Developing a socialist-oriented market economy is to abide by objective law in the cause of socialist construction in Vietnam.

August 21, 2017

By Assoc. Prof. Dr. Vu Van Phuc,  Vice Chairman of the Scientific Council of the Central Party agencies

In the process of national contruction and development, especially amid uncertainties in the current world situation, there is skepticism about the path to socialism in Vietnam. It is necessary to reaffirm the correctness of this choice as well as map out goals and solutions in the coming time to develop a socialist-oriented market economy in Vietnam.

The characteristics and nature of the socialist-oriented market economy

Market economy is a popular economic form that governs all social production. Rules of the market economy, such as value, supply-demand, competition, circulation of money are manifested through the fluctuation of community-money, price, supply-demand, and competitive relations. In the market economy, there are different forms of ownership, economic sectors and types of enterprises. Given division of social labor, these relations have been developing; relations between producers and consumers objectively exist and are regulated by objective rules.

By appearance, the market economy appears to be competition, its prices are spontaneously decided by the relation of supply (the quantity of goods to be sold and the desired selling prices) and demand (the quantity of goods to be bought and the desired buying prices) through a negotiable and voluntary contractual basis, and the right to freedom of business (freedom of production, freedom to buy and sell). But, the nature of the market economy is the commodity-money-commodity relationship, a form chosen by humans to link free, creative, entrepreneurial and creative activities to one another to maintain economic social survival.

In other words, the commodity-money-commodity relationship is a solvent for people to maintain their freedom of production and business, thereby deepening specialization and connecting with others through exchanges to work together in an increasingly reasonable network of social labor division. Thus, the market economy is an economic form in which production force is free to develop on the basis of deepening specialization and quicker application of technological advances to production as people are free to develop their potential in cooperative relationships through commodity-money-commodity exchange.

In other words, necessary relations for the commodity-money-commodity exchange, such as the right to freedom of business, legal equality between parties to the transaction, mechanism to ensure contract compliance, agreed regulations between the parties about unit of measurement, currency, mode of transaction are the relations of production which must meet the development requirements of production forces. This is essential regardless of political regimes of countries, which adopt the market economy. Today, the economic circle calls the above relations of production the market economy institution.

Developing a market economy requires increasing economic democratization and liberalization in order to liberate and develop all social production, paving the way for modernization of social production. Economic benefits are the most important development driving force for the market economy, first of all the interests of investors, producers, laborers, consumers, collectives, the state and entire society. In the market economy, all components must abide by objective rules under a common operating mechanism – the market mechanism, and at the same time, the market economy is specific to development level, institution and concrete conditions of each country.

The market economy’s movement is directed towards a more reasonable flexible balance of the structure of industries, production sectors, and the total quantity of goods. The rapid development of science and technology, especially high technology and information technology, has changed the characteristics of material production and the type of organization and management of the traditional market economy. The growingly and sustainably developing knowledge economy is the mainstream trend; people are transiting from a passive to actively position to be more creative in the process of socio-economic development.

Modern market economy is the common trend of development, the ultimate product of the development of social production force; the more modern the social production force, the more modern the market economy. The market economy is both a condition and manifestation of production socialization. The market economy is not a product of capitalism only, nor contradictory to socialism; on the contrary, market economy development is a path, a means, a fundamental condition for achieving real socialism in the future.

The development of a market economy inevitably requires revolutionary reform of production relations to match the modernization of production forces. The market economy is the most favorable environment, which conforms to objective law for the production forces to develop; the more developing, modern, socialized the production forces are, the more they require progressive and suitable production relations, which are socialist production relations. Thus, the process of developing a market economy is also the process of developing in a natural order that human society advances to socialism in its own right.

The 30 years of renovation have proved that the road to socialism in Vietnam must transit the market economy. Without the market economy, it cannot advance to socialism. Because the market economy has advantages that in-kind, autarkical, and self-sufficient economy does not have: first, the market economy motivates and creates driving force for each laborer through competition to become the best (most creative, dynamic and suitable); second, the market economy promotes further specialization in order to bring into play the multifaceted potentials of different people; third, the market economy consciously coordinates, regulates the behavior of people through voluntary and negotiable mechanism of goods exchange in line with the rule of supply-demand; fourth, the market economy reflects the high degree of freedom, and democracy while resources to satisfy demand are still scarce. However, it should be affirmed that the market economy itself could not bring about socialism.

If the market economy evolves spontaneously, it will inevitably lead to unacceptable social harms: rich and poor stratefication, the winner in the competition takes it all and the loser has nothing. Moreover, when possessing production material, the rich can coerce the poor with unfair exchange. In particular, when wealth is concentrated in the hands of a group of people, if they are not satisfied with the interests set by the market, they will keep their wealth in store, and laborers will not have jobs.

This is exactly what Karl Marx stated the commodity economy (market economy), if let to spontaneously develops, will advance to capitalist production. The spontaneous market economy also leads to the devastation of the common living environment for short-term benefits, causing shocks to supply and demand and making life too precarious.

Therefore, the State must act on behalf of society to regulate the market economy, forcing it to operate in certain frameworks. The capitalist state regulates the market economy but does not change its foundations, such as private ownership, business freedom, prices are set mainly by the market, and the state only regulates wealth through the state budget, intervenes supply or demand when there are “shocks.”

The socialist state may intervene deeper into the market economy through changing the ownership of a certain amount of production material or assisting forms of production and businesses in the interests of laborers, such as cooperatives and state-owned enterprises. Here, interventions may be the same between capitalist states and socialist states, but the objective is different: the capitalist state only helps to stabilize the market and supports as much as possible to those who lose. The socialist state attaches great importance to the training of laborers, enabling them to master the production and distribution processes for their benefits.

In addition, what the laborers cannot do, the state will provide support with social security, and social welfare. The Communist Party and socialist state strives to seek effective and beneficial production and business organization models for laborers. In the present stage, the market economy will be the main regulator, the socialist state regulates on the basis of theoretical and practical experience to have a more efficient and beneficial market economy for laborers. Therefore, the socialist state does not limit itself to activities like the capitalist state. That is the basis for our Party to define our economy as a socialist-oriented market economy: both are subject to objective laws of the market economy and ensure the social orientation.

The socialist factor has been manifested in that the Communist Party is the vanguard of the working-class which leads the development of the market economy (if the Communist Party degrades or fails to take lead, it is inevitable the market economy will spontaneously follow capitalism). The socialist state is also the institution whereby the laborers can reform everything that is beneficial to them, also a subject of the market economy, and not merely a political institution.

If the state apparatus and public empoyees degenerate to the point of acting only for their own benefit, trampling on the interests of the laborers, the Communist Party will lead the laborer to reform the state. Since the market economy can adapt to different political regimes and the mode of socialist production has not yet asserted themselves by practical efficiency models, the socialist-oriented market economy is by nature still a quest: both abiding by the rules of the market economy (as it is still the most efficient form of economic organization to date), and finding economic models that are more effective and adaptable to the market economy and benefit laborers. Thus, creative efforts and loyalty to the common interests of the laborers, the Party, the State and the people of Vietnam are the nature of socialism. To do so, three conditions are needed:

– Laborers must be self-aware, improve their political level and economic ability to become masters and and act as masters;
– The Communist Party must really work for the laborers and be capable of leading the State and society;
– The State (in fact, law and public employees) must both have the capacity to manage and work in the interests of the working people.

The 12th Congress of the Party affirmed: “The socialist-oriented market economy of Vietnam is fully and synchronously operating under the laws of the market economy and at the same time ensuring the socialist orientation of each stage of development of the country. It is a modern market economy which is embarking on international integration under the management of the socialist rule-of-law State, led by the Communist Party of Vietnam and aiming achieving “prosperous people, strong country and democratic, equitable and civilized society.”

The socialist-oriented market economy in Vietnam has an progressive production relationship that is consistent with the level of development of production forces, different forms of ownership, economic sectors in which the state sector plays the leading role, the private sector is an important motive force of the economy; entities of all economic sectors are equal, cooperative and competitive in accordance with law; the market plays the key role in mobilizing and effectively allocating development resources, and is the main driving force for releasing production force; state resources are allocated according to market strategies, plans and programs in conformity with the market mechanism.

The State plays the role of guiding, building and perfecting economic institutions, creating a fair, transparent and healthy competition environment, use the tools, policies and resources of the State to orient and regulate the economy, boost production and business and protect the environment; exercise social progress and equality in each step and each development policy. Promote people’s ownership role in socio-economic development.”(1)

The socialist-oriented market economy is the creative application of the market economy – the prevailing economic mode of human society – on the condition of Vietnam to bring into full play the positive role of economy while minimizing the contraints and the negative side of the market economy in the construction of socialism of Vietnam. Socialist orientation is the characteristic and nature of the market economy that Vietnam is building.

This typical characteristic is determined by the nature of the economy, the characteristics of components that lies within the internal structure of the economy and determines the nature and tendency of the economy of Vietnam. Socialist orientation in the market economy in Vietnam reflects the objective, mode of development, management mechanism and mode of distribution of the economy in order to maximize positive features and the advantages of the market economy, while at the same time limiting and correcting the negative side, the constraints of the market economy in the interests of all people to achieve the objectives of socialism.

Basic issues in the coming time

In order for the country to develop quickly and sustainably, it is necessary to continue perfecting the socialist-oriented market economy in the following aspects:

By 2020, basically perfect the system of socialist-oriented market economy institutions according to the common standards of the modern market economy and international integration; ensure synchorization between economic and political institution, between the State and the market, the harmony between economic growth and cultural and human development, social progress and social equality, social security, environmental protection and sustainable social development; actively and positively integrate into the international economy in association with building an independent and autonomous economy; ensure transparency and foreseeability in the formulation and implementation of economic institutions, creating conditions for stable and favorable socio-economic development.

Continue to perfect institutions on ownership, develop economic sectors, and types of enterprises.

Institutionalize property rights (including ownership, use rights, decision and benefit from the use of property) of the State, organizations and individuals as provided for in the 2013 Constitution. Ensure transparency of obligations and responsibilities in state administrative procedures and public services for smooth transaction of property rights. Ensure the State’s right to manage and benefit from public assets and equal right to access and use public assets of all stakeholders in the economy. Improve the capacity of institutions and perfect civil dispute resolution mechanisms, and economic disputes in the protection of property rights.

All businesses of all economic sectors must operate in accordance with the market mechanism, equality and competition under the law. Encourage business start-up. Policy must be made to promote the development of Vietnamese businesses in both quantity and quality to become a core and leading force in industrialization and modernization.

Ensure freedom of business in areas not prohibited by law; build, implement in a coordinated and effective manner the post-inspection mechanism, further improve the law on competition, increase transparency of state monopoly and enterprise monopoly and control of business monopoly. Perfect institutional protection for investors, ownership and property rights. Improve the law on bankruptcy of enterprises under the market mechanism.

Continue stepping up state enterprise restructuring to ensure that the State-owned enterprises focus on key and essential aspects, important areas and national defense and security, and areas where businesses of other economic sectors do not invest in.

Step up equitization and sale of capital in enterprises where the State does not need to hold or to hold dominant shares, including enterprises which are faring well. Complete institutional arrangements for valuation of land, tangible and intangible assets (intellectual property, trademarks) in equitization in line with market principles. Separate production, business from political and public tasks.

Separate the State’s ownership of assets, and capital from State regulatory functions, business administration of State-owned enterprises; early relieve the ministries and people’s committees of the function of state ownership over state capital and assets of enterprises. Establish a specialized agency to act as the ownership representative of State enterprises. Build up the contingent of cadres, managers with state-owned enterprise administration capability of international standards.

Strengthen management, supervision, inspection and control to ensure transparency on investment, finance and activities of state- owned enterprises. Renovate the organization and operation mechanism of public service delivery units along the line of improving their autonomy and self-responsibility of organizational structure, staffing, personnel and finance; mobilize participation of different sectors including economic sector in the public service delivery.

Continue renewing the content and mode of operation of collective or cooperative economies; promote linkages and cooperation based on benefit relationships, apply advanced management methods in line with the market mechanism. The State has mechanisms and policies to support access to capital, train human resources, transfer technology and technology, support market development, create conditions for cooperative economy development on the basis of developing and upholding the role of household economy.

Encourage the development of different types of enterprises, forms of production organization and business with mixed ownership, especially joint-stock enterprises.

Perfect mechanisms and policies to encourage and facilitate the development of the private economy in almost all economic branches and domains into an important engine of the economy. Perfect policies to support the development of small- and medium-sized enterprises, and start-up businesses. Encourage the formation of private multi-ownership economic groups and capital contribution from private sector to state-owned economic groups.

Raise the efficiency of attracting foreign direct investment, attach importance to the transfer of technologies, advanced management skills and market for products; take initiative in selecting and adopting preferential policies for foreign-invested projects with modern management and technology, effective position in the global value chain and linkage with domestic enterprises. Strengthen linkages between foreign-invested enterprises and domestic enterprises in order to develop large-scale, high-quality supporting industries and large-scale industry in association with regional and global value chains.

In the management and development of enterprises of all economic sectors, it is necessary to bring into play the positive aspects for the country’s interests and at the same time inspect, supervise and control to ensure transparency, and limit negative impacts.

Synchronously develop market factors and types of markets.

Consistently implement the market price mechanism; ensure to full account and transparency of price constituting elements for essential goods and services; at the same time, issue policies to support entitled people, the poor and ethnic minorities. Prices will not include social policies. Improve the law on charges and fees, review and change policies on fees and charges of a number of public services into service charges. Expand the mechanism of bidding, auction, and price appraisal. Develop and strictly implement corporate social responsibility towards consumers and environment. Step up the perfecting of consumer protection institutions, resolutely fight against smuggling and trade frauds; fully and properly bring into play the role of consumers and consumers’ associations in the economy.

Continue to develop and smoothly operate all types of markets. Diversify and modernize the market of goods and services, set store by forming a legal framework, and developing a smooth and efficient distribution system. Restructure the financial market, ensure the healthy and stable macroeconomic stability, eliminate threats to system safety, effectively serve the development of production and business; ensure the market principles for the financial market along with strengthening management, inspection and control of the State and the supervision of the society; develop debt trading market, derivative tool market, and property lease. Continue perfecting the legal system, mechanisms and policies so that the real estate market operates smoothly and in conformity with the law of supply and demand in order to efficiently and economically exploit and use resources from land and assets, infrastructure on land; prevent speculation and waste. Perfect the mechanism and policies for synchronous development of the labor market, both in terms of labor size and quality and the branch and trade structure. Continue renewing, developing vigorously and synchronously the science and technology market, implementing the market mechanism and adopting supportive policies to encourage organizations and individuals, especially enterprises to invest in research, development, transfer of technology, and application of scientific and technological advances to production and business. (2)

Perfect institutions linking economic growth with social progress and equality in each step, each policy of development and protection of the environment, enhance the leadership of the Party, effectiveness and efficiency of state management of the economy, and strengthen the role of supervision, social criticism of the Fatherland Front, mass organizations and people.


(1) Document of the 12th National Party Congress, Central Party Office, Hanoi, 2016, pp. 102-103

(2) Document of the 12th National Party Congress, Id., pp. 104-110