The draft report on the implementation of the socio-economic development strategy 2011-2020 and the development of the 2021-2030 Strategy stated that the limitations and weaknesses in Vietnam’s economy over the past decade have been mainly caused by subjective reasons. 

Notably, awareness of the socialist-oriented market economy in some contents is not deep and unified, especially the relationship between the State and the market, and in land ownership, allocation of resources, the relationship between rapid and sustainable growth, the role of state-owned enterprises (SOEs), the collective economy, cooperatives, private enterprises ...

The socialist-oriented market economic institution is incomplete, and does not keep up with development requirements. The direction and administration work in some areas is still limited, and the policy response is slow. It has not created strong motivation to promote development. 

The standards of a modern, complete market economy

To evaluate this issue, first of all, it is necessary to agree on a viewpoint on the standards of a modern and complete market economy, and at the same time, it is necessary to determine which sectors of Vietnam's economy are not modern and what are bottlenecks that must be cleared to make the economy modern. 

A modern market economy is an economy in which the State and the market reasonably  perform their roles, functions and duties well and combine and complement each other. Some of the main features of the modern market economy can be mentioned as having a clear and definite regime of property ownership and property rights; the owner is a natural person or legal entity; each property has a specific owner, whether public or private; owners have full ownership rights. 

In this economy, market subjects are legally independent and free to decide what to produce, how much, how, and for whom; they freely negotiate contracts, decide on prices and exchange based on market demand and supply. 

Business freedom and market competition are the basic factors governing the allocation of resources, dominating the choices of market subjects and deciding the winners and eliminating businesses and individuals that are not able to compete. In other words, the State intervenes in the economy not contrary to market principles, but conforming to the market. 

There is never a perfect market in the world, but the State's intervention must be directed to the perfection of the market, overcoming and correcting market defects. It should be frankly acknowledged that, after nearly 35 years of Doi Moi (renovation), Vietnam's path to a market economy is still unfinished. 

Hopefully, we will end the transition, so that Vietnam has a modern market economy, not a prolonged transitional market economy. 

The for-people state

Regarding the socialist-oriented market economy, it is the modern market economy, in which the socialist orientation is that the socialist State should do more and better perform its social functions. In the market economy in Vietnam, the role of the State should be a little more, but not too much. 

For example, the State creates more development opportunities for the people; and ensures fairer access to development opportunities, especially for disadvantaged groups in society. The State implements a comprehensive growth strategy, and equitably shares development benefits for groups of the population and economic regions. 

We have chosen a very strong institutional breakthrough, with a focus on administrative procedure reform, improving the business environment. 

The State invests in and develops the areas that the private sector cannot; the State does not invest in business, merely seeking profit. The state spends more on developing education, health care, and social security. The state serves people more. The state is more for the people than in other market economies. 

Vietnam still in the lower group

To assess the market level in the economy, the world is applying the Heritage Foundation's Index of Economic Freedom (IEF), which has 12 indicators such as ownership, judicial effect, government integrity, tax burden, government spending, financial health, business freedom, labor freedom, monetary freedom, trade freedom, investment freedom, and financial freedom.

In addition, there is also the World Bank’s Governance Indicators that measures the effectiveness of state management. In a market economy, the role of the State and the market cannot be separated or oppose each other, but complement each other. An economy that scores well on both sets of indicators is an efficient market economy.

The Vietnamese economy has not achieved good rankings in both sets of indicators. The index of economic freedom only reached the average level of 51-53/100 for many years and could not surpass it. For the governance index, Vietnam scored only about 200 points out of a total of 600 points.

In these rankings, Vietnam's economy is still in the lower group compared to other economies, showing that both the State and the market have not played a proper role in the market economy.

In the immediate and long term, reform must be from the State because the current difficulties in converting to the market economy are not on the market side, but on the State side.

In a modern market economy, the State's role is to stabilize the macro-economy; establish a legal framework and enforcement apparatus for the market to function properly, overcome market defects and failures, and ensure equality of development opportunities for all.

In a socialist-oriented market economy, the socialist state must do more and better perform its social functions. It can be said that the difference between the modern market economy and the socialist-oriented market economy is in the role of the state itself, which is better in development and solving social problems.

Change mindset to move to market economy

It should be clear that when moving to a market economy, there is a need to develop markets, factors of production, the private sector, and institutions to protect assets and property of enterprises and people. This should be a breakthrough in economic reform and restructuring in the coming period. These are also important points to decide whether Vietnam is really transitioning to a market economy or still in the state of a transition economy.

We have chosen very strong institutional breakthroughs, with a focus on administrative procedure reform, improving the business environment. The fact is that Vietnam has made significant advancement in the rankings of business environment and global competitiveness. However, administrative procedure reform is only the top of the problem. The essence of institutional reform is the content of the legal documents system. We always talk about breakthroughs, but breakthroughs are not much. Perhaps, there are reasons such as not choosing the right point, the right place; don't have the right tools; human resources are not qualified for implementation.

Markets of production factors cannot be formed and function well if the State does not change its roles and functions. If the State owns and controls, the ask-give mechanism still continues, the market will be distorted, and unable to function properly.

The fact shows that it is difficult to choose breakthroughs, tools and capable people, but it is even more difficult to find motivation and create pressure to implement factor-of-production markets. However, the best way to enlighten yourself, as well as the way to motivate and pressure your change, is to join the rankings with economies around the world.

When we declare to the world that we are moving to a fully integrated, modern, market economy, we have to show our efforts, to rise to higher ranks, not to stay at the average level, the average low level like the present.

Tu Giang

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