The State as Development Agent

Although Vietnam now recognizes the utility of a state-regulated market economy, and the desirability of a multi-sectoral economy (that is both private and state enterprises), the complete abandonment of state-owned enterprises (SOEs) is not deemed acceptable. Indeed, Vietnam wishes to see the state sector maintain its position at the forefront of the economy. One general conviction prevailing, and categorically stated in two of the chapters on Vietnam (Tiem and Thanh, Tuan et al.), is the view that the state plays a pivotal role as a development agent; and that the provision of certain goods and services shall remain in the exclusive domain of the state. The areas listed range from public utilities, infrastructure, defence, security, transport, postal services, and telecommunications to fertilizers, pesticides, veterinary products, and geological prospecting.

Three basic reasons have been given for an active state role: (1) low or non-profitability in the provision of (often capital-intensive) public utilities and infrastructure; (2) the need to help develop remote and mountainous areas; and (3) the need for industries necessary for Vietnam's industrialization and modernization, which the private sector is unable, at present, to play an important role in promoting. The literature on the establishment of SOEs, however, cites many more reasons, pertaining to factors such as macroeconomic stabilization, just and fair distribution of income and wealth, market failures and imperfections, monopolistic market structures, and externalities (see for example, C.Y. Ng and N. Wagner, Marketization in ASEAN. Singapore: ISEAS, 1991).

Indeed, the ASEAN experience has shown a strong case for the state to play a pivotal role in development, through the establishment of SOEs. It should, however, be noted that all ASEAN countries are currently undergoing dramatic transformation, through divestment of SOEs, having experienced a serious drain on their budgets in the recent past. The one possible exception where SOEs have been (in general) profitably and efficiently run is Singapore, and yet this state too has a comprehensive programme of privatization.