New mindset key to resolving institutional bottlenecks, promote growth: economist

By Dinh Vu, Minh Hue

Sun, November 24, 2024 | 3:30 pm GMT+7

Moving from a mindset of control to that of promoting growth is key to clear four institutional bottlenecks in the way of national development, says Dr. Nguyen Dinh Cung, former director of the Central Institute for Economic Management (CIEM).

Vietnam has reformed its institutions and amended its legal system frequently. The country has identified institutional reform as the “breakthrough of breakthroughs" since 2011. Why are the results not as expected?

Party General Secretary To Lam has said institutions are "the bottleneck of all bottlenecks" and I agree.

The first bottleneck is that the law sets up thousands of barriers for control and management, making investment projects and business operations slow down at these points, causing congestion.

As a result, an investment project may take many years to complete its procedures. By the time the procedures are finished, the business opportunity may have passed, and initial plans would have to be revised.

The second is the overlapping of laws that pull in opposite directions – one requiring you to go right while another demands you go left. This problem is quite common.

The third is related to infrastructure and real estate. Thousands of construction projects are held up by legal complications and cannot move forward. We can imagine this situation as thousands of vehicles being temporarily impounded after a violation or traffic accident.

It seems that we don't distinguish between the "vehicle" and the "driver," between individuals and legal entities. Clearly, the violation is committed by the driver, but the vehicle is treated as evidence and impounded.

When the case of the driver is not resolved, even after many years, the vehicle remains there. Similarly, projects are waiting, unable to proceed, causing significant damage not only to the involved legal entities but to the economy as a whole.

Finally, bottleneck 4, which has emerged in the past 3-4 years, is the phenomenon where citizens and businesses submit documents through portals and the officials processing them must obtain approval from all related units.

In the past, they would ask two or three units, but now there are many more; and the documents are only passed when all parties agree. If any unit disagrees or if the situation is unclear, the documents cannot be approved.

What are the causes and solutions?

There are many causes, but the main one is mindset. The current mindset in management is a mindset of control, not for development.

To address the bottlenecks, first, we need to distinguish between the "vehicle" and the "driver," and between individuals and legal entities.

For example, a violation is committed by the manager (the individual), while the company is the legal entity, and the project is the property of the legal entity. We cannot freeze the assets of a legal entity as evidence. These assets are simply tools for carrying out business activities. We have recognized this issue and are discussing how to get thousands of stalled projects moving.

A Party resolution mentions "addressing violations without legalizing them." However, “how to not legalize violations" has not been clarified, leading to difficulties in implementation.

As for bottleneck 4, we need to ask “why didn’t this phenomenon occur before? Because public servants feel unsafe in handling their work now.

Our laws are such that, no matter what, there’s always a potential violation. If they (officials) don't violate the regulations of one ministry, they violate those of another; if they don’t violate one law, they violate another, or they may not violate the current law, but they might violate one from 10 years ago. So civil servants don’t feel secure.

To resolve this bottleneck, we must address the "safety" issue by setting a "red line" - that officials do not act for personal gain but for common development. We must evaluate the outcome of their work, not the process, and the leaders must commit to protecting those who follow this principle.

Removing these bottlenecks means we also address urgent issues that we face right now, which is is essential for handling long-term problems later. If we fail to address these urgent problems, solving long-term issues like laws and policies will become very difficult if not impossible.

What are the long-term institutional issues that need to be addressed?

As I mentioned earlier, bottlenecks 1 and 2 will take longer to resolve. I haven’t commented on or contributed ideas to any draft laws in recent years, because I believe that the way laws are made today only adds more burdens and creates more bottlenecks, rather than solving them. This has been proven in practice.

For example, recently, to remove the bottleneck in the real estate market, we passed three laws at the same time: the Land Law, the Housing Law, and the Real Estate Business Law, but we still haven’t solved the market’s issues. Then, we tried to create a law that amends several others in an attempt to solve the market bottleneck, but this only leads to more bottlenecks. This is a contradiction.

We also create special resolutions, but they still don’t resolve the issue. Laws, before they’re just finalized, already create bottlenecks and require special mechanisms to solve the problem.

To fix this, we need to change both the mindset of lawmaking and the method of making laws. If we continue to rely solely on the state’s administrative apparatus to reform and build laws, it will be very hard to succeed.

We need to mobilize social resources for reforms. We could set up a consulting team, including experts, researchers and business leaders, to assist with reforms and legislation.

We should recognize capabilities outside the state apparatus. The business sector has huge resources and is willing to contribute to solving the problems. I believe we can tap this resource.

However, for all this to happen, there should be a leader who dares to take personal responsibility for the decisions made with support of the consulting team.

I believe that if we do this, we can solve the bottlenecks in the real estate market and infrastructure development within a week, and then address legal and policy-related issues.

A law that amends several others is seen as an innovation to remove current obstacles, as it would take too long to amend each law. However, you believe this would not be effective. Is there a better way?

A very good approach would be to eliminate some laws. In my opinion, we need to seriously and methodically study the possibility of phasing out some laws. For example, the Ministry of Construction currently has 7-8 major laws, but the only thing it needs to do well is to manage the quality of construction projects.

We need to change the lawmaking mindset because, without that, amending several laws or creating special resolutions will not remove the bottleneck of bottlenecks.