By PhD Pham Quy Tho- Associate Professor, Former Dean of the Faculty of Public Policy, Academy of Policy & Development, Vietnam’s Ministry of Planning and Investment.
2022 is a ‘dark‘ year for real estate businesses. Business difficulties and a series of arrests and trials preceded a bond market crisis. There are concerns about the criminalization of economic and civil relations… The question is when the Party and the State strengthen their power, how will the policies towards businesses change?
The Party-State is strong, enterprises are big, the problem is bigger, and the complexity of the relationship between government and business is one of them, which is important for economic development.
“Losing patience”
In recent years, the violations and profiteering of some businesses have increased in number and nature, causing the government to “lose patience” and show strong hands.
A trial is taking place from December 2022 in Ho Chi Minh City (HCM) tried the Chairman of the Board of Directors (BOD) of Alibaba Real Estate Company and 22 defendants in the “scam” case with 3,986 victims, 100 people with related interests and obligations … 22 public affiliated companies have been established and assigned family members or close friends as legal representatives. Then, these companies buy a large amount of agricultural land in the southern provinces, conduct infrastructure construction, ‘draw’ residential projects to sell to customers…
Two typical arrests of leaders of two real estate groups (real estate) are Tan Hoang Minh and Van Thinh Phat. They are said to take advantage of the ‘openness‘ of the policy, specifically Decree 153 in 2020, which has issued “subprime” corporate bonds, defrauding bondholders to appropriate money. The ‘boom’ of issuing bonds by many businesses has caused a negative domino effect on the financial market. Dealing with these two large real estate corporations, which have a long development process with complicated relationships, does not exclude the “backing forces” which are said to be “especially complicated,” the number of victims can be up to thousands. tens of thousands and hundreds of companies are involved.
Recently, on November 27, 2022 during a meeting with HCM City’s leadership, Prime Minister Pham Minh Chinh expressed his determination: “Whoever does wrong must be dealt with, whoever does well will be protected. Handling wrongdoers in order to protect those who do well, and protect the legitimate rights and interests of people and businesses.” However, in the process of transitioning the policy market is not simple, clearly right and wrong about the law, the government cannot be innocent, but the interpretation and handling of the relationship always aims to maintain the regime as a prerequisite.
“Tolerant”
In the process of developing private enterprises, the government enforces ‘tolerance‘ in terms of legislation, policies and institutions, most notably in the land sector, and concurrent with this trend the decentralization of powers to localities At the local level, especially at the provincial and municipal level, there was also strong progress along with the encouragement of investors. After the Doi Moi/Rennovation in 1986, the amendment of the Land Law and related legal documents in the direction of ‘market advance, the Party backward’ was carried out regularly, and it is expected that in 2023 there will be important changes to promote marketization.
This ‘tolerance’ has boosted economic growth by developing the real estate market into an important pillar, accounting for more than 14% of GDP. However, the negative side of the policy is also gradually exposed: corruption and moral deterioration of the leadership and civil servants have become more and more serious over the term of the Party congress. The giants benefit from tolerance, especially for businesses with advantages in capital, business strategy, and management capacity, but success is not possible without a friendly relationship with the government permission. And, the Party has realized the ‘holes’ in the decentralization mechanism are not accompanied by control over power, policy and enforcement, ‘tolerance’ for businesses but lack of institutional and legal environment for businesses. essential principles for them to function.
And, consequences are inevitable. After every fast-growing business or every real estate project and public investment, it is a fact that the power of ‘backing’ is a reality. A series of officials big and small, including secretaries and chairpersons of some provinces and cities belonging to this “power” have been revealed and prosecuted. Public opinion is speculating after the cult arrests in 2022, especially the Van Thinh Phat case, will it be possible to expose the ‘terrible’ backing force?
“Rescue”
The decision to rescue the corporate bond market more clearly reflects the policy of developing the economic sector and private enterprises. On December 12, 2022, the Government issued Official Dispatch 1156/CD-TTg on the supply of credit capital to the economy, in which the ‘credit room’ was increased by 2% and noted the need to “promote state management, combating cross-ownership, unhealthy and improper activities, taking advantage of policies, and urgently strengthening the leadership of the Banking Supervision and Inspection Agency…” Solutions to ensure benefits for bondholders, regain market confidence, perfect institutions and policies to develop this capital mobilization channel for the economy…
Business freedom has gradually been expanded since the 1990s, but economic freedom has been ‘suffocated’ by the institutional construction of the “socialist orientation“, especially in terms of ownership by the whole people. Although state-owned enterprises under the centrally planned mechanism have collapsed and disbanded, and enterprises are allowed to make profits but must operate for the benefit of the Communist Party, the business environment is slow to improve while bureaucracy bloated, moral degradation and corruption. The Party has learned lessons to rescue instability in the previous decade due to the mistake of the growth policy based on state-owned enterprises. The bailout policy this time has emphasized strengthening state management so that credit can be delivered to the right address and on time. However, with the notion that “the market is not capitalism” is still a justification for the regime, in addition, its operation is only according to the law and not subject to the subjective will of strong power in the unified model of “Party – State.”
The great Scottish thinker Adam Smith in 1776 first described the market, capitalism in his famous work on “The Wealth of Nations“, but he did not invent it. As an economic system, in the market any individual is free to decide what he will produce and whom he will serve, since both parties must agree, in which the government only act as an intermediary to prevent profiteering. That is, the needs of others need to be served before one’s work is rewarded. This ideology has brought prosperity results to countries, economic and political models that know how to perfect it. In some developed countries it is constitutional as a core principle.
It is not clear how the current economic model will be changed to adapt to the policy of the “strong Party-State” model, but the idea of free enterprise should continue to be promoted, institutionalized, and the basis for the market to operate needs to be established. Freedom of business is not only for its great material benefits, but also for the spiritual benefit of self-determination for each individual to decide their own destiny and “pursue happiness.”
Thoibao.de (Translated)
