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The Inevitability of Forming Economic Groups in Vietnam


the global economy. They allocate resources and manage production and business activities on a global scale. Through the trade and investment activities of economic groups, the interdependence and interconnectedness of economies in the world are increased. Along with the expansion of foreign investment contributing to increasing international investment, economic groups also promote domestic trade, making the national economy continuously grow, thereby promoting the development of international trade. Thus, building economic groups is also a measure to contribute to promoting the process of international economic integration, shortening the development gap between countries in the world.

II. THE NECESSITY OF THE FORMATION OF ECONOMIC GROUPS IN VIETNAM

1. The process of formation and development of economic groups in the world

From the end of the 19th century, after a period of strong development under the impact of the industrial revolution, companies began to need more capital to expand their business fields and locations, especially to expand to the international market. By the end of the 20th century, this process began to take place strongly, a series of transnational corporations, operating in many fields, were born, existed and developed until today.

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The globalization of the world economy has created a strong wave of development of giant multinational corporations. Some corporations have a dominant role and influence on the economy of not only one country but the whole world. All economists and politicians have recognized the positive impacts of corporations along with their existence and role on the world economy in general and each country in particular. And people have used the development of a few corporations to measure the economic strength of each country.

1.1. Method of forming an economic group

The Inevitability of Forming Economic Groups in Vietnam

Economic Groups in the world are formed through two main paths: the traditional development path and the formation of a Group on the basis of a very large-scale State-owned Company. In general, the majority of economic Groups in the world are formed according to the law of competition, leading to the concentration and accumulation of production in production and business entities. During the operation process, some enterprises accumulate large capital and invest in expanding


Expanding the scale of production and business. Over time, facing market fluctuations and competitive pressure to survive, have competitive strength and develop, businesses tend to associate, merge, consolidate, acquire or annex each other, leading to the birth of giant economic groups. However, the establishment of economic groups can also be carried out by administrative orders of the government, typically economic groups in East Asian countries such as Japan, Korea... and neighboring China. Thus, in the process of formation and development of economic groups, they are mainly affected by market rules, but they are also strongly influenced by the regulations and policies of each country.

1. 2. Principles of formation and development of economic groups

Research shows that the formation and development of economic groups is based on the principles of efficiency, voluntariness and market rules. The main principles:

In line with the state's economic development policies and strategies. The formation of economic groups must have a positive impact on adjusting the production structure and product structure. First of all, it is necessary to form key groups that can promote the development of other manufacturing industries, positively impacting the research and development of high-quality products to meet market demand...

Encourage competition, limit monopoly. Ensure fair competition, strictly prohibit market manipulation or regional blockades.

Clearly distinguish between business management functions and administrative management functions. The parent company of the Group cannot perform both business management and administrative management functions. The Group must be identified as neither a state management agency nor an industry association but an economic organization. The relationship between the parent company and member enterprises is established on the basis of shareholding or technical production relations, not administrative relations.

Implement the principle of voluntary investment. The formation of an economic group must comply with economic laws, cannot be assembled by administrative orders, must comply with the voluntary contribution method.


contributing shares, participating in shares of investors, with the link between enterprises mainly being capital. This ensures clear relationships within the Group and stabilizes the organizational structure of the Group.

In other words, the principle of forming an economic group is mutual benefit, freedom to join and withdraw from the group, and anti-monopoly in operations.

2. The inevitability of the formation and development of economic groups in Vietnam

The goal of industrialization, modernization of the country and proactive integration into the international economy is being actively implemented by our country. With that goal, Vietnam needs to increase the growth rate, expand foreign economic relations based on promoting inherent comparative advantages to create economic breakthroughs to not only avoid falling behind but also catch up with other countries in the region and the world. In fact, with such goals and orientations, the formation and development of strong economic groups in a number of key economic sectors is extremely necessary. The following are three reasons affirming that the formation of economic groups in Vietnam is an affirmation of the development of a socialist-oriented market economy in Vietnam both in terms of the nation and the strength of the business community.

Firstly, international integration and cooperation is an objective necessity that requires the organization and rearrangement of small, dispersed enterprises into large enterprises that are competitive and strong enough to become partners with foreign enterprises, which is a very correct policy of the Party and the State. Only enterprises with abundant capital, modern management skills, strong potential, etc. are capable of competing with foreign enterprises. While there are very few enterprises in Vietnam that can meet the above conditions, only state-owned corporations are capable of converging these factors and economic groups.

Second, Vietnam advocates building a socialist-oriented market economy, which means accepting competition as an objective necessity. Competition between enterprises leads to the process of


The process of accumulating and concentrating capital on production and thereby leading to the formation of large enterprises. Furthermore, the formation of economic groups from State-owned corporations is inevitable for the current trend of developing economic groups.

Third, most of the State Corporations operate inefficiently or achieve low efficiency. This is largely due to the operating mechanism of the Corporation form (such as management by administrative orders, ambiguity in ownership regime...). The transformation from the Corporation form to an Economic Group will help the Corporations reduce and gradually eliminate the weaknesses that have existed for a long time.

From the three factors mentioned above, it can be affirmed that in order to build a socialist-oriented market economy that brings high economic efficiency, it is necessary to form strong economic groups in key areas because economic groups are symbols of the development of Vietnamese enterprises.


CHAPTER II

CURRENT STATUS AND DEVELOPMENT TRENDS OF ECONOMIC GROUPS IN VIETNAM


I. THE ESTABLISHMENT OF ECONOMIC GROUPS IN VIETNAM

1. Government's viewpoints and orientations for the formation of economic groups in Vietnam

1.1. The Party's viewpoints and policies on developing the economic group model from general corporations

The establishment of economic groups in Vietnam also stems from the ineffective operating mechanism of state-owned corporations and itself is no longer suitable for the market mechanism (because of weaknesses that need to be changed such as these corporations are too dependent on administrative decisions, unclear ownership relations, weaknesses in business management between the corporation and its member units...). Economic groups are a necessary replacement to improve the weaknesses of state-owned corporations, demonstrate the implementation of socio-economic policies and are a transformation of the production and business management mechanism to suit technological advances.

In the current period, the solution to turn a number of corporations into economic groups is highly feasible, for the following reasons:

Although the private economic sector has developed, in general, this sector is still fragmented and has not invested in key economic sectors due to lack of strong potential. In addition, the ability to connect in business of enterprises in this sector is still very low. If the law of the market economy decides the formation of economic groups, it will be very slow. Currently, the private sector has a number of groups such as Hoa Phat, Tan Hoang Minh... but these groups are still fragmented and not enough to become true economic groups in the market economy.

Currently, there are many state-owned corporations with significant accumulations of capital, number of skilled and professional workers, technology - engineering, and some corporations with a certain level of specialization... enough to become an economic group with many


member units operate effectively.

The 9th Conference of the 9th term, the Central Executive Committee of the Communist Party of Vietnam emphasized: Summarizing the pilot project of transforming State-owned corporations into a number of strong economic groups with State-owned corporations as the core, with the broad participation of domestic economic sectors and foreign investment. The Conference pointed out that in order to form and develop economic groups in Vietnam, it is necessary to thoroughly grasp the following main viewpoints:

The formation and development of economic groups in our country must be associated with the cause of industrialization, modernization of the country, economic restructuring and innovation of the management mechanism of the national economy.

In the current conditions of Vietnam, the formation and development of economic groups must originate from the internal needs of the enterprises themselves through economic means and according to the principle of voluntariness.

The issue of capital management also needs to change, by the form of the enterprise's capital group will be transformed into a multi-ownership form to interweave ownership, disperse investment risks, enhance the responsibility of management and use of capital of the enterprise. Thus, this form brings many advantages in capital management, thereby promoting the process of capital accumulation and concentration, improving the efficiency of production and business activities of the Group.

The formation and development of economic groups must follow the goal of higher socio-economic efficiency, enhance the competitiveness of enterprises, promote the advantages and overcome the limitations of state-owned corporations.

The formation and development of economic groups must be carried out gradually and selectively, not massively and in accordance with the general innovation process of the economy. The general direction is to build strong enough state-owned corporations to be the core of large economic groups, with the capacity to compete in domestic and international markets such as Oil and Gas, Electricity, Coal, Aviation, Railway, Telecommunications, Chemicals, Metallurgy...

State-owned corporations, once they have become economic groups, need to be completely autonomous in production and business, and determine strategies.


development planning as well as implementation measures to achieve the proposed plan in accordance with the strategy and development plan of the national economy. The State does not interfere in the production and business activities of the Group.

With the current socio-economic conditions of Vietnam, in order to soon form economic groups, it is necessary to take the State Corporation as the core, on that basis, widely attract the participation of domestic economic sectors and foreign investors, expand the business lines and fields on the basis of the main professional fields of the Corporation. However, at present, the Corporations become Groups due to the orientation of the State and do not really follow the law of forming economic groups of the market economy. Therefore, in the near future, it is necessary to form economic groups from the private sector, creating favorable conditions for economic groups to develop from the private sector.

1.2. Some specific directions for the development of economic groups in Vietnam

1.2.1. Orientation on the method of forming an economic group

The formation of economic groups is mainly based on the current corporations, especially the 91 companies operating in fields with comparative advantages in the national economy. The reason for this orientation is that economic groups must be large in scale while currently the 91 corporations in Vietnam are quite large in scale (compared to other domestic enterprises). Within each 91 company, a system of member units has been formed, spread across the country, with close relationships with each other in terms of technological chains and production processes such as the postal and telecommunications corporation, electricity, etc. At the same time, many corporations also have economic partnership relationships with domestic and foreign companies.

On the other hand, under the direction of the State, in the process of reform, innovation, development and improvement of production and business efficiency, many member enterprises or parts of member enterprises in the Corporation have been equitized and converted to enterprise ownership. This is the condition for the Corporations to have more conditions to convert to a new economic model in the form of Parent company - Subsidiary (Parent company and subsidiaries).

In the direction of developing a market economy in a socialist-oriented manner


In the context of socialist integration, participating in the international economic integration, competition between domestic enterprises with each other, competition between domestic enterprises with foreign enterprises right in the Vietnamese market is inevitable and unavoidable. Therefore, the requirement to have a number of economic groups strong enough to compete with foreign economic groups in the Vietnamese market as well as the international market is an extremely necessary condition to ensure economic development and maintain independence and sovereignty. The rapid formation of a number of economic groups from existing corporations is necessary and most suitable.

1.2.2. Orientation on the organizational structure of economic groups

In principle, there is no unified model that applies to all corporations. Depending on the field of operation and the specific characteristics of each corporation, the corporation will be reorganized in terms of internal structure, the relationship between member units, the structure of the member units' industries to form an appropriate organizational model and management mechanism. However, the orientation of reorganizing corporations in Vietnam according to the economic corporation model will be based on the parent company - subsidiary model. In the corporation structure, the parent company will invest in many forms and at many levels in the subsidiaries.

The parent company is currently a state-owned company, operating under the law on state-owned enterprises with 100% capital invested and held by the state. During the development process, the parent company can also change its business type to a joint stock company, limited liability company, etc.

The Group will not have its own management and administration apparatus but will use the apparatus of the Parent Company. The Parent Company can be the representative of the Group. The leadership and management apparatus of the Parent Company is also the leadership apparatus of the Group. The Parent Company can both organize and manage the business of investment capital in subsidiaries and companies outside the Group through the Financial Investment Company.

, directly participating in production and business activities in a key position in the industry or the parent company can simply be a pure capital investment and trading company.

The parent company may hold shares in different proportions for each Company. However, for Subsidiaries with important positions, holding positions

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