Vietnam Academy Of Social Sciences

Restructuring Economy from A Perspective of Development Engines in New Era


Tran Dinh Thien(*)


Abstract: The cause of economic renovation in Vietnam over the past more than 30 years has an important content of renovating the mode of development, helping the economy to revive quickly and achieve spectacular development. However, in the context of increasing globalisation, and the Fourth Industrial Revolution, the country needs a new approach to development. It must actively seek both new resources and engines of development in new ways, combining them with traditional development engines and modes of development, and move towards sustainable development.

Keywords: Engines of development, economy, restructuring, Vietnam. 

Subject classification: Economics


1. Introduction

Over the past 30 years  of  renovation, Vietnam's achievements in economic growth and development are very positive. Most important is the transition of the mode of  development  from  a  centrally  planned subsidised economy to a socialist-oriented market  economy,  creating  a  strong  new development engine, helping the economy escape  from  the  "loss  of  growth  engine" that lasted many years.

The foundation of the new engine is the change  from  the  old  ownership  structure, and  the  "total  state  ownership"  economy (with a dominance of state ownership and collective ownership) to a multi-ownership economy (with multi-sectors and the private economy  being  accepted).  Changing  the mode of development, adopting the market mechanism, embarking on new growth, and development trajectory, have brought about many positive results.

However, looking deeply into the nature of development, especially into some indicators reflecting the quality of growth and  development  such  as  changes  in  the technological  level  or  economic  structure level (i.e. manual or mechanical, sub- contracting assembly or manufacturing, imitating or creating technology), it is easy to see that there are serious problems in the Vietnamese economy today. These include unsteady growth, the trend of a declining GDP growth rate, the quality and level of economic  development  (i.e. technological level, labour quality,  institutional  level) which is only slowly changing, Vietnamese enterprises' capacities being low and slowly improved, and the remaining bottlenecks of growth and development. The  severity  is even more obvious when one considers the "problematic status" of Vietnamese enterprises' capacities from the perspective of international competition.

Box 1: Vietnam's GDP growth

Starting from a poor, backward country, whose production hardly met domestic demand, after nearly 30 years of implementing the renovation process, Vietnam has gained many important achievements  in  economic  development.  The  Gross  Domestic  Product  (GDP)  was  always maintained at a good growth with an average annual growth rate in the period 1990-2014 recorded at 6.9%, bringing Vietnam from one of the poorest countries in the world to a middle-income country with a GDP per capita in 2014 recorded at USD 2,052 - 21 times higher than the average rate in 1990. From a country with a GDP in 1990 only recorded at about USD 6.4 billion, ranked 90th  in the world, after nearly 25 years of development, Vietnam's economic scale has improved significantly, with the GDP in 2014 reaching USD 186.2 billion, ranked 55th in the world [3].

The remarkable achievements in economic growth and development in the past period were basically associated with the exploitation of available resources ("static" resources) in the traditional "fully exploited" way (i.e. exploiting and exporting raw resources for sale was a key basis for growth), and not reliant on structural changes. Even efforts of opening up and integrating into the global economy, and quickly closing the gap with advanced countries also relied mainly on the foundation of "fully exploiting" resources, cheap labour, low skills and a large number of small  and  micro  enterprises  with  poor and  weak apacities. Meanwhile, the serious situation of development stems from the fact that the development drivers (i.e. "dynamic" resources) of the economy were not promoted, even diminished fast. This is the intrinsic reason that forces us to rethink the issue of "drivers of growth and development" in a fundamental, systematic and  serious  manner  -  like  more  than  30 years  ago  at  the  time  of  "the  eve  of renovation", when the issue of "development drivers", and the situation of "declining  labour  motivation"  became  so critical, signalling the revolutionary renovation (which actually started from the 6th Congress  of  the  Communist  Party  of Vietnam  in  1986).  Currently,  after  more than  30  years  of  renovation,  Vietnam's development situation has changed fundamentally, and  the  world  has  moved into   the   era   of   the   Fourth   Industrial Revolution.  Development  conditions  have changed, and there is a need to approach the issue   of   “development  drivers”   on   a different level,  i.e. seeking new development   drivers   and   new   ways   of promoting  development  drivers  combined with  traditional  ones.  This  article2   deals with the  perception of  "development drivers", analysing the situation and solutions  to  enhance  development  drivers for the new period in Vietnam.

2. Perception of development drivers

Resources are required for economic development. In the era of the agricultural economy  (characterised  with  subsistence and self-sufficiency), the two basic resources  are  land  and  labour  (i.e.  low- skilled   labour), basically   envisioned   as natural  and  static  resources,  as  shown  in function  (F)  for  economic  development with two main variables: land and labour. In the industrial-market era, the development function is expanded, with the addition   of   the   "capital"   element   (i.e. resources of social nature and high mobility). In this development function, of the three variables of this era, land, labour, and   capital,   the   capital   factor   is   the determinant of the "higher level" of a new production  mode,  which  plays  a  leading role in development.

Nowadays,  humanity is  moving  into  a new era of development, with the participation of two additional new resources,  which  is  substantially  different from traditional resources. It is technology (high technology) and human intelligence. The   development   function,   accordingly, also    changes, including land, labour, capital, and technology.  According to the established  logic,  the  new  resource  that joins the development function (i.e. technology and human intelligence) is the most dynamic and has the highest level of development, which  governs the structure and   operating   principles   of   all   other resources,  and  plays  a  leading  role  in development in the new era.

Resources that arise later chronologically and follow the development logic are always more "dynamic", playing a dominant and leading role in development. If Vietnam prioritises the development of these (leading) resources, strong development drivers will be created in the form of breakthroughs and the historical journey of Vietnam will be shortened. Resources must be combined in defined  ways to create wealth. The rationality of the mode of integration, also meaning the way of allocating development resources, is a determinant of the efficiency of the economy.

The principle that "productive relations fit production forces" is the most important driving force for the development of human history (i.e. one of the most important principles of Marxism stemming from this relationship).

This principle implies "the decisive role of  institutions  in  development"3.  Modern institutions, in accordance with the conditions  and  capacity  of  development, will  be  the  driving  force  and  the  most important   development   drivers.   On   the contrary,  those  backward  institutions  that chain the capabilities will inhibit development. Institutions, in their specific form, are the "system  of  development  mechanisms  and policies",  and  the  core  of  which  is  the benefit-incentive  mechanism.  This  is  the driver that motivates people to act, the type of driver that plays a decisive role in the system of drivers. The transformation of the economy from a central planning mechanism to a market mechanism created a strong development impetus as seen in the first  ten  years  of  renovation.  This  is  a typical example of the thesis on institutions’ role of development drivers.

"Drivers", different from "static forces", are identified as  "dynamic forces", which are  the  development  forces  and  entities, generally understood as the  "human element". In economy, entities' forces exist in the form of economic sectors (i.e. state sector, private sector, household sector, and sector of foreign-invested enterprises).

These entities' forces, in the era of door- opening, can be accessed in a different structure, including indigenous forces (Vietnamese enterprises) and foreign ones (foreign-invested enterprises).

Expanding the concept of "human driving  force", at a more  specific  level, there are the lines of "cultural  driving force", "economic driving force", and "political  driving  force".  These  specific types of driving force are associated with defined benefit structures. In the process of modern development, science, technology, and the creativity of humans are "dynamic" sources of endless potential. Development mechanisms and policies towards the future of every country must, in principle, pay the utmost attention to promoting the development and maximising the effects of these resources and driving forces.

Countries with developed economies under the Organisation for Economic Co- operation  and  Development  (OECD)  and the less developed countries are trying to establish a pioneering role of development in  the  new  era,  such  as  the  Republic  of Korea (South Korea) and China, which are implementing this strategic orientation and achieve  breakthrough  advances.  For  the Communist  Party of  Vietnam  (CPV),  the approach  and  perception  of  development drivers  are  constantly  changing,  renewed and developed through the CPV Congresses. Considering  the  general  flow of   cognitive   development,   the   specific connotation of the concept of "resources" and the "driving force" of economic growth and   development,   basically   covers   the above contents. The addition of arguments and guidelines on "the cultural foundation of development", "the cultural driving force of development", and "the private sector is an  important  driving  force  of  economic development" into the paradigm of national and economic development drivers in the recent CPV Congresses which demonstrate the efforts of the CPV and State to explore, discover,   and   promote   the   strength   of growth and development forces.

3. Current  situation of promoting development  drivers  in  the  renovation period

The economic reform over the past 30 years has the core content of changing the mode of  development  -  from  the  "traditional" socialist institutional system and the socialist production relation with two main axes, namely (1) the regime of total public ownership (actually meaning total ownership of resources), and (2) centralised planning mechanism (i.e. resource allocation mechanism) to market institutions with two core   axes,   namely   (1)   multi-ownership regime (i.e. multiple sectors), and (2) market competition mechanisms.    The newly established mode of development   has helped the economy previously exhausted by the crises revive rapidly, giving it a new development  momentum  and  spectacular economic growth and development results (Figure 1).

However, in parallel with these spectacular achievements, certain development obstacles have   been   emerging   in   the   economy, suppressing or "deflecting" newly established development driving forces and becoming increasingly difficult to overcome.

Figure 1: GDP Growth and Per Capita Income in the Period 1985-2018

Source: PCAP.KD.


3.1. Actual status of operation of economic growth and development drivers

In order to identify the current situation of the operation of economic growth and development drivers, it is necessary to analyse the trend of short-term and long-term growth and economic development (Figure 2).

Figure 2 shows the trend of the declining GDP growth rate in the period 1991-2018, over each ten-year span. After the first ten- year  span,  the  annual  growth  rate  of  the second ten-year span decreased by 0.8%, and of the third ten-year span dropped by 0.6%. Such  a  trend  of  "steadily"  declining  GDP growth was against the highest priority goal throughout  the  period  striving  to  achieve "higher growth rates, year after year". It was not that Vietnam's economy is so large that the GDP growth tends to decrease compared to the period when Vietnam's economy was at a small scale. This is because there is another growth  situation,  reflecting  the  nature  of Vietnam's  lagging  trend  compared  to  the world, especially with other countries in the region (Figure 3).

Figure 2: Average Annual GDP Growth Rate During 1991-2018

Source: PCAP.KD.


Figure 3: Vietnam's GDP Per Capita Compared to That of Other Economies in the Region

Source: World Development Indicators.


Figure 3 shows that Vietnam's lagging situation is far worse than that of the main competitors. This fact  implies that Vietnam's growth performance is not good enough to shorten and narrow the gap of development   lag  and   that   growth   and development  drivers  of  Vietnam  are  not strong enough to help the economy rise, go ahead and keep up with the world. This is  a  big  problem  for  Vietnam,  in  the context of going behind, engaging in fast and deep international integration, as the whole world moves quickly into the era of high technology.

The  cause  of  this  condition  cannot  be explained by external effects, or by random and short-term causes. The key issue is that Vietnam's  economic  growth  drivers  have been steadily declining after a spectacular period  of  start-up  renovation.  The  long- term  trend  of  the  continuous  decline  of growth shows that the cause belongs to the internal   structure   of   the   economy,   not because   of   temporary   policy   errors   or certain individual weaknesses of the managerial  apparatus.  That  is,  there  is  a question of the continuing weakening of the growth engine of the transitional economy, although  it  is  of  a  systemic  character, associated   with   changing   the   mode   of development,  not  merely  specific  driving forces associated with individual solutions.

This observation is complemented by a "different"   development   situation:   over more  than  30  years  of  renovation  (1986- 2018),  15  years  of  which  saw  Vietnam's economy  in  crisis  and  efforts  for  crisis management.  That  was  from  1986-1990, 1997-1999 and 2008-2015.

Experiencing ups and downs, until now, the economy has not  yet fully recovered. Achievements   of   the   period   1990-1996 thanks  to  the  momentum  of  opening-up reform, and of the period 2000-2007 (i.e. the  driving forces  of reform and integration), have been significantly eroded during the financial-monetary crisis in East Asia   (1997-1999)   and   the post-WTO accession crisis period (2008-2015).

This situation reflects the uncertainty of the  growth  and  development  process  and the unstable trend of development drivers (Figure 4).


Figure 4: Annual GDP Growth, by Quarter, Period 2010-2018

Source: Author's compilation from the General Statistics Office's quarterly Socio-Economic Reports over the years.


The graph’s shape shows abnormal GDP growth   dynamics: The "growth of the subsequent quarter was higher than that of the previous quarter" and the annual growth plan has always been fulfilled. The graph’s shape also reflects the abnormal state of the growth drivers: efforts were  always "maximised" to achieve short-term growth, while Figure  2 above   shows  the "problematic" state of the long-term growth. It can be said that "achievementism" was a very strong engine of growth of the Vietnamese  economy,  at  least  for  a  long time  until  2017.  Due  to  its  short-term motivation, this growth engine did not aim for  fundamental  and  long-term  goals  and achievements, such as changing the level of industry  structure,  upgrading  technology, improving labour productivity and improving the quality of growth. In essence, this short- term   motivation   had   a   different   effect (promoting the "quantity" side of growth) and  the  opposite  direction  (discouraging, even obstructing the achieving of the goals of  structure  and  quality of  development) with efforts to achieve long-term goals. It caused a distorted mechanism and retained an economic growth model which was no longer appropriate, reflecting the inconsistency, even a conflict between the engine and goal of economic development.

The  "problematic"  general  situation  of the aforementioned development drivers is reflected  in  the  division  and  dispersion status  in  the  economy  (i.e.  dividing  and splitting   of   enterprises   and   territories, discrimination  against  certain  sectors  and entities). Structure of key economic forces and  economic  sectors  were  "anomalous": Most  of  the  GDP  was  produced  by  the weakest forces (i.e. the private individual economy) and by the least efficient forces (i.e. the state sector) while the foreign direct investment (FDI) sector tended to “dominate” the domestic sector (Figure 5).

Figure 5: Structure of Economy by Sector and Entity

Source: The 2011-2018 National Year Book Data.

Many studies show that: (1) After 30 years of developing a market economy, Vietnam's private enterprise sector contributes less than 10% of GDP; (2) only in 2017 was the private sector officially recognised by the CPV and the   State   as   an   "important   development driving   force";   (3)   of   the   four   current economic  growth  drivers,  three  "internal" drivers  (namely state-owned enterprises, Vietnam's private sector, and the household sector) have been seriously weakened.

The lack  of  linkages  and development cooperation  among  sectors  and  economic entities is identified through the concept of a "2-in-1 economy" (implying the division between the domestic economic sector and the foreign investment sector). The concept of  "Vietnamese  business  force"  lacks  the "standard"  connotation,  focusing  only  on the  number  of  businesses,  but  neglecting the structure of connectivity. The result is a small, fragmented enterprise sector, which "grows slowly, is difficult to grow and does not want to grow", shows a lack of linkage to lead development (namely, strong private economic groups) (Table 1).

Table 1: Structure of the Vietnamese Business "Forces"


Type of ownership














Size by capital








Rate by row (%)





Rate by column (%)












Rate by row (%)





Rate by column (%)












Rate by row (%)





Rate by column (%)












Rate by row (%)





Rate by column (%)













Rate (%)





Source: Compiled from the 2017 Enterprise Survey Data.

In terms of space, the division between local  economies, and between  the  local economy and the national economy is a fact that deserves analysis and clearly identifies the mechanism. Together with the division of   enterprises, the spatial division of development shows that the economy lacks the motivation to connect. Therefore, it is impossible to converge, link, and resonate power, thereby creating development diffusion. The most important type of development driving force of the market economy (namely competition and development linkage) has not been brought into full play in Vietnam's economy.

The situation of "horizontal development",  a  lack  of  focus,  and  key points, without spearheads and true "locomotives" has existed for many years. A "jackfruit-shaped development strategy" is   a   term   that   accurately  and   vividly describes  this  developmental  state.  The State  apparatus  operates  and  directs  the economy  with cumbersome    payrolls, overlapping laws, policies, and procedures, complex business conditions, an ineffective  and  inefficient  civil  service, coupled with high transaction costs. This is one of the main causes of the situation of "having   no   need   to   grow,   and   being difficult to grow" of Vietnamese enterprises.

3.2.   Cause   of   decline   of   growth   and development driving forces

In the first phase of renovation, efforts to shift to a market economy  mechanism created a double driving force for development in the economy: (1) Changing the ownership structure, creating a driving force for market competition; (2) Regulation  by  the  State,  implementing  a distribution regime that both complies with market rules (namely, distributing according to labour and asset contribution), and ensuring social equity (namely, poverty reduction, social policies) have helped the economy  quickly  escape  from  the  crisis, establishing new momentum of growth and development. The effort to open up has also given the economy two types of strong new growth drivers, namely foreign direct investment and export growth.

However,  after  the  start-up  period  of renovation, many factors hindered   and weakened the drivers for economic development.  Vietnam  did  not  solve  the relationship between "developing a market economy"   and   "maintaining   a   socialist orientation" well. The failure to focus on developing input markets of the economy4 associated  with  the  tendency  to  curb  the development of the private economy is  a practical  trend  that  has  lasted  for  many years.  This trend itself reflects the "problematic situation"  in  the  theoretical awareness and perception of basic concepts of the market economy and their relationship to Vietnam's innovative development formula (i.e. socialist orientation).   This   situation   means   the absence of a competitive environment and the absence of healthy competition, which is   always   the   basic   driving   force   of development in the market economy. The trend   of   restraining   and   delaying   the development   of   markets   also   explains why the restructuring of the economy and the renewal of growth models in the past ten   years   have   been   almost   "at   a standstill" despite enormous efforts of the State and the whole economy. There are grounds  to  affirm  that  this  is  the  main source   of   awareness,   perception,   and practice   of   the   trend   of   weakening economic development driving forces  in Vietnam in the recent period.

Preserving too long the "discrimination" mechanism, followed by a system of “asking and giving”, the direct source of corruption, and the formation of opposing interest groups that conflict with the overall development interests are key factors suppressing incentives in the spirit of "fair market competition".  The cumbersome, complicated, and ineffective  status  of  the State's   regulation   system   and   business conditions have increased business costs and weakened the competitiveness of enterprises.

A "permissive" growth model is based on exploiting available resources, unskilled labour  resources,  and  the  "pumping"  of cheap credit. This has caused the consequences of eliminating the motivation, trading-off growth with the environment, a low-wage  economy,  high inflation trends, and more. Integrating those "negative" factors inevitably leads to a highly speculative economy. For many years, the number  of  real  estate  enterprises,  centres for real estate, and securities brokerages, as well as consultancy services, often account for an overwhelming proportion of the total number of newly registered enterprises.

For  many  years,  the  growth  model  of Vietnam has been designed in the direction of  encouraging  imports  (both  inputs  and ordinary consumer goods), not encouraging domestic   production   and   exports. The mechanism of budget allocation and investment capital allocation based on the principles of “asking-giving”, exchange rate policy,  import  and  export  taxation,  have become a strong driving force to promote the tendency of imported input dependence, to encourage the development of industries of processing, assembly, and exploitation of natural resources, and restraining the development of supporting industries. This growth model discourages innovation, eliminates chain linkage capacity and fair competition among the Vietnamese business community.

A "reverse" incentive system has been designed   and   maintained for too long, including policies and measures to encourage "achievementism". Efforts to achieve short-term quantitative achievements  are  being  preferred  rather than encouraging the promotion of innovation  capacity,  quality improvement, and high added value5. Talented people are less appreciated. The mechanism to attract talented people is too rudimentary, focusing on  "small  benefits"  (i.e.  salary  increase, bonus,  housing)  to  attract  them  but  not paying due attention to creating favourable conditions for them to bring their capacity into  full  play.  A  typical  example  of  a reverse incentive system is the situation in which the "choosing the winner" principle is  applied  instead  of  the  "rewarding  the winner" principle.

The way of selecting a contractor without going through bidding, or organising bidding according to the deployment of "blue troops, red troops", in which a bidder will surely win as the others, called “blue troops”, are fake competitors, who  compete  in  a  way  that  they  will certainly lose; or setting up  the so-called "backyards",  or  cronyist  companies...  are also specific manifestations of this mechanism of operation. As a result, many truly capable entities were excluded from the race. In fact, such "reverse incentive" policy system carries many risks both for those entities doing business in good faith and the "selected" winners.

With  this  way  of  creating  non-market development drivers, in Vietnam after more than 30 years of embarking on a socialist- oriented market economy, only a few private enterprises have been able to rise to become big economic groups, especially in industry, or if they have managed to rise, they have to face very high risks.

Meanwhile, state-owned economic groups, which were promoted to develop under the mechanism of "choosing the winner", could not  grow normally, doing business ineffectively,and posing high risks.

Recently, a series of economic corporations and  state-owned  enterprises,  which  were once  "illustrious  and  famous",  have  been plunged   into   in   a   state   of   lack   of competitiveness, business losses, and faced the risk of bankruptcy and dissolution; and many "illustrious and elite" leaders of this sector have been  faced with legal proceedings and/or imprisonment.

The  mechanism  and  policies  to  attract and  utilise  FDI  capital  were  biased  and discriminatory towards the local economic forces,   applied   for   a   too   long   time, distorting the business environment and its consequences  on  long-term  development strategy. To attract foreign investment, the system  of  policies  and  solutions  was  not only based on the most attractive factors of Vietnam, namely the "available advantages" (i.e. advantages of latecomers, well - endowed, geo-economic location advantages, abundant   natural   resources,   low   labour costs,  hard-working  labour, and a stable socio-political environment) but also placed special emphasis on policy incentives such as  tax  incentives,  incentives  of  access  to land,  preferential  input  prices  (including low   energy   prices,   low   environmental costs),  preferential  access  to  workforce, being  less  affected  by domestic  inflation, and high interest rates, as  well as guaranteed  exchange  rates  stability.  Such incentives  created  an  unfair  competition situation among domestic  enterprises, especially private enterprises, and foreign- invested  enterprises  (FIE);  and  national development  interests  suffer  while  FIEs enjoy benefits as a result.

The   competition   to   attract   foreign investment among localities takes place on the  way of "a race to  the bottom",  both harming the interests of the localities and causing the domestic enterprises - which are already weak and prone to face disadvantages  - to  suffer losses  in  many aspects, and causing development drivers to  decline.  This  is  one  of  the  important reasons   why   the   majority   of   foreign enterprises investing in Vietnam use low technologies risky of major environmental pollution,  pay  low  wages,  and  are  not interested   in   developing   linkages   with local  businesses.  A large  part  of  foreign enterprises   (up   to   60%)   submit   their reports  on  continuous  losses  for  many years  but  they  are  constantly  expanding their   business.   This   kind   of   "reverse" incentive,   ironically,   helps   the   foreign investment sector become an increasingly important  development  driving  force  for the Vietnamese economy.

4. New context and solutions to enhance development drivers for the new period

4.1. New era contexts and new requirements for the system of development drivers

The world is entering a new era of development,   fundamentally  different   in level, structure, and logic of development from previous stages. The era transition this time, therefore, is also completely different from the previous transitions. It is possible to describe the era with the following four basic contents:

First,  the  trend  of  globalisation  will vigorously continue, but with different and conflicting  solutions  (e.g.  the  trend  of "protectionism"). In this era, international integration and competition will still be the environment and one of the basic drivers of development.

Second, the Fourth Industrial Revolution will be a key orientation for humanity to enter a high-tech economy as an integration of the physical economy (i.e. high-tech with the digital economy). High technology and the digital economy will be the basis of the  new  development  of  humanity.  The Fourth  Industrial  Revolution  will  be  a strong  breakthrough taking place with  an unprecedented  speed.  From  both  angles, innovation and creativity will play the role of  the  strongest  development  forces  and will have endless potential of the world in the coming period6.

Third, as the world development situation changes, a global conflict with the dominant axis based on the US-China relations  tends  to  increase.  The  conflict between the United States and China (the two leading powers of the world) is creating unprecedented  development  opportunities and   challenges   for   the   whole   world7. Because these are the two most important economic and political partners of Vietnam, the way to handle this relationship contains potential capabilities for promotion or curbing of development for Vietnam.

Fourth, Vietnam is one of the countries most affected by climate change. This sets new requirements and demands on Vietnam's capacity and solutions to respond to it.

Shaping the  era  with  the  four  contents above cannot cover the current and ongoing global trends, but it is provisionally enough to assert that a new approach to development is  needed.  This  requirement  is  fierce  and urgent when the above processes and trends are taking place with unprecedented speed and  uncertainty.  The  implication  of  this statement is that improving and upgrading the  efficiency  of  traditional  resources  and driving forces is not enough. Efforts must be action oriented to seek both new resources and new growth drivers in new ways.

The factors that shape the era mentioned above suggest  a new approach to development drivers. Those  development drivers   associated   with   the   economic transition will continue to be effective in the coming period.

The 4.0 era economy requires that Vietnam  cannot stop  at  overcoming  the development and growth "bottlenecks" that the economy is being plunged into. As a highly   open and integrated economy, Vietnam must create  a new structural foundation and modern development drivers  compatible  with  the  era  of  the Fourth Industrial Revolution.

First, the Fourth Industrial Revolution is creating  a  distinctly  logical  development structure: on the basis of high technology and   digitalisation, humankind   is   being provided with very new development tools to build a new economic system, which is the integration of the analogue (traditional) and digital economies. This economy operates with fundamentally new qualitative resources,  a  new  linkage  structure  and operational mechanism, oriented to satisfy a new demand paradigm. To build and operate that economy, new capacities and new driving forces are needed.

Second, participation in international economic   integration   by   new-generation free  trade  agreements  implies  compliance with  economic  institutional  requirements, technical   standards,   and   regulations   of products and services at a very high level. In  this  case,  international  integration  not only brings  about  enormous  opportunities but also creates unprecedented development pressures. Both opportunities and pressures of  development  have  become  a  driving force for reform, improving labour productivity and pushing the economy to a new level of development.

Transforming development pressures into driving forces for reform must be considered a new development approach in the era of open international integration for Vietnam.

4.2. New approach and a new orientation of solutions

4.2.1. Approach

First, the principle of Marxism-Leninism must  be  followed.  This  means  building appropriate  production  relations,  paving the way for production forces to develop on the basis of innovation to increase the proactive pioneering of the superstructure systems, especially the political superstructure. At present, the innovative pioneering  of  the  political  system  is  a prerequisite for reforming economic institutions, thereby creating a new system of development driving forces to accelerate reform and development. 

Second,  developing  synchronously  all kinds of markets, paying special attention to developing  input resource markets, especially  the  land  market,  is  the  most important content to create motivation for the  development  of  the  economy  in  the coming period.

Third, it is necessary to build a state that enables and facilitates development in the spirit of serving the  market, serving businesses, designing a modern institutional framework for development governance, in accordance with integration commitments.

Fourth, the principle that "internal forces are decisive and external forces are important" must be followed in developing Vietnam's contingent of enterprises and in implementing the strategy for FDI attraction and utilisation in the coming period.

Fifth, the implementation of international integration commitments is the pressure (to be  the  most  powerful  driving  force  for reform and development).

Sixth, it is important to make full use of the   advantages   pertaining   to   being   a latecomer, to strive for good institutions, to encourage   innovation   and   creativity,   to consider  science,  technology,  and  human intelligence  as the most important development drivers in the coming period.

4.2.2. Orientation for solutions to enhance development drivers

First, it is necessary to formulate strategies

for   synchronous   development   of   input markets and to pay special attention to land market development strategies in the spirit of   acknowledging   the   multi-ownership regime, as well as to build a legal system recognising, respecting, and protecting the property rights of economic entities. It is important to consider the development of input     markets     as     a     foundation    for successful   economic   restructuring   and growth model renovation.

Second, it is necessary to formulate and to implement  the national programme "Developing Vietnam's contingent of enterprises" in  accordance  with  the  market principles. This implies that entities who are equal in status but functionally different will be encouraged to develop as per the principle of "encouraging the winner”. It is important to  pay  special  attention  to  promoting  the establishment of Vietnam's production chains, to   create   favourable conditions for the development of strong economic groups of the country to lead the process of formation and  development  of  chains  and  pillars  of private economic groups.

Third, it is necessary to actively reform the state with two major contents: (1) building a state  for  development,  and  (2)  building  a smart state including the building of a "digital government"   and   "smart   cities".   Specific measures include the following:

-  Building  the  state  apparatus  on  the principle of (1) "function-based organisation", and  (2)  professionalism  of  civil  service (including   selection   and   recruitment   of public officials and civil servants, and job competency profiles).

- Reforming the salary and wage system in   the   public   sector   on   the   following principles: (1) full monetisation of salaries and   wages,   (2)   performance-based   and function-based  payment,  and  (3)  payment of salaries and wages according to the job contract    (according     to    the    level     of completion of the committed work).

It is necessary to implement a new strategy of attracting and utilising foreign investment on the  principle  of  "limiting incentives, paying attention to building good institutions", creating the most favourable conditions to establish  and  to develop production chains with the active participation of strategic foreign investors.

It is important to design a consistent and long-term  policy  system,  to  limit  input imports  for  assembly  work, causing environmental pollution (with low technology and low added value) and the trend of promoting speculation activities.

It  is necessary to abandon the mechanism of capital distribution and allocation  in  an  asking-giving manner,  to focus on the development of growth axes and  development  centres  for  them  to  be sufficiently capable of international competition, and to quickly develop smart cities, first of all "leading" cities such as Hanoi, Ho Chi Minh City, Hai Phong, Da Nang,  Can  Tho,  Nha  Trang,  Vinh,  and Buon Ma Thuot.

The State needs to actively support the establishment of National Innovation Centres, to create focal points to promote the "national start-ups" work in the spirit of innovation  and  creativity,  and  to  adopt special  policies  to  support  science and technology  enterprises  for  innovation  so that science and technology can become the most powerful development driving forces in the coming period.

5. Conclusion

Vietnam's economy is at a turning point. The strong  driving forces  for the development of a transition economy have been stimulated by the renovation efforts' reduced impacts. In order for the economy to recover its growth momentum, the issue is not to modify, improve, and upgrade the old driving force system. Vietnam cannot solve  the  problem  of  "lagging  behind  in development"   -   rather   "lagging   behind farther in development" by continuing to maintain   the   old   development   driving forces system. The reality of ten years of economic restructuring and renovation of growth model proves such arguments. The way to solve the problem is to change the system of growth and development drivers and engines. But that is only one side of the development task that is being laid out for Vietnam, stemming from the intrinsic needs   of   the   economy.   The   world   is changing  profoundly.  Structural  changes under the impact of the Fourth Industrial Revolution  -  a  revolution  that  has  the power of "reversing development logic" - were unprecedented in the previous three industrial  revolutions.  The  correlation  of global  power  and  development  changes with an unprecedented strong rise of China and  India  followed  by  a  series  of  late- coming economies. The US-China conflict is an inevitable consequence of responding to such a rise. "Deformed" globalisation is associated with the rise of protectionism.

These factors resonate, creating another new era of development in terms of structure and logic of development.

Vietnam is an economy with high openness, meaning that it is "natural" for it to enter such a new era. Brand new opportunities and totally new challenges are arising. In order to "step in" without being "dragged" along with the era, Vietnam needs a new paradigm   and   system   of   development driving forces, not just the "renovated" old ones. It is not enough to just renovate the old existing system of driving forces which means  that  if  so,  the  economy  will  be plunged into a farther-lagging situation. The task set for the economy at the time is not new   in terms  of name,   but highly challenging:   renovation   of   development drivers and engines at a new higher level compared to those of 30 years ago.



1 The paper was published in Vietnamese in: Khoa học  xã  hội  Việt  Nam,  số  8,  2019.  Translated  by Luong Quang Luyen, edited by Etienne Mahler.

2 The article was presented within the framework of the NAFOSTED Project: "Restructuring Vietnam's economy in the period 2011-2010 towards sustainable development”.

3 Why nations fail? The answer of Daron Acemoglu and James A. Robinson is: “Institutions, institutions, institutions!” [6].

4 Markets for land, currency - finance, energy, and labour.

5  A common phenomenon in the economy is that subordinates have to ask their superiors to "allow" for renovation. They must "ask for permission" to avoid the risk of being "deviated", to be granted with resources for implementation thereof. The approval process for being "renovated" is very complicated, not   associated   with   the   responsibility   of   the approving   level   (i.e.   superiors), so it   often discourages those who want to really renovate and are willing to take risks to promote development.

6 This trend is associated with a situation where the comparative  advantage  of  "low-wage  labour"  and resource exploitation in Vietnam is declining. The structure of resources  and  the drivers   of development  are undergoing unprecedented profound changes.

7   The  trend  of  moving  global  production  chains (global   production   chains   are   currently   strongly moving  out  of  China,  like  they  once  moved  into China 30 years ago) or the risk of flagging growth and global economic instability under the impact of the US-China trade war are actually acting as the most powerful  economic  development  drivers  (in  both positive and negative directions) of the modern world.



(*) Vietnam Institute of Economics, Vietnam Academy of Social Sciences.

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