing doctrines”.

In terms of theory and practice, is the assessment of the hostile forces true?

1. The development of the socialist-oriented market economy is consistent with the objective law

The hostile, reactionary forces, and “democrats” constantly seize opportunities to increase their resistance by any means. Taking advantage of freedom and democracy, they have posted on social networking sites a series of articles critical of the outlooks and guidelines of the CPV on the socialist-oriented market economy. With the trick of “playing the cat-and-mouse game”, they try to argue that, since the CPV first introduced the concept of “socialist-oriented market economy”, it has never clearly defined the concept, which contains internal contradictions. Those who have opposing views on the Party deliberately distort the development of the CPV’s theoretical thought. Especially, they rely on the criteria of the socialist orientation in developing a market economy to claim that the CPV has borrowed or used fraudulent concepts. Some of them even strongly affirm that the market economy which attaches to universal human values, when being added with the “socialist-oriented” tag, will create a “monstrocity” economic model, or an unprecedented socialist-oriented market economy in history. If applied, it will create obstacles to Vietnam’s development, production, labor productivity, and creativity.

Before the 6th Party Congress, the Vietnamese communists, in spite of facing many national impasses due to poverty and crisis, made their attempts to find a path acknowledging the existence of the commodity economy’s reasonable factors in the subsidy economic mechanism. Started from the favorable and contraband contracts, the renewal of the management mechanism in enterprises and so on, they turned a new page of national renovation at the 6th Congress. In which, they officially mentioned the production of goods and the “planning mechanism on the mode of socialist business accounting” (CPV 6th Congress, 1986). That was de facto a turning point of the CPV when it accepted using the market economy to build socialism in the transition period. The 7th Congress (1991) determined to build “a multi-sector commodity economy, moving on the base of the market mechanism under the management of the State”. The 8th Party Congress (1996) advocated building “a multi-sector economy, operating under the market mechanism under the State’s management according to the socialist orientation”.

The CPV’s 9th Congress (2001) affirmed: “Our Party and State advocate implementing consistently and long-term the policy of developing a multi-sector commodity economy based on the market mechanism with the State socialist-oriented management”. That is the socialist-oriented market economy. Thus, it was 15 years since the implementation of national renovation that the concept of “socialist-oriented market economy” was officially defined at the Party’s 9th Congress.

Since then, the Party’s awareness of the socialist-oriented market economy has been increasingly supplemented and developed in accordance with the requirements of reality. The 12th Congress determined: “Vietnamese socialist-oriented market economy is the one that both operates fully and synchronously on the laws of the market economy and ensures an appropriate socialist orientation for each developing phase of the country. That is the modern and international-integrating market economy governed by the socialist law-ruled State, led by the CPV with the aim of ensuring a “rich people, a strong country, and a democratic, equitable and civilized society”(1).

The 5th plenum of the Party Central Committee (12th tenure) issued three resolutions on “Improving the institution of the socialist-oriented market economy”, “Continuing to restructure, innovate and improve the efficiency of state-owned enterprises”, and “Upgrading the private economy to become an important driving force of the socialist-oriented market economy”. This is an important event because the CPV has - in the resolutions - supplemented and developed several new and important contents on continuing to perfect the socialist-oriented market economy institution. Accordingly, the definition of the “socialist-oriented market economy” for Vietnam has been agreed “as an economy that both operates fully and synchronously on the rules of the market economy and ensures a socialist orientation proper to each stage of the country’s development; a modern market international-integrating economy under the management of the socialist law-ruled State and the leadership of the Communist Party of Vietnam aiming at achieving “a prosperous people, a strong country, and a democratic, equitable and civilized society”(2).

The socialist-oriented market economy in Vietnam is a type of economic mechanism which both complies with the laws of the market economy and relies on the principles and nature of socialism in three aspects: ownership, management and distribution. In other words, it is a multi-sector commodity economy operated under the state-controlled market mechanism with the view to striving for a rich people, a strong country, and a democratic, equitable and civilized society.

Compared with the capitalist market economy, the socialist-oriented market economy shared both similarities and differences in nature. Its similarities with the modern capitalist market economy are: based on ownership distribution and multiple ownership systems; the economy is operated mainly under the market mechanism; there is the management and regulation of the State; diversified forms of distribution.

The difference and creativity in Vietnam’s implementation of its socialist-oriented market economy are the attachment of economic development to social progress and equity. Entities in the market economy compete with each other with the view to maximizing their profits. Therefore, it is inevitable that along with economic growth is the gap between the rich and the poor. Many disadvantaged people are eliminated from the economic cycle leading to negative phenomena and social evils. In capitalism, working people are employees. The goal of capitalism is to increase profits and maintain the dominance of the bourgeoisie. To achieve its goal, capitalism has brought forward many guidelines and solutions on social issues, including progresses such as reducing inequality as well as seeking to reduce stress in society. However, they are not sustainable because the capitalist fundamental contradiction between socialization and the private possession of the means of production still exist. In a socialist-oriented market economy, economic development must attach to the effective settlement of social problems. “The degree of economic development is a material condition to implement social policies, but social goals are the purpose of economic activities”(3), and “Economic growth must be associated with progress and social equity in every of its phase and throughout its development process”(4). Thus, the implementation of the socialist-oriented market economy model is not the subjective combination between market economy and socialism, but the grasp and application of the objective movement trend of the current market economy. Market economy itself is still considered the most effective way in allocating and exploiting resources for development. Socialism is a future society, ensuring the conditions for human’s comprehensive development. Therefore, the choice of a market economy is one that is in accordance with the rules of development and specific historical conditions of the time and the latter countries. It allows these countries to shorten their path to socialism based on the strength and limitations of their market.

2. Socialist-oriented market economy in Vietnam - achievements refuting distortions

To achieve their evil schemes of reducing people’s confidence in the leadership of our Party, the hostile and reactionary forces, along with the “democrats” have used many smoke-screens taking advantage of some limitations on current economic management to make up some information that is difficult to verify and confusing for readers to distinguish between the truth and the fake. They have cooked up “shocking” stories. For instance, the weakening international competition, as well as the sluggish and unstable growth of the macroeconomics in Vietnam, is due to the socialist-oriented market economy. Furthermore, it is the socialist-oriented market economy that results in a malfunctioning economic growth engine, inefficient exploitation of social resources, losses, and debt. In addition, a market economy with a “distorted” and “deformed” foundation will make the economy less competitive and the private sector be squeezed, which disables development. They also cause a number of other consequences such as corruption, waste, bad debt, etc. These allegations are not only fallacies but also the intentions full of malice aiming at denying the direction and leadership of the CPV, especially its policies of developing a socialist-oriented market economy, which has been proven effective in reality.

After nearly 35 years of national renovation, Vietnam has obtained significant and historical achievements paving the way for its innovation and development in the coming time. The economy has arisen continuously, becoming one of the fast-growing economies; macro-economy has been stable and gradually strengthened; competitiveness, potentiality and scale of the economy have been upgraded. The consolidation and regulation of the Party, the reinforcement of the political system and especially the fight against corruption, have altered drastically making several breakthroughs and gaining various remarkable results. Accordingly, they have been welcomed, consented, trusted and supported by the people. Society and politics have been stable; national defense and security have been constantly beefed up to maintain determinedly and persistently national independence, sovereignty and territorial integrity; diplomatic relations and international integration have been increasingly profound and efficient contributing to enhancing Vietnam’s reputation and position in the international arena. According to the World Economic Forum, in 2019, Vietnam’s economy rose to the top half of the world rankings for the first time, ranked 67/141 (up 10 places compared to 2018), ranked 8th among the best economies in the world to invest in (up 15 places compared to 2018).

There are goals seemly arduous to achieve simultaneously often leading to trade-offs in the development process such as the larger the economic scale is, the harder it is to grow rapidly. However, this is not true in Vietnam. In 2018, the scale of Vietnam’s economy logged at nearly 250 billion USD, 9.3 times higher than the start of Doi Moi in 1986, and nearly 1.3 times higher than in 2015. At the beginning of the 12th Party Congress in 2016, we reached the growth rate of 6.21%; meanwhile, in 2019, we enjoyed a growth of 7.02%, bringing the scale of the economy in 2019 to more than 262 billion USD(5).

To deliberately prove the inaccurate choice of socialist-oriented market economy model in Vietnam, it is argued that Vietnam has to accept a trade-off between rapid growth and macro stability. In 2010, amidst the post-crisis sluggish recovery of the global economy, Vietnam’s economy soon got out of the drop, gradually recovered and increased quite rapidly at 6.4%, respectively in the following years from 2011 to 2019, Vietnam recorded growth rates of 6.2%, 5.2%, 5.4%, 6.0%, 6.7%, 6.2%, 6.8%, 7.08%, 7.02%. In 2019, Vietnam not only ranked the top rapid growth in the region as well as in the world but also maintained a stable macroeconomic foundation. The inflation was only 2.79%. The interest rates and exchange rates were always stable in the context of volatile global financial markets. The budget balance up to the 23rd of December, 2019 was in surplus. The public debt ratio dropped from over 64% of GDP a few years ago to about 56% of GDP. The scale of import and export was more than 517 billion USD. The trade balance in goods reached a record surplus of nearly 10 billion USD. Foreign exchange reserve reaches nearly 80 billion USD, which was unimaginable for us 10 years ago.

The aforementioned achievements are not a trade-off between the quantity and quality of growth, between high and sustainable. In 2019, Vietnam belonged to the group of leading countries with a high and stable economic growth in Asia. Its growth quality has significantly improved which was reflected in the increased rate of labor productivity. There are arguments that pre-industrialized emerging countries, to promote their rapid economic growth, often have to accept a decline in their environmental and social factors. However, Vietnamese government has always been consistent with the message of no trade-offs, sacrificing the environment for growth and defining the three-in-one formula of development as Economy - Society - Environment.

In the international arena, Vietnam’s development is also objectively recognized as a bright example for investment and development. At the 2017 APEC Enterprise Summit, US President Donald Trump affirmed: “In the early 1990s, nearly half the people of Vietnam lived on just a few dollars per day and one of four people was off-grid. Today, the open Vietnamese economy is one of the fastest-growing in the world. The economy has increased by 30 times and Vietnamese students are, admirably, among the best in the world”(6).

In 2019, in the World Economic Outlook Report, the International Monetary Fund (IMF) predicts that global growth in 2019 will still slide downhill to 3.2%; however, Vietnam is believed to enjoy the growth of about 6.5%. It is also predicted at respectively 6.6% by the World Bank and 6.8% by The Asian Development Bank (ADB). Meanwhile, the new Global Innovation Index (GII 2019) announced by the World Intellectual Property Organization shows that Vietnam jumps 3 places, ranking 42/129 countries and territories. In 2019, Vietnam is ranked 8th among the world’s best economies to invest in, up 15 places compared to 2018. Vietnam’s poverty achievements maintain to be a bright spot much appreciated by the international community. The country was also elected as a non-permanent member of the Security Council of the United Nations with the votes 192/193. In the first quarter of 2020, amid the global economy being affected by the COVID-19 pandemic which led to a slowdown in economic growth as both supply and demand declined, but according to the latest prediction by the Development Bank Asia (ADB), the foundation of Vietnam’s economy remains. “Even though economic activity declines and risks from the COVID-19 epidemic still exists, Vietnam remains one of the most rapid growing economies in Southeast Asia,” said the ADB consultant in Vietnam, Eric Sidgwick. The growth drivers of the economy in the coming time are the robust and dynamic development of the private sector, the improving business investment environment, and the rapid growth of the middle class. Public investment disbursement has been improved significantly, increasing by nearly 18% in the period from January to February 2020 compared to the same period in 2019. Disbursement will continue to be upgraded in 2020 for this is one of the priority fiscal measures in response to the COVID-19. A multitude of bilateral and multilateral trade agreements that Vietnam has participated in promises to increase market access for the country, which is essential for its economic recovery after COVID-19.

Up to now, Vietnam has established trade bonds with 230 countries and territories. It is also a member of the World Trade Organization. 71 countries have recognized Vietnam as a market economy. The country has also signed 14 new-generation free trade agreements with other economies, of which 11 have already taken effect. Currently, Vietnam is actively promoting negotiations with the Regional Comprehensive Economic Partnership (RCEP) with other countries. Most recently, on February 12nd, 2020, the European Parliament (EP) officially voted to ratify the Free Trade Agreement (EVFTA) and the Investment Protection Agreement (EVIPA) between Vietnam and the European Union.

Regarding international trade activities, Vietnam has also made a transformation in the direction of reducing the proportion of exports which include unprocessed products completely dependent on foreign countries. In 2018, amidst the tension between the trend of “trade liberalization” and “new trade protectionism” among world powers, Vietnam’s total trade turnover logged at 475 billion USD, an increase of 11.7%; of which, exports were 238 billion USD, up 11.2%. Trade surplus continued to be 6-7 billion USD. In 2019, the total value of goods import and export nationwide reached 517.19 billion USD, up 7.6%; of which exports reached 264.19 billion USD, up 8.4%, and imports of Vietnam reached 253 billion USD, up 6.8%. Trade surplus stood at 11.19 billion USD(7). With the high growth indexes with comprehensive and concrete statistics, why do you think that the socialist-oriented market economy in Vietnam is “ambiguous”? On the contrary, is this a “vague” perception of our country’s economy? If not, it is clear that the accusation was unfounded, unfounded aiming at deliberately evolving, and sabotaging Vietnam.

To “exaggerate” the destructive allegation, there are also opinions that “the socialist-oriented market economy developing path is utopian. Vietnam is standing at a crossroads, not knowing which path to follow. The country will eventually have to pay for not integrating into the era, following capitalism. If it is self-conscious, it will get to the destination faster; otherwise,  it will have to follow that path, but to more painful and slowly”.

The argument is ridiculous, in contrast to that unsubstantiated inference, it cannot be denied that under the leadership of the CPV in the country’s renovation, integration, and development the people’s life has been upgraded progressively.

A number of socio-economic development programs in extremely difficult communes of ethnic minorities, mountainous, remote, and vulnerable areas have been implemented with vivid outcomes. So far, communes and residential clusters have had enough essential social facilities, such as electricity, roads, schools, medical stations. Growth in the agricultural sector has always been on the upward trend, recorded at 3.65% in 2018, the highest level since 2012. The export of agricultural products in 2018 reached over 40.5 billion USD. In 2019, due to the heavy influence of African swine fever, the sector’s growth is only 2.2%; however, many targets met and exceeded the assigned plan. Accordingly, the export of agricultural products in 2019 reached 41.3 billion USD with a trade surplus at 10.4 billion USD. 54% communes and about 111 districts reach new rural standards...(8)

GDP per capita in 2019 was nearly 2,800 USD (if the omitted size of the economy is included, it is over 3,000 USD), an increase of more than 700 USD compared to that of 2015. The rate ofhouseholds suffering from poverty and hunger has dropped rapidly, always reaching and exceeding the periodic set target as well as fulfilling and exceeding the millennium goal on poverty reduction. In 2018, the rate of poor households was 5.2 - 5.7%, a decrease of 1-1.5% (especially, in poor districts, it is reduced by over 4%).

The United Nations has recognized Vietnam as one of the countries with the fastest poverty reduction rates in the world. The results indicate the correctness in the Party’s leadership, the effectiveness in State management of socialist-oriented market economy with the goal that economic development associated with addressing social problems (starvation, poverty, job, income, rich-poor gap, social justice), ensuring ecological environment. That demonstrates the human nature of the socialist regime.

Therefore, the claim that the socialist-oriented market economy is “utopian”, “being paid a price” is actually reactionary plotting to steer the Vietnamese revolution along the path of capitalism.

The insistent outlooks in the leadership include strengthening the Party’s discipline, establishing an upright, active and creative administrative system serving in the direction of the government, launching the start-up year with the companion of the enterprise community and the attempt of people. Besides, the maintained stable political situation, national security and social order and safety, as well as the favorable investment and business environment, are the main momentums for the socialist-oriented market economy in Vietnam to keep overcoming imposed difficulties and enjoying high and positive growth indicators. This is the most vivid proof to refute the hostile forces, the political opportunity elements’ recently distorted claims about the country’s socialist-oriented market economy.

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Endnotes:

(1) CPV: Document of the 12th National Congress, National Political Publishing House, Hanoi, 2016, p.25.

(2) Resolution of the 5th plenum of the Party Central Committee (12th tenure) on completing the institution of the socialist-oriented market economy, http://dangcongsan.vn.

(3) CPV: Document of the 6th National Congress, Truth Publishing House, Hanoi, 1987, p.86.

(4)  CPV: Document of the 8th National Congress, National Political Publishing House, Hanoi, 1996, p.113.

(5) Vietnamese economy and society in 2019 – many paradoxes change, http://baochinhphu.vn.

(6) The address of the US President Donald Trump at APEC Enterprise Summit, https://vn.usembassy.gov.

(7) Data extracted by the author from General Department of Customs’ website.

(8) Vietnam’s agriculture in 2019 keeps its relative uptrend, https://www.mard.gov.vn. 

Dr. Ho Thanh Thuy

Institute of Political Economy, Ho Chi Minh National Academy of Politics

Dr. Nguyen Duc Ha

People’s Security Academy