This part argues that the emergence of state monopolies in Vietnam has been the product of a number of theoretical approaches. They include the standpoint of the „leading role‟ of the state sector, the guidelines for SOE reform and the demand for state monopolies in Vietnam under pressure from international economic integration.
3.1.1 The concept of the ‘leading role’ of the state economic sector
It is important to note that documents of the Vietnam‟s Communist Party are often seen as the primary sources, serving as the guidelines for legislative and policy making in Vietnam. Throughout these documents there is strong confirmation that the state sector must be used by the state to direct and to participate indirectly in the economy. In sum, the state sector must play a leading role; hence it should seize the core means of
56 production and therefore should dominate key industries in the economy.1
The details of this approach have been clarified by Vietnamese scholars and the notion of
„leading role‟ of the state economic sector, which has served as the central concept,2 has undergone new interpretations. As explained by Tran Kim Hao, „leading role‟ means that the state sector must become a „lever‟ for economic development, whereby state firms seize essential positions in key industries and branches of the economy. Their functions are to pave the way and to direct and support other sectors and they are a material force (tool) for the state to regulate macroeconomic issues.3 In another study, it is explained that the state sector should only control core means of production and focus on significant and strategic industries that ensure the harmonious operation of the economy.4 Finally, state resources are only to be provided for some industries and areas that have the potential to further develop in the future, or that are important for the state to invest in for specific purposes.5
Why the „state sector‟ should play a decisive role in the economy is another important question. It is often argued that this complies with the nature of the Vietnamese socialist
1 It was clearly indicated in the Strategy for Socio-economic Development 2001 – 1010 that : „…The State economic sector is an important material force and the instrument for the State's orientation and macro- regulation toward the economy; it is to focus investments on socio-economic infrastructures and a number of important industrial establishments. State enterprises assume key positions in the economy; pioneer in the application of scientific and technological advances; and set examples in productivity, quality and socio- economic efficiency and law compliance‟. See Communist Party of Vietnam, Strategy for Socio-economic Development 2001 – 2010 (presented by the Central Committee, 8th Tenure, to the IX National Congress, 4/2001) <www.cepal.org/iyd/noticias/pais/2/31522/Vietnam_doc_1.pdf>.
2 See, eg, Tran Kim Hao, To Huy Rua, Nguyen Duc Binh, Tran Quang Nhiep.
3 Tran Kim Hao, Mot so Y kien Ve Vai tro Chu dao Cua Kinh te Nha nuoc Trong Nen Kinh te Thi Truong Đinh huong Xa hoi Chu nghia o Nuoc ta [Several Comments regarding the Dominant Role of State Economy in the Socialist-Oriented Market Economy of Vietnam] (2006)
<http://www.ciem.org.vn/home/vn/upload/info/attach/11633996416870_Vai_tro_KT_NN_HT_TT_TV.doc
>.
4 It is commonly agreed that as it is a powerful tool for the state to intervene effectively in the market, state groups should only concentrate on those areas where they have advantages, while other companies do not, such as in electricity, difficult natural resource exploitation, infrastructure, metallurgy... This concentration is important to guarantee that the base of the national economy will not be dominated by monopoly companies and the term „leading role‟ of the state sector must be understood in that way.
5 Central Institute for Economic Management (CIEM) and Swedish International Development Agency (SIDA), Tiep tuc Xay dung va Hoan thien The che Kinh te thi truong Dinh huong XHCN o Vietnam [Continuous Building and Perfecting Institutional Framework for Market Economy with Socialist Orientation in Vietnam] (Science and Technology Publishing House, 2006).
57 state model.6 According to Vietnamese scholars, the decisive role of the state economic sector originated from the interests of the state in the transitional period to socialism. The achievement of a „strong state, wealthy people, a civilized, democratic and equitable society‟ requires the implementation of a decisive role for the state economic sector.7 Hence, to keep a „socialist orientation‟, it is necessary to place this state sector in a prominent position8 and it must take control of key positions in the economy in terms of scientific and technological ability,business and production expertise.9
3.1.2 State sector reform
Like any other countries in the transitional process from a planned economy to a market economy10 the reform of state-owned enterprises (SOEs) has become the most important issue and this process has been closely linked to overall economic reform in Vietnam since 1986.11 It is widely argued that the development of state monopolies is deep-rooted in the motivation of SOE reform and that their monopoly in crucial areas in the economy
6 As it is stated in the Strategy for Socio-economic Development 2001 – 2010 of the Communist Party of Vietnam, the SOE sector is entrusted to be a significant tool for the state to manage and direct the economy and business activities. See Communist Party of Vietnam, Strategy for Socio-economic Development 2001 – 2010 above n 1.
7 To Huy Rua, „Nang Cao Vai tro Chu dao Cua Kinh te Nha nuoc Trong Nen Kinh te Thi truong Dinh huong XHCN‟ [Enhancing the Dominant Role of State Economy in the Socialist-Oriented Market Economy.](2007) 1 (122) Communist Review
<http://www.tapchicongsan.org.vn/details.asp?Object=17134728&News_ID=22151242>.
8 Nguyen Duc Binh, „Xay dung Dang ta that vung manh‟ [Building our Party to be Genuinely Strong] Nhan Dan (Online) (2006) <www.nhandan.org.vn>.
9 Tran Quang Nhiep, Fundamental Features of the Socialist Oriented Market Economy in Vietnam (2007)
<netx.u-paris10.fr/actuelmarx/cm5/com/M15_socia_Tran_Quang_Nhiep.rtf>.
10 Tran Van Tho, Vietnamese Gradualism in Reforms of the State-Owned Enterprises (2000)
<http://www.f.waseda.jp/tvttran/en/recentpapers/E02States-owned%20entreprises%20in%20Vietnam.doc>.
11 It is noted that in the early 1990s, a gradual program aiming to reform state-owned enterprises was launched in response to poor economic performance, ineffectiveness, loss of money and low
competitiveness, as well as the impacts of the economic crisis during the 1980s. In an attempt to fix the failures of the command economy model, this process was undertaken in parallel with the changing of roles of the state in the economy. See Le Dang Doanh, „Legal Consequences of State-Owned Enterprise Reform‟
in Ng Chee Yuen, Nick J Freeman and Frank H Huynh (eds), State-Owned Enterprise Reform in Vietnam:
Lesson from Asia (Institute of Southeast Asian Studies, 1996).
58 has originated from the guidelines for SOE reform.12 In general, it is firmly asserted by Vietnamese government that reform and renovation of the SOE sector, at both macro and micro levels, must assure the dominant role of the state sector.13 This is the consistent standpoint of Vietnam‟s government as it has appeared in both documents of the CPV Party Congresses and state legislation.14
Notably, the role and position of the state sector are discussed in the context of Vietnam‟s private sector development. As private firms in Vietnam are newly developed and generally small-scale, it is predictable that the SOE sector will continue to play an important role in contributing to economic development and will not be replaced by other sectors in the near future. There are three areas where only SOEs can perform effectively and this is unchallengeable: the supply of essential public utilities, national defence and security and investment in rural and mountainous areas or wherever there is low economic productivity. It plays an active role as the „locomotive pulling the whole economy towards sustainable high growth‟.15
3.1.3 The demand for state monopolies in Vietnam
Explanations given by Vietnam‟s scholars16 to support the existence of state monopolies are based on arguments over the role of SOEs. Again, state monopoly is justified by the key role of SOEs in the economy. The state is considered to need them to be the material
12 The way to reform of SOEs is commonly agreed as below:
State-run enterprises should be fundamentally re-arranged, mainly for the purpose of maintaining control over key areas of the economy and should shift entirely to a market-oriented economic mechanism. Thus, they will play a leading role in the economy by virtue of their effectiveness, rather than by relying on state subsidies and a monopoly position as in the centrally planned product economy.
See Nguyen Thanh Bang and Tran Duc Nguyen, „The Ownership System and Variuos Forms of Business Organisations in the Multi-Sector Commodity Market‟ in Per Ronnas and Orijan Sjoberg, Socio-economic Development in Vietnam: the Agenda for the 1990s (Swedish International Development Agency, 1991) 194.
13 Phan Van Tiem and Nguyen Van Thanh, „Problems and Prospects of State Enterprise Reform, 1996 – 2000‟ in Ng Chee Yuen, Nick J Freeman and Frank H Huynh, State-Owned Enterprise Reform in Vietnam:
Lessons from Asia (Institute of Southeast Asian Studies, 1996).
14 As it was observed, socialist framework must be kept unchanged with a new economic and political model to boost Vietnamese economy. See Joanna Harrington, Constitutional Revision in Vietnam:
Constitution Renovation but No Revolution (1994) <www.capi.uvic.ca/pubs/oc_papers/harrington.pdf>.
15 Tiem and Thanh, above n 13.
16 For example, Dang Vu Huan, Pham Hoang Ha, Le Hoang Tung, Nguyen Trung, Nguyen Thi Loan, Dao Xuan Thuy.
59 force acting as a tool for guiding and regulating macro-economics.17
It is argued that the creation of state monopolies enables the state to control crucial areas of the economy or to guarantee essential public goods needed by the entire people. State monopolies are closely linked to the implementation of socioeconomic, security and defence policies. They allow the state to carry out its preferential policies and to regulate competition according to its wishes, stabilizing the economy and protecting consumers‟
interests.18 It is believed that in the existing conditions of Vietnam‟s economy, state monopolies in some sectors are essential for maintaining a certain balance in the economy, ensuring stability and sustainable economic growth.19
The rationales for maintaining state monopolies also arise from the need to mobilise investment capital and resources to develop key industries, especially in science and technology. State monopolies, it is thought, should be maintained in areas that require large investment but need a long time for capital returns. Moreover, the existence of state monopolies seems to be significant in those areas where it is difficult to attract foreign investment.20 It is believed that state economic activity plays an important role in attracting capital from various economic sectors21 and contributes to the stabilization of prices of crucial goods; and more recently, it has been significant in the context of the
17 Dao Xuan Thuy, Dieu kien va Giai phap Hinh thanh Cac Tap doan Kinh te Tu Cac Tong Cong ty 91 [Conditions and Solutions for the Establishment of Economic Groups on the Basis of the 91 State General Corporations] (National Political Publishing House, 2009) 50; Pham Hoang Ha, Boi canh Kinh te cua Chinh sach va Phap luat Canh tranh [Economic Context of Competition Policy and Law] (2005) <www.cuts- international.org/7up2/2ndNRGvietnam2.ppt>.
18 Dang Vu Huan, Phap luat Ve Kiem soat Doc quyen va Chong Canh tranh Khong Lanh manh o Vietnam [Law concerning Monopoly Control and Anti-Unfair Competition in Vietnam] (PhD in Law Thesis, Hanoi Law University, 2002).
19 Le Hoang Tung, „Competition and Monopoly in Vietnam‟ (Paper presented at International Workshop on Competition Policy in Seoul, July 30 - August 2, 2001). This viewpoint has been demonstrated by the active role of state enterprises in dealing with the economic crisis in the world recently. In the meeting with leaders of state corporations and economic groups in July 2007, Prime Minister Nguyen Tan Dung stated that state enterprises had become important tools of the state to regulate the economy, through their attempts in terms of inflation restraint, macroeconomics stabilization, growth maintenance and the
guarantee of social security. See Saigon Giai phong Online, „Cac Tong Cong ty Nha nuoc Co Vai tro Quan trong Gop phan On dinh Xa hoi‟ [State General Corporations Play an Important Role in Stablizing the Society]<http://www.sggp.org.vn/kinhte/2009/2/180496/>. See also Conclusion of the Prime Minister at the Meeting with State Economic Groups and General Corporations on 20/08/2008.
20 Phan Thi Van Hong, Doc quyen va Phap luat ve Kiem soat Doc quyen o Vietnam Hien nay [Monopoly and Law Concerning Monopoly Control in Vietnam] (LLM Thesis, Hanoi Law University, 2005) 40.
21 Tung, above n 19.
60 rising price of fuel in the world.22