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Monday, May 15, 2017, 06:17 (GMT+7)
Not to repudiate Marxist-Leninist economic theory

During the process of counteracting Vietnam revolution, the focal point of hostile forces is the founding ideology of our Party; including the Marxist-Leninist economic theory. They distorted that the theory is out of date, no longer revolutionary and scientific, thus it is not beneficial for economic development of Vietnam.

In order to counteract that distorted point of view, the National Defence Journal would like to introduce Prof. Dr. Chu Van Cap’s series of articles whose first one is entitled “Not to Repudiate Marxist-Leninist Economic Theory”.

I. Not to deny the role of state economy, and not to absolutely value the role of private sector in Vietnam

Vietnam is developing its socialist oriented market economy with several economic sectors in which the state sector plays the leading role, and the private sector is the driving force of the economy. It is suitable with the theory and relevant to the reality of Vietnam. However, a small portion of people think that the state sector should not play the leading role, it should be the private one. Then, they call for privatizing the economy. Objectively and scientifically, it is impossible.

1. The undeniable role of state-owned economy

Each social system always has its own dominant production relationship, including the main economic sector. In capitalist economy, the private ownership is the foundation. In capitalist countries, there remain state-owned economy and state-owned enterprises built on the basis of state-owned monopoly capital. Though stated-owned economy is not considered the leading role, the state-owned monopoly capital plays the key role.

Vietnam’s economy includes multiple forms of ownership, various economic sectors, in which the State sector plays the leading role and an important factor assuring the development of socialist-oriented market economy. It is confirmed at Item 1, Article 51 of the 2013 Constitution.

State-owned economy has been playing the leading role. It includes: (1) Enterprises where the State owns 100% capital or those where the State holds dominant shares or capital; (2) The non-business sector, which besides the state-owned assets, also includes land, forests, sea, airspace, natural resources, production material, state budget, and national reserves, etc. With such a huge scale, state ownership and state-owned economy play a key and leading role in the nation's socio-economic development, and provide the basic foundation for the development of other branches, fields, economic sectors, and models of enterprises. Accordingly, the system of state-owned enterprises plays the key role, and is being reformed. Though their GDP portion is decreasing from 29.34% in 2010 down to 29.01% in 2013, and 28.69% in 2015, it still plays the dominant role in a number of key economic sectors and areas. In spite of a decrease in the number of state-owned enterprises as a result of restructuring, reforming, and equitizing, it is vigorously bursting with the scale of asset, turnover, profits and remittances to state budget.

In 2013, 18 state-owned corporations and enterprises alone had a state capital of VND 840 trillion (about USD 40 billion)  (accounting for 83%), their total value was VND 1,985 trillion, total revenue was VND 1,184 trillion (USD 50 billion), remittance to state budget was VND 191 trillion (USD 8,5 billion).

State-owned enterprises have become the core force, playing an important role in the socio-economic stabilization, growth and development, contributing greatly to ensuring national defence and security, food security, and energy security. State economic sector has become the key resource to form economic hubs, new urban areas, and investors which invested in key national projects requiring huge capital, while the capital recovery time is long and the profit is low, etc. They have been also the main force in international integration, attracting foreign direct investment, and reducing negative impacts of the global financial-economic crisis in 2008-2010 period. A number of them have run their business successfully, such as: Viettel Group; Vietnam Posts and Telecommunications Group; Vinachem; and Vinacomin, etc.

However, the state-owned enterprises have also exposed limitations and weaknesses. The efficiency of production and businesses as well as the productivity of several groups has been low. Their competitiveness has been weak. There exist the state of privilege, corruption, and business monopoly that distort market relations, cause losses to consumers, and limit the competitiveness and development of the economy. A small number of people exploited these weaknesses to distort that the state-owned economy could no longer maintain its key role in the country’s economy. Then they called for privatization of state-owned enterprises and corporations, or removed the phrase “state-owned enterprises and corporations play the key role in the country’s economy”, etc. These are all one-sided views.

State-owned enterprises and corporations have shown limitations and shortcomings; however, these are the weakness of organizational structure, management and business, as well as the limited capability of several managers and executives. They are not the wrongful guidelines to maintain the key role of state-own sectors.

Moreover, the whole economy, including state-owned sectors relies on limited capability of production force. Meanwhile, the market economy and the economic integration are something rather new.

The facts also show that, not all private companies and foreign invested enterprises are doing their business well. A number of private company owners have gone bankrupt, lost their business, and even gone to courts. So the efficiency of production and business is not necessarily attributable to ownership. In the capitalist economy, many businesses have suffered losses, gone bankrupt due to the competitiveness factor or economic crisis.

2. Avoid absolutely valuing the role of private sector.

Private sector born on the basic of private ownership, and includes: Individual economic sectors, smallholders and private capitalist economies.

Since we conducted economic renovation, the private sector have been admitted and encouraged; it has been considered “a long-term strategy” in the whole transition period to socialism in our country. Up to now, the private sector has developed and become a major factor, playing the role of important driving force of the economy, making contribution to the success of renovation and the forming of market economy oriented to socialism.

Fostering private economy and encouraging private ownership to make legal wealth and contribute to the wealth of society are important measures to liberate production force and develop society and economy. The development of private economy creates pressures to foster innovation of other economic sectors and innovation in state management; forming up a dynamic team of entrepreneurs who can adapt quickly to market mechanisms and international economic integration.

Over 30 years of innovation, the private sector has developed vigorously. The number of new registered private enterprises is ever increasing with larger scope, covering all aspects, from manufacturing to commerce and services, contributing more and more for the development of the country. At present, there are about 500 thousand private enterprises and companies, accounting for 90% of enterprises the nationwide and about one million individual businesses. In 2006-2015 period, the private sector contributed 40% of the GDP; 30% of total industrial output value; about 80% of the total retail and service flow. In 2011-2015 period, it attracted 51% of the labor force, created about 1.2 million new jobs annually, making active contribution to solving social issues. The prominent advantage of the private sector in generating employment is that it can attract a diverse workforce: from highly qualified employees to simple workers; the level of investment in a workplace is lower than that of other economic sectors. Therefore, it has developed vigorously, contributing much to the socio-economic development of the country.

Nevertheless, it is not for this reason that we should consider it the “foundation” and the “key role” of the whole economy. At present, 98% of the private enterprises and companies is small and medium-sized; of which very small companies (employ not up to 5 workers and registered business capital are under VND 10 billion (USD 500 thousand) account for 96%. The number of big private enterprises in Vietnam is still moderate.

According to VnReport annual report on top 500 biggest enterprises in Vietnam, the number of private enterprises has got slight increase. There have been big private enterprises, such as: VinGroup, Hoa Phat Group, TH Group, and Sun Group, etc. However, the number is still moderate. The 40% contribution of private sector to GDP mainly comes from individual companies.

In 2005, the contribution to GDP of private enterprises was 8.51%, while its of individual companies was 32.06%. In 2015, that number was 7.80% and 31.33% respectively. How could that contribution of private sector bear the “key role”? In addition, this sector still has low competitiveness, limited quality of goods, small financial resources, low level of technology, and limited management capability. Most of the private sector businesses conduct "short-term" business and have no long-term business strategies. Moreover, the private sector shows no eagerness to, or does not have capacity to invest in major long-term projects, while the investment efficiency is low and capital recovery is slow. Therefore, should this sector be assigned “the key role” of the economy, it means the same as assigning a "utopian" task beyond its capacity. Thus, it should not be illusory that the private economy can play the "dominant role" of the economy.

Our Party has determined to build and develop our country in the direction of socialism, so the assertion that the state economy plays the leading role in the economy is the correct political orientation and perfectly relevant to the theory of Marxism-Leninism. The purpose of people who manage to privatize the economy is to change the political system in Vietnam. Because the base decides the superstructure, when privatizing the economy, inevitably the country will develop in the capitalist orientation.

This is a very dangerous plot. We should be wary of these "self-evolving", "self-transforming" manifestations and the opinions that deny the economic development orientation of our Party and our State, lower the role of the state economy, support the privatization of the economy, and lead to the deviation of the socialist orientation of our economy./.

To be continued

Prof Chu Van Cap, PhD.


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