Achievements in the development of the socialist-oriented market economy in Vietnam over more than 35 years of renewal

1. The State of Vietnam has transformed the Communist Party of Vietnam’s theoretical understanding, viewpoints, and orientation on the development of the socialist-oriented market economy into laws, strategies, planning, and development of the economy, sectors and areas with the following significant achievements:

First, the socialist-oriented market economy continues to develop, the macroeconomy is more stable, equilibrium of the  economy is basically ensured, and a relative high growth rate is maintained. The scale and potential of the economy continue to expand and growth quality improves. The understanding of the socialist-oriented market economy has become more comprehensive. The legal system, mechanisms, and policies continue to be fine-tuned to build a modern market economy and promote international integration.

Market factors and types of markets gradually develop in sync and are connected with regional and global markets. Some markets develop strongly and operate relatively smoothly, such as the commodity and service markets, and the stock market. The scope and liberalization of various markets are expanding. The basic elements of the financial market, such as the banking credit market, stock market, and insurance market, along with various financial instruments and securities, have been relatively well-established and put into operation, helping to attract capital for national socio-economic development. The monetary market is growing, with an increasing transaction volume, and more diverse financial instruments, helping to promote the flexible regulation of short-term capital across the entire banking system, thereby enhancing the effectiveness of capital use by commercial banks.

The effectiveness and efficiency of state management over the development of markets have been enhanced. Administrative procedures have gradually improved to meet the requirements of market development and many barriers to market participation have been removed. The investment and business climate has significantly improved and a dynamic environment has been created for innovative startups and business development.

State-owned enterprises have been restructured step by step to operate more effectively. Private enterprises have increasingly positioned themselves as a crucial driving force of the economy. The collective economy has been renovated and linked with market mechanisms, and the foreign-invested sector has grown rapidly, becoming an essential component of the national economy.

International economic integration has deepened and expanded at different levels and in various forms. Many new-generation bilateral and multilateral free trade agreements have been signed. The import-export turnover and foreign investment have increased remarkably, contributing to economic growth and national development.

Second, the development of the socialist-oriented market economy has resulted in significant changes in Vietnam during the renewal process.

With an average annual growth rate of about 7%, Vietnam has not been included in the group of low-income countries since 2008. In 2022, its GDP was estimated at 409 billion USD with GDP per capita of 4,110 USD(1). In terms of GDP by types of ownership, approximately 27% came from the state sector, 4% from the collective sector, 30% from the household economy, 10% from the domestic private sector, and 20% from the foreign-invested sector(2).

Particularly, after the COVID-19 pandemic was basically contained, Vietnam's economy reopened in the fourth quarter of 2021 and has recorded strong recovery and growth. In 2022, GDP growth reached 8.02%, the average basic inflation rose 2.59% compared to 2021. The export turnover of goods hit 371.85 billion USD, up 10.6% from the previous year, while the import turnover of goods reached 360.65 billion USD, up 8.4% compared to the previous year, resulting a trade surplus of 11.2 billion USD. Implemented foreign direct investment was 22.4 billion USD, up 13.5% from the previous year.

Social welfare has gained many important achievements, especially in education, healthcare, and support for people in difficult circumstances. Many common diseases have been successfully controlled. The poor, children under 6, and the elderly are provided with free health insurance. The malnutrition rate in children and the infant mortality rate have decreased nearly threefold. By April 2022, 5,706 of 8,227 communes nationwide met the new rural standards, including 663 achieving advanced standards and 71 meeting model standards(3). Most rural communes have roads accessible by car to the center, have access to the national power grid, and have primary and secondary schools, health stations, and telephone services.

Economic development has enabled Vietnam to better care for national devotees, support Heroic Vietnamese Mothers, and take care of the graves of martyrs who sacrificed for the Homeland. People’s cultural life has improved visibly thanks to diverse cultural activities. About 70% of the population currently use the internet, ranking Vietnam as one of the countries with the fastest internet growth rate in the world. The United Nations has recognized Vietnam as one of the leading countries in achieving the Millennium Development Goals.

The renewal policy including the development of the socialist-oriented market economy has brought about remarkable, profound, and positive changes in Vietnam. The economy has developed; the productive forces have been strengthened; poverty has been rapidly and constantly reduced; people's lives have improved, and many social issues have been addressed. Political and social stability and national defense and security have been ensured; international relations and integration have expanded; the stature and power of the country have been enhanced; and the people's trust in the Party's leadership has been consolidated.

2. From the results and achievements gained, some theoretical issues and lessons learned in building and developing the socialist-oriented market economy in Vietnam can be summarized as follows.

Theoretical perspectives

* The socialistoriented market economy in Vietnam is a new type of market economy that has no historical precedent. It is neither a capitalist market economy nor a fully socialist market economy. Instead, it is an economy that creatively applies Marxism-Leninism and Ho Chi Minh’s thought to the specific circumstances of Vietnam as well as selectively and scientifically absorbing many of the achievements that mankind has attained, including those of capitalism, especially in science, technology, and management expertise.

* In terms of structure, Vietnam's socialistoriented market economy has various forms of ownership and economic sectors which have persisted over time, representing the characteristics of the economy during the transitional period towards socialism in Vietnam. Enterprises from all economic sectors operate autonomously, cooperate, and compete on an equal footing under the law. Different economic sectors have different positions, roles, and functions in the economic environment. The state sector plays a leading role; the collective and cooperative sectors are continuously strengthened and developed; the private sector is an important driving force; and the foreign-invested sector is encouraged to develop in line with the country's socio-economic development strategies and planning.

* Vietnam's socialistoriented market economy is defined as a "modern market economy, which is internationally integrated and operates fully and synchronously in line with the laws of the market economy and under the management of the socialist law-governed State and the leadership of the Communist Party of Vietnam."(4) The modernity and international integration of the socialistoriented market economy are demonstrated in various aspects and criteria, such as its compatibility with international standards and practices in terms of institutions, laws, mechanisms, and policies. Other elements include modern state governance and the synchronization of the different market types and factors in the socialist-oriented market economy with regional and global markets. The full and synchronous operation in accordance with the laws of the market economy and under the management of the socialist lawgoverned State and the leadership of the Communist Party of Vietnam, reflects the comprehensive and coordinated development of market factors and types within the socialist-oriented market economy. It also addresses the relationship between the State, the market, and society in  regulating and operating the economy.

* In the socialistoriented market economy, commodity prices follow a market mechanism under State management. The rights to business freedom, free circulation of goods, and equal competition among enterprises from all economic sectors are recognized and legally protected. Prices of basic social services, such as healthcare and education, have gradually transitioned to a market mechanism under State management. Focus is put on developing a diverse market for goods and services, protecting consumer interests (regarding prices, product quality, food safety and hygiene, etc.), promoting civilized and modern transaction methods, enhancing international integration in the goods and service market, and boosting the science and technology market.

* In the socialistoriented market economy, the State, the market, and society share a close and complementary relationship in economic matters. The State builds and completes institutions, protects property rights and business rights, ensures macroeconomic stability an and major economic balances, and creates a favorable, transparent environment for the operation of enterprises, social organizations, and the market. The State regulates, directs, and promotes economic development, integrates economic development with cultural and social development, and ensures social welfare, people's wellbeing, environmental protection, and national defense and security. The market plays the decisive role in determining the prices of goods and services, mobilizing and efficiently allocating resources, regulating production, circulation, and business operation, and filtering out ineffective businesses. Social organizations play a role in creating connections, coordinating activities, resolving issues among members, and representing and protecting the interests of members in relationships with other subjects and partners. They provide support services to members, reflect the desires and interests of the people to the State, participate in legal scrutiny, and monitor State agencies and the bureaucracy in law enforcement.

* In the socialistoriented market economy, there is a close link between economic development and social development for the overarching goal of development for people’s well-being. “A fundamental characteristic and an important attribute of the socialist orientation in the market economy in Vietnam is the integration of the economy with society. Economic policies are aligned with social policies, and economic growth goes hand in hand with social progress and social equity at every step, in every policy, and throughout the development process(5).

- The socialist orientation of the market economy in Vietnam is demonstrated as follows:

First, the development of the socialist-oriented market economy in Vietnam is to achieve the goal of "wealthy people, strong country, democracy, equity, and civilization." It also reflects the goal of serving the people and their interests.

Second, the socialist-oriented market economy is developed under the leadership of the Communist Party of Vietnam and the management of the socialist law-governed State, involves the participation and oversight of the people and society, and promotes the people’s right to master socio-economic development. The Party's leadership is the decisive factor ensuring the socialist orientation in the development of the market economy tailored to each stage of the country's development.

Third, the distribution principle in the socialist-oriented market economy both increases motivation and encourages competition for development while effectively addressing social issues. Distribution is primarily based on labor results and economic efficiency, along with contributions of capital and other resources. Distribution is conducted through the social security and welfare system.

Fourth, economic development is closely linked with cultural and social development and environmental protection. Economic policies are aligned with social policies, and economic growth goes hand in hand with social progress and social equity at every step, in every policy, and throughout the development process. Lawful enrichment is coupled with poverty reduction and the people's role as the master in socio-economic development is promoted.

Lessons

Based on the practical experience in developing the socialist-oriented market economy in Vietnam over more than 35 years of renewal, the Communist Party of Vietnam has drawn several lessons.

First, ensure the consistent leadership of the Party and improve the Party’s leadership capacity, improve the effectiveness and efficiency of state management, and leverage the strength of the entire political system for the development of the socialist-oriented market economy. It is imperative to constantly study theory, draw experience, and creatively apply  Marxism-Leninism and Ho Chi Minh's thought to economic development. Efforts should be made to study and selectively absorb viewpoints on and experiences in the development of the market economy from countries around the world, as well as to introduce role models and new approaches   in  economic development across Vietnam, in order to enhance the Party's policy-making capacity.

Second, create consensus in perception and action throughout the entire political system and the entire population regarding the development of the socialist-oriented market economy, a general economic model applied during Vietnam’s transition towards socialism in Vietnam. It is one of the three pillars of development during the transitional period, namely the social-oriented market economy, socialist democracy, and a socialist  law-governed State. The socialist-oriented market economy is a modern market economy, which is internationally integrated and operates fully and synchronously in line with the laws of the market economy and under the management of the socialist law-governed State and the leadership of the Communist Party of Vietnam. It ensures a socialist orientation for the goal of "wealthy people, strong country, democracy, equity, and civilization," suitable for each stage of national development.

Third, underline the role and interests of the people in the development of the socialist-oriented market economy. The happiness and well-being of the people should be the goal when building, planning, and implementing economic development viewpoints and policies.  Economic policies should be coupled with social policies, with each economic policy aiming at social development goals, and each social policy contributing to driving economic development. People’s right to master economic activities needs to be ensured according to the Constitution and laws. It’s essential to bring into full play the role of the Vietnam Fatherland Front and other political-social organizations in building socio-economic development orientations, policies and laws, and in overseeing their implementation.

Fourth, keep a close eye on the Vietnamese and global economies, accurately and promptly forecasting new developments in the region and the world to determine suitable goals, roadmaps, steps, viewpoints, and policies for the development of the socialist-oriented market economy. It’s necessary to harmonize and balance the relationships between adhering to market laws and ensuring the socialist orientation, and between economic growth and cultural development, social progress and equity.

Fifth, fully understand, respect, and correctly apply the laws of the market economy suitable to Vietnam’s specific development conditions. It is important to ensure coherence among the components of the socialist-oriented market economy, between market factors and market types, between economic institutions and political and social institutions, and between the State, the market, and society.

Sixth, resolutely, persistently, and creatively direct the implementation the Party’s correct policy on the development of the socialist-oriented market economy. Efforts should be made to strengthen the Party’s leadership in institutionalizing and implementing the Party's guidelines and policies on the development of the socialist-oriented market economy, with a focus on leading the State in perfecting the institutions of the socialist-oriented market economy, creating a favorable, healthy, and fair investment and business environment for all economic sectors, and promoting innovation.

Seventh, actively and proactively integrate into the international community, with a focus on international economic integration. Attention should be paid to linking Vietnam's economy with the regional and global economies, making full use of internal resources and the self-reliance of the economy, and utilizing external resources for national development.

3. In the coming time, many new issues are expected to emerged, creating both advantages and difficulties, opportunities and challenges. They include the rapidly evolving Fourth Industrial Revolution; the fast-changing global and regional situations with many unexpected developments, especially the conflict between Russia and Ukraine; the comprehensive and strong impact of the global economic recession and crisis; declining international trade and investment; increasing global public debts and risks in the financial and monetary markets; energy security, non-traditional security, climate change, rising sea levels, population aging, environmental pollution, and the immediate consequences of the COVID-19 pandemic.

Vietnam's goal is to become a developing country with a modern-oriented industry, surpassing the low middle income level by 2025; a developing country with a modern industry, high middle income by 2030; and a developed country with high income by 2045. Therefore, the development of the socialist-oriented market economy plays an important role, being one of the pillars and core tasks that need to be deeply grasped both in perception and action.

First, continue to enhance the role, quality, and effectiveness of the leadership of the Communist Party of Vietnam in the development of the socialist-oriented market economy. There is a need to improve the Party’s capacity for planning economic development orientations and policies; to strengthen the Party’s leadership in institutionalizing and implementing the Party's guidelines and the State’s policies and laws on socio-economic development. It is crucial to strengthen inspection, supervision, and review to prevent irregularities and fine-tune the Party's guidelines and policies. Other tasks include completing the arrangement of officials involved in socio-economic fields and guiding their performance; implementing the personnel strategy in the industrialization and modernization period; renovating the mindset and working methods; and addressing weaknesses in each stage of personnel work.

Second, create consensus in the perception and improve awareness of the development of the socialist-oriented market economy, including criteria on modernity and international integration; the full and coordinated operation mechanisms in accordance with the laws of the market economy under the management of the socialist law-governed State and the leadership of the Communist Party of Vietnam; the socialist orientation for the goal of "prosperous people, strong country, democracy, equity, and civilization," suitable for each stage of the country's development; the position and role of different economic sectors; and the relationship between the State, the market, and society. This aims to unify understanding and implementation.

Importance should be attached to promoting communication on the development of the socialist-oriented market economy among cadres, Party members, civil servants, and employees at all levels, in all sectors, and across all social strata. It is essential to enhance theoretical research, and concretize perspectives on the content, nature, and characteristics of the socialist-oriented market economy. Emphasis should be placed on drawing practical experiences in economic development to clarify emerging issues, and promote new, effective models and approaches in the development of the socialist-oriented market economy.

Third, continue toward the  completion of socialist-oriented market economy institutions, focusing on removing bottlenecks. It is crucial to improve the quality and effectiveness of national governance and the development and enforcement of laws, strategies, and plans. During the transition to a socialist-oriented market economy, one of the main 'bottlenecks' is the incomplete and overlapping legal system. Moreover, amid the Fourth Industrial Revolution, many new industries and professions have emerged, requiring an improved legal environment to ensure development. Therefore, it is necessary to establish a favorable legal framework and environment to promote development, innovation, startups, digital transformation, and the digital economy while supporting and encouraging new sectors and business models. Focus should be placed on revising contradictory and overlapping legal provisions that are hindering economic development. Administrative reform should be accelerated in a resolute, coordinated, and effective manner while the business environment should be improved to ensure healthy, fair, and transparent competition.

Institutions on resource mobilization and allocation, as well as land, resource, and state investment capital management should be completed to ensure that state resources are allocated in line with market mechanisms, including open and transparent bidding with the participation of businesses from various economic sectors. It is necessary to complete institutions on the integrated development of market factors and market types and implement consistent market pricing mechanisms for goods and services, including the prices of essential public services determined by the State. There is a need to develop a comprehensive system, with modern infrastructure and transaction methods, of various markets, including the commodity and service market, the financial and monetary markets, the science and technology market, the labor market, and the real estate market, to ensure smooth operation and connection between domestic and global markets.

Fourth, harmonize the relationship between the State, the market, and society in the development of the socialist-oriented market economy. It is necessary to maximize the role of the market in allocating production resources, regulating commodity production and circulation and business activities, and filtering out ineffective businesses. Measures should be taken to renovate and improve the efficiency of state economic management, enhance the quality of the development and enforcement of laws, policies, strategies, and plans; accelerate administrative reform; maintain macroeconomic stability; and facilitate development. It is essential to create favorable conditions for political and social organizations to promote their role in protecting the rights and interests of their members, providing feedback regarding State laws and policies, and overseeing businesses, agencies, and the bureaucracy in law enforcement.

Fifth, continue to enhance development and operation of businesses. For state-owned enterprises, the central task is to promptly address issues relating to bad debts, divestment, equitization, and restructuring as well as to promote innovation, improve technological capabilities, and adopt modern corporate governance practices. There is an urgent need to conduct strict inspections and monitoring to prevent the loss and waste of state capital and assets. The state supports and encourages the development of cooperative economic models, cooperatives, small and medium-sized enterprises, and household businesses involved in agriculture. It is necessary to improve mechanisms and policies to promote the development of the private economic sector, considering it one of the crucial driving forces of the economy. Another important task is to develop strong Vietnamese private businesses and create favorable conditions for them to enhance technological capabilities, develop human resources, expand markets, improve income and working conditions for their employees, while participating in social activities, environmental protection, and the fulfillment of social responsibilities. The effectiveness of public-private partnership projects in infrastructure development should be improved. Priority should be given to foreign-invested projects which utilize  advanced technology and are ready to transfer technology and help domestic enterprises develop and participate effectively in the global value chain.

Sixth, improve international economic integration. The international economic integration strategy needs to be incorporated into the socio-economic development strategy. Integration capacity should be raised while international commitments and free trade agreements should be implemented effectively. The benefits of international economic integration should be brought into full play to motivate innovation and provide resources for national development. The legal and policy system should continue to be built and fine-tuned to fully implement international economic integration commitments in line with the set roadmap. This aims to maintain a stable investment and business environment to ensure the interests of existing businesses and new investors.