Friendly relations and honest business

Recently, Prime Minister Nguyen Xuan Phuc requested to immediately eliminate the situation of cronyism that is "suffocating" legitimate business. Dr. Le Dang Doanh, former Director of the Central Institute for Economic Management, discussed this issue.

Dr. Le Dang Doanh

How do you perceive the current state of cronyism in the economy?

In a market economy, there is a phenomenon in economics called cronyism. That is, businesses and people in power combine together, creating more favorable conditions for accessing state projects and preferential conditions.

This does not stop at each case and each project, but can spread more widely, affecting the entire process of issuing policies and decisions, such as allowing a certain business to import and export a specific product.

Cronyism exists in many economies, but in countries with close supervision, especially with the role of competition authorities and elected bodies, cronyism can be detected and severely limited.

For example, in South Korea, there is a huge scandal involving large corporations donating tens of millions of dollars to non-profit foundations owned by a presidential friend. Kinship can only be pushed back step by step.

But in reality, businesses with friendly relationships can still grow, even very quickly. What do you think about this?

Some businesses may grow, but cronyism leads to unfair and unhealthy competition, squeezing the motivation of other businesses. Instead of focusing on investing in science and technology and improving productivity, crony businesses invest heavily in relationships with officials and bribes. A business based on domestic cronyism cannot compete internationally.

In fact, we see that there are “tycoons” in Vietnam who have no breakthroughs in science or technology, no inventions or innovations, but can “catch thieves with their bare hands”. They also have no special business ability, but are, for example, allowed to build a highway, they do nothing but sell it to others and immediately make a profit of thousands of billions of dong.

If analyzed more broadly, this is the reason why Vietnam's transportation and logistics costs become expensive, creating a burden for businesses, making it difficult to compete regionally and internationally.

Crony relationships can also creep into laws, circulars, and regulations, creating inequality with other small businesses. So many Vietnamese businesses remain small, unable to grow, and some do not even want to grow.

Can you elaborate on this?

Currently, the number of business households in Vietnam is very large, reaching millions. According to the Enterprise Law, using more than 10 workers must register a business, but in reality, there are many households using hundreds of workers, having up to three hotels, but thanks to their relationships with local officials, they still refuse to register their business.

As long as they are business households, they do not have to strictly comply with accounting laws, do not have to pay taxes according to invoices but pay lump-sum taxes, they and tax officials can negotiate with each other so that both sides benefit, only the state budget suffers.

In other words, the impact of cronyism is very harmful, distorting business motivation and the motivation for market economic development.

In the Vietnam 2035 Report, the authors warned of the commercialization of relations between state agencies and the private economic sector, i.e., cronyism. Cronyism has many colors, sometimes it is a direct financial relationship, sometimes it is hidden under the so-called hometown affection, acquaintance, and then the children of the powerful.

Prime Minister Nguyen Xuan Phuc said that cronyism is stifling legitimate business. What do you think about this message?

This is a very accurate and very encouraging comment from the Prime Minister. He has clearly seen the reality. I once heard a noodle seller say that this or that person often eats noodles and thanks to that she is allowed to sell, otherwise she would be fired. Instead of spending a lot of time and effort to make a delicious bowl of noodles, the seller has to worry about pleasing someone. This is exactly what the Prime Minister said and was worried about.

In order to eliminate cronyism, I think we must first increase publicity and transparency, and all decisions of state agencies must be consulted. At the same time, we must determine individual responsibilities and increase accountability.

Anyone who decides anything, even based on collective opinion, must bear the highest responsibility if the decision is wrong and must be punished, whether financially, administratively or criminally.

As in Hanoi, recently the Chairman of the City People's Committee discovered that the grass cutting fee alone was up to 886 billion VND, after reviewing it, it was reduced by more than 700 billion, to only 178 billion. Whether there is a "backyard" issue here or not, needs to be clarified.

The Prime Minister has made a very resolute statement about fighting and pushing back that relationship. We hope that the Prime Minister's statement will be accompanied by specific regulations to limit and eventually eliminate cronyism, and punish those who violate the law when using their power to benefit their cronies.

As National Assembly Chairwoman Nguyen Thi Kim Ngan said, if there is a violation, even after retirement, it will not be possible to land safely. I hope that with the strong determination of the Government and the National Assembly, that will not happen.

Thank you very much!

According to Ha Chinh/baochinhphu