Communist Review - The 13^th Party Congress has identified key goals for Vietnam's economic development by 2030, with a vision to 2045, in which the central goal by 2030 is to become a developing country with modern industry and a high average income and GDP per capita of 7,500 USD. To achieve economic growth goals, due consideration has been given to strongly renovating the growth model, restructuring the economy, improving productivity, performance, and competitiveness of the economy.

Vietnam's economic paradigm for catch-up development

After more than 35 years of renovation, Vietnam's economy has entered a new period with a GDP of about 343 billion USD and a high rate of foreign exchange reserves. However, if compared with some countries in the Organization for Economic Co-operation and Development (OECD), Vietnam is among a group of low-middle-income countries and is still far lagged behind developed economies in terms of socio-economic development. It is crucial over the long run to continue renovating the socio-economic growth model to deal with consecutive economic-financial crises from 2008 to now as well as the COVID-19 pandemic and complete the transition process to a fully modern market economy, integrate the socialist-oriented market economy into the world, maintain a sustainable growth rate greater than 7%/year.

Vietnam should give top priority to economic development, social security, welfare, and protection of the living environment. Only rapid growth can help Vietnam not be left behind in the world and regional economy. Therefore, upgrading the growth model and restructuring the economy to ensure rapid and sustainable growth are vital conditions in the coming time.

The current international economy is characterized by post-industrial globalization. Therefore, the problem that Vietnam faces and has to deal with is catching up with both the industrialization and the post-industrial period. Industrial production capacity based on technological potential will decide the success or failure of the economic “catch-up” through industrialization and modernization during the Fourth Industrial Revolution. In the specific context of Vietnam, to formulate the industrialization and modernization strategy, it is urgent to answer the following questions:

Firstly, how to carry out industrialization and modernization? What is the role of the State in this period? Is this process conducted via direct involvement of public or private sector or public -private partnership?

During more than 35 years of Doi Moi, Vietnam shifted from a centrally planned toward a market economy through liberalizing economic activities and prices, even in international economics in order to abolish the mechanism of government subsidies on resource allocation. Many researchers reckon if Vietnam wants to build an economic model according to the standards of developed countries, the State needs to follow the rules of the market economy. Accordingly, it must promote and maintain fair competition, liberalize business operations and prices, abolish the planned allocation of national resources so as to gradually reduce state intervention in the economy.

In the past time, after a period of continuous growth, to date, Vietnam's economy has revealed its limitations, especially: GDP growth rate slows down, inflation remains high (compared to other countries in the region), investment activities do not satisfy modernization conditions (the ICOR value is high compared to countries under similar conditions), the competitiveness of products and enterprises is still weak. Therefore, from the success of newly industrialized countries (NICs), in the “economic catch-up model” that Vietnam needs to implement, the State's role is hugely important. The State plays the role in selecting priority industries and fields, formulating strategies and action plans, making policies, mobilizing all resources to implement plans and connecting the State and businesses in a public and transparent manner. From the successful experience of the NICs model, the “economic catch-up model” is essentially a purposive political direction in building and implementing mechanisms, allocating national resources on the basis of respecting the inherent law of the modern market economy. When developing a socialist-oriented market economy, the Vietnam State is still the owner of many major enterprises and key national resources. Therefore, when implementing the “economic catch-up model”, the State's direct or indirect involvement is inevitable. The problem is that when the economy operates under the market mechanism, the State must gradually withdraw from sectors that are no longer prioritized. Such practice is consistent with the world economy context during the Fourth Industrial Revolution. The important point is that the State's participation contributes to accelerating the process of economic diversification by promoting the development of manufacturing industries, gradually enhancing the non-manufacturing sector without obstructing free competition. 

Secondly, regarding the business development model, experiences learned from G7 countries and NICs recently have indicated that in the “economic catch-up model”, the level of concentrated industrialization of the economy is quite high, large corporations and enterprises play a decisive role in this success. However, this model also reveals its downside, namely: 1- When forming an industrial-financial enterprise model, there will be a relationship between a part of government officials with businesses, thus reducing the efficiency of the market mechanism, leading to the deviation of national resources allocation from the initial target; 2- The creation of industrial-financial businesses risks forming “crony capitalism” that may manipulate the market and obstruct fair competition; 3- Industry-financial firms create a new group of millionaires that gain benefits thanks to the inequitable allocation of national resources. Looking at the development process of emerging economies, we understand the common concerns of society about these problems. For Vietnam, besides these drawbacks, the industrial-financial group model has been created and has an impact on macro policy-making in determining priority order in investments, in using public financing in projects, increasing tax pressure. These acts have been sued by countries to the World Trade Organization (WTO) for violating commitments on product subsidies.

Consolidation, also known as increasing the size of enterprises and expanding their scope of activities, is an inevitable way to improve productivity and performance of the economy in the process of industrialization. In the age of the Fourth Industrial Revolution, thanks to technological advances which play a significant role and satisfy better the diverse needs of society, the small and medium business model has the advantage over large businesses. In the next 20-30 years, Vietnam must harmonize the relationship between them. State-owned enterprises should be proactive and responsible in concluding and implementing association agreements with small and medium enterprises.

Vietnam's catch-up model to step up national industrialization and modernization needs to promote the role of industrial-financial firms regardless of their ownership form to maximize funds and resources and reduce transaction costs. Consequently, the state has the role of inspector (rather than actor) to control the relationship between large enterprises and small enterprises and with preferential policies within a given time frame, which helps to reduce the economic burden on the government, stabilize the national financial system.

Thirdly, it is necessary to build an economic model to ensure rapid and sustainable growth. This is an issue that has been pointed out by the Party's Platform for National Construction in the Transitional Period to Socialism (Added and developed in 2011) and a common concept of making the transition from broad-based growth to growth in depth has been given. However, many years have passed, the model of growth in depth is still slowly being formed.

It is crucial to develop the economy - protect the environment - ensure social security and welfare, consider this a growth triangle as a basis for assessing and building an industrialization model amidst dizzying technological advances on a digital platform.

It is evident that economic development has impacts on the ecosystem - human living environment. The problem is then how do we behave. As early as the end of the nineteenth century, German scientists introduced a concept of ecological balance when studying the supply of fireproof coating of wood and concluded that ecological balance is preserved when the quantity of timber harvested is equal to the growth rate of grown timbers. That means on a fixed area, the exploitation of forests is limited by the amount of wood that a newly planted forest can produce at the same time. Considering the current context, Vietnam should consider whether to grow 3 rice crops or only 2 rice crops and the remaining time for water to overflow naturally in the Mekong Delta. This will be more beneficial in terms of disease prevention and control, reducing risks from chemicals and negative environmental impacts. Is it time to think of removing dikes in the Mekong Delta to better develop natural balance or imitating the Red River dike model?

Regarding the axis of social security and welfare, in the current context of Vietnam, it is required to reexamine the way of implementing many social policies that make government run a budget deficit and add to its debt, threatens development investment and the ability to ensure the social security and welfare for the next generations. The problem is to publicize the maximum ability that the country can create social consensus in the issue of social security and welfare. Breaking the organic relationship of the development triangle is a manifestation of unsustainable growth.

Restructuring the economy

It is advisory to adopt an approach in economic restructuring: Restructuring the economy based on the Fourth Industrial Revolution, ensuring national full employment, social security and welfare in which, national full employment is the central goal to succeed in economic restructuring and maintain social stability, build a strong country with rich people. The new model will contribute to an efficient allocation of limited national resources in order to answer the following questions:

- Which industries will be given priority? How many jobs will they create? What is the labor structure of high-value industries?

- What policies to adopt to promote the service sector?

- What orientation and growth space for the industrial sector?

- What policies to develop the industrial sector?

In order to create a breakthrough for economic restructuring between 2021 and 2030, due consideration should be given to successfully handling the following issues:

The first one: It is necessary to build a socio-economic development model of Vietnam amid accelerated industrialization and modernization in the age of the Fourth Industrial Revolution and economic globalization and take into account the impact of the COVID-19 pandemic.

First of all, it is essential to be aware that the renewal of the growth model is always associated with economic restructuring and this is a process of constant renovation of the economy. The 13^th Party Congress has specified three key tasks and three breakthroughs for economic development. Different scientists have explained the concept of economic restructuring as restructuring resources in order to better allocate them for effective financing. Thanks to the success achieved after a period of broad - based reform, each region and sector has changed and created its own advantages. As a result, restructuring the economy is to bring into full play the comparative advantages of each industry and locality to create competitive advantages for domestic products and build strong Vietnamese brands in the global value chain. Thus, the country's comparative advantage has been enhanced by making full use of the advantages of each industry and field. Only a good awareness of this question will help us fully realize socio-economic development plans with a different perspective. The central government will no longer set quotas for each locality to achieve a high growth rate but will assign development requirements following local realities. For example, in Ha Giang province, due to natural, political, economic, and social specificities, the main task is to maintain the country's borders, preserve and promote ethnic minority culture, especially the culture of the Mong people. Thus, the province's socio-economic development orientation in the coming time will be tourism services associated with the rocky plateau and the passionate sound of the Khèn (a wind instrument consisting of several small bamboo tubes)... Production is mostly agroforestry through a linkage between agroforestry processing and forest growth, and border protection. This condition is suitable for local and national small and medium-sized enterprises. Funds for social security needs and infrastructure will be financed by the Central Government. Thus, local authorities must not be concerned about calling for investment in industrial projects to achieve an economic growth rate equal to or higher than that of the whole country. If so, the story of provinces’ GRDP with a growth rate of 9% - 10%/year, higher than the national GDP will no longer be repeated.

The second one is related to allocating national resources or implementing the Law on Public Investment and the Law on Investment (amended). The Platform (amended and developed in 2011) and the 2013 Constitution both affirm that in Vietnam's multi-sector economy, the state economic sector plays the leading role. Therefore, effective use of public investment to attract investment of other economic sectors into economic development is the most important factor of the State. Improving the efficiency of capital use in state-owned enterprises in order to increase resources to invest in key industries and fields with many initial risks is a vital element to provide additional resources in the context of limited resources. From Samsung's lesson, Vietnamese businesses' participation in the global smartphone value chain poses a new requirement for the State. It is needful to establish some technology-based enterprises to meet Samsung's high requirements by using the capital that the State collects through the equitization and divestment of state-owned enterprises. Thus, the total public capital in enterprises is not reduced but is preserved and increased to deal with the fact that the more innovative is the governance of SOEs, the smaller is the state capital proportion. After businesses run stably and effectively, a capital divestment will be conducted so that other investors can manage and hold businesses. By doing this, the State will provide a new source of capital to newly formed risky industries. Thus, the State's activities in this field are considered as a venture fund in developed countries and state-owned enterprises play the pioneering role in paving the way. Or the model of financing infrastructure facilities and then transferring the project as the Hanoi - Hai Phong expressway or Ho Chi Minh City - Trung Luong launched by the Ministry of Transport is also a piece of evidence to this above proposal. Thus, we must change the mindset of having a state-owned enterprise participate in the regulation of the market according to subjective wishes to a mindset of state-owned enterprises participating in the market operating according to universal laws. The State which is represented by a state-owned enterprise should be involved in industries and fields that it is responsible for or according to the long-term goals set by the State.

The third one: It is crucial to choose a breakthrough point in the implementation of the socio-economic development plan 2021 - 2025 based on the spillover effects of dynamic areas in the economy.

In the recent period, the restructuring of the economy, specifically the three axes, did not create a close bond between fields and the regional economy. We have not seen a close relationship between the handling of bad debts by credit institutions and the health of not only state-owned enterprises in particular but also Vietnam's business system in general. Inefficient public investment is also one of the important causes ravaging the financial health of businesses. Take an example of businesses in transport construction that have become major debtors of commercial banks due to outstanding debts in capital construction. The reality of Vietnam today shows that it is challenging to create breakthrough products compared to the world and to take advantage of the golden population period. As a consequence, the textile and garment industry cannot be underestimated. On the contrary, it must be considered a major industry in the next few decades as it can employ a large number of skilled workers who are trained for a short-term (less than 3 months) but have 2-3 times higher income than agricultural workers. The question is to focus on investing in the textile industry to meet the high requirements of new-generation free trade agreements, starting from yarn production to gradually participate in all four stages of the textile industry: design - production of raw materials - processing - distribution in the next 20 - 30 years, hence creating jobs for a large number of agricultural laborers who change jobs, linking the development of textile and garment industry with the promotion of agricultural and rural industrialization and the urbanization process of Vietnam's countryside.

Among large-scale firms in Vietnam, VinGroup focuses on producing electric cars and artificial intelligence technology. This is a breakthrough direction in line with the Party's view of “catching up to take the lead” in the process of industrialization and modernization. If producing cars using fossil fuels, VinGroup is hundreds of years behind the world. By choosing electric cars, the starting point of this Vietnamese enterprise is only about 10 years later. Thus, the role of the State is to adopt policies to support businesses producing batteries for cars and a storage source for renewable energy, which is trending in Vietnam. Through mechanisms and policies, the State creates favorable conditions for the formation of a market large enough for enterprises to invest effectively in. By this, public-private partnership will rise to a new height, demonstrating the role of the State in orienting development according to the goals approved by the Party Congress. Along with dealing with the above issues, it is necessary to make a fundamental change in the investment and development mindset in order to focus resources on creating economic locomotives capable of driving Vietnam's economic ship quickly to the goal of rich people, a strong country, democracy, justice, and civilization. In the next few decades, there will be regions that grow rapidly, leading to multiple problems of urbanization. So, there must be a policy system to limit the formation of megacities that bring potential risks for social security./.

This article was published in the Communist Review No. 975 (October 2021)