The role of the State on investment by the state budget capital in the field of defense industry in Vietnam

budget capital in the field of defense industry Investment by state budget capital in the field of defense is an activity invested with state budget capital in programs and projects in the field of defense industry aiming at protecting the national security and defense. Investing with the state budget capital in the field of defense industry is a form of state investment using state budget capital and investment purposes to serve public goals. 2.1.2.2. Features of investment by state budget capital in the field of defense industry - Investments comply with the Law on National Defense, the Law on Public Investment and the Law on State Budget Management. - Investment to produce special products with high accuracy and damage. - The investment process including planning, implementation, inspection and supervision is highly confidential. - Investment products have security, accuracy and high reliability when putting into practical use. 2.1.2.3. Importance of the investment by state budget capital in defense industry sector - Investing with state budget capital in the field of defense industry contributes to ensuring the development of the national defense for the entire people; - Investing with state budget capital in the field of defense industry contributes an important part in developing the country's military potential. - Investment with state budget capital in the field of defense industry is a very important factor in the production of national-specific weapons. 2.1.2.4. Some major investment models in defense industry sector * Model 1: The State provides finance and the State completely organizes the production of goods in the field of defense indusry. 6 This is a completely traditional investment model in the operating economy, with the State's deep intervention in production in defense industry sector. The basic feature of model 1 is the complete state 'self- sufficiency, self-supply' in defense industry sector. * Model 2: The state provides finance and the private sector organizes the supply of goods according to the orders of the State in the field of defense indusry. The state only provides finance from the state budget and orders private enterprises to research, produce and meet state requirements. Model 2 is commonly applied in the countries with developed market economies and with a long history of private enterprises engaged in arms production. * Model 3: The state provides finance, the state and the private sector jointly produce goods in the field of defense industry Model 3 is a combination of model 1 and model 2. Most countries in the world apply model 3. However, for each country, there are certain characteristics to apply the model 3 or highly inclined to model 1 or model 2. 2.2. Basic theory of the role of the State on investment by state budget capital in the field of defense industry 2.2.1. Definition and characteristics of the role of the state on investing with state budget capital in the field of defense industry 2.2.1.1. Definition of the role of the state on investing with state budget capital in the field of defense industry Applying historical and logical methods, generalizing the theoretical development of the economic role of the State reflected through economic models: • Socio-economic market model • Free market economy model • Mixed economic model By scientific abstraction method, the dissertation introduces the concept of the role of the state in state budget investment in the field of defense industry, an economic category reflecting the aggregate impact of the State on investment by state budget capital in the field of defense industry in order to strengthen defense potential, maintain national security and national sovereignty. 2.2.1.2. Characteristics of the state's role on state budget capital investment in the field of defense industry • Demonstrating class political views on building defense forces, international cooperation, development orientation of defense industry and investment in defense industry. • Leading and directing comprehensively the investment activities in the field of defense industry. • Organizing the implementation of the state budget investment process in the field of defense industry under the command of the Ministry of Defense in an imperative and military discipline. • Performing the role of the state on investing with state budget capital in the field of defense industry to ensure regulations on national security. • The role of the state on investing with state budget capital in the field of civil engineering is assessed by socio-economic efficiency, the result of fulfilling planned tasks. 2.2.2. Contents and criteria for evaluating the role of the State on investment by state budget capital in the field of defense industry 2.2.2.1. The content of the State's role on investment by. the state budget capital in the field of defense industry Firstly, the State develops strategies and plannings on investment by the state budget capital in the field of defense industry. The State is the subject of elaborating strategies and plannings on investment with state budget capital in the field of defense industry. The development of strategy, planning, and investment plan for defense industry comes from the analysis and evaluation of risks, challenges, threats and the identification of long-term strategic goals as well as specific goals of defense activities. Secondly, the State has developed and issued mechanisms and policies for state budget investment in the field of defense industry. The policy of investing with the state budget capital in the field of defense industry represents the goals of the policy which will be achieved when investment is effective, efficient, sustainable, and transparent. Thirdly, the State organizes the implementation of investment by the state budget capital in the field of defense industry. Building the state management apparatus for investment projects; Organizing the investment by the state budget through the investment process; Coordinating among state management agencies of investment 7 projects. Fourthly, the State carries out examination and inspection of investment by the state budget capital in the field of defense industry. The State shall inspect the implementation of strategies, plannings, mechanisms and policies on investment by the state budget capital from organizations and agencies with the task of making investment by the state budget capital in the defense industry sector. 2.2.2.2. Criteria for evaluating the role of the State on investing with state budget capital in the field of defense industry Firstly, qualitative criteria: Qualitative criteria assessing the role of the State on state budget investment in the field of defense industry are considered in the following aspects: relevance, effectiveness, efficiency and sustainability. Second, quantitative criteria: In fact, quantifying the role of the State on investing in the field of defense industry is very difficult and complicated; it is difficult to collect and process secondary data due to the statistical system of defense industry and the principle of confidentiality of national defense. In the study, it is necessary to use sociological survey data to collect primary data and perform by multivariate linear regression analysis with independent variables as an impact factor to show the role of the State and the dependent variable to determine the impact level of each factor. 2.2.3. Factors affecting the role of the State on investment by state budget capital in the field of defense industry 2.2.3.1. Military defense strategy and policy of developing national defense industry 2.2.3.2. Level of economic development and investment ability of state budget in the field of defense 2.2.3.3. Impact of military restructuring on defense budget 2.2.3.4. Infrastructure and adaptability of defense industry with the process of international integration. 2.2.3.5. Qualification of officials in charge of executing the role of the State on investment by the state budget capital in the field of defense industry. 2.2.4. Necessity of the role of the State on investment by state budget capital in the field of defense industry The role of the State on investing with state budget capital in the field of defense industry is necessary and objective, because of the following reasons: Firstly, there must be a role of the State on investing with state budget capital in the field of defense industry in order to overcome market failures in the defense industry sector, in order to ensure that they work effectively. Secondly, there must be a role of the State on investing by state budget capital in the field of defense industry in order to create an equitable and healthy investment environment and condition in the defense industry sector. Thirdly, due to the necessity of ensuring the development of national specific weapons, it must ensure the independence of the nation's military development strategy. Fourthly, due to the requirement that there is a need for unity in the development of the management of national weapons and military equipment. 2.3. International experience on the role of the State on investment by state budget capital in the field of defense industry and lessons learned for Vietnam 2.3.1. Experience of some countries 2.3.1.1. Experience from Australia The role of the State in Australia's development of defense industry is confirmed by the strategy and viewpoint of developing the national defense industry. Identifing an autonomy strategy in building defense capabilities, and at the same time enhancing the wepons export cooperation; developing the field of "designing, building and exporting 2.3.1.1. Experience from China The viewpoint of the role of the State in investing and developing the state's defense is as follows: The state continues to play a leading role in developing the defense industry; defense industry building must obey and promote economic development ; It must be based on economic capacity and scientific and technological potential to build a modern defense industry of Chinese identity ; It moves to production and development under the market mechanism under the management of the State. 8 2.3.1.1. Experience from Indonesia : The strategy of building an independent and autonomous industrial development platform, at the same time, cooperating with the developed industrial countries in the defense industry under the motto of "leapfrog". Due to the limited budget allocated for the state defense industry in the context of high demand for weapons and equipment, the government requires strict management of state budget investment in the field of defense. 2.3.2. Lessons learned for Vietnam Firstly, perfecting the strategy for developing defense industry, especially in the context of the fourth industrial revolution. Secondly, reforming the organizational structure to manage and renovate financial mechanisms in line with the system of legal documents invested with state budget capital. Thirdly, strengthening the State's inspection and supervision of state budget investment in the field of defense industry. Fourthly, strengthening the expansion of international cooperation in developing defense industry. CONCLUSION OF CHAPTER II In chapter II, the thesis has performed the specific tasks as follows: (i) Clarifying the concept and characteristics of defense industry and investment by state budget capital in the field of defense industry. (ii) Overviewing some key theories about the economic role of the State; analyzing 4 contents and 4 criteria for evaluating the role of the State in state budget investment in the field of defense industry. (iii) Analyzing the six influencing factors and the necessity of the role of the State on state budget investment in the field of defense industry. (iv) Doing a survey on the experiences of Australia, China and Indonesia and drawing four practical lessons for Vietnam on the role of the State on state budget investment in the field of defense industry. 9 CHAPTER III CURRENT SITUATION OF THE STATE'S ROLE ON INVESTMENT BY STATE BUDGET CAPITAL IN THE FIELD OF DEFENSE INDUSTRY IN VIETNAM 3.1. Overview of Vietnam's defense industry 3.1.1. The process of formation and development After independence, on September 15, 1945, the President Ho Chi Minh signed a decision to establish the Military Division (directly under the Military Supply Department). On March 25, 1946, the Military Division was separated from the Military Supply Department to become a Military Department, tasked with researching and manufacturing weapons and military equipment. Decree No. 22 / HDBT of March 3, 1989 of the Council of Ministers officially established the General Department of Defense Industry and Economics. On December 24, 1998, the Prime Minister signed Decision No. 249/1998 / QD-TTg renaming the General Department of Defense Industry and Economics into the General Department of Defense Industry. 3.1.2. Development characteristics of Vietnam's defense industry - The capacity of mobilized industrial establishments is still limited. - Vietnam's defense industry has made a shift from a central planning mechanism to a market mechanism. - Investment capacity for defense industry is limited; capacity, technological level, scientific and technological level of human resources of defense industry had an initial basis but were still low compared to the world. - The combination of production of defense goods and economy remains difficult; the development of defense industry is still inadequate with the ability to meet the resources for development. 3.2. Situation of the role of the State on state budget investment in the field of defense industry in Vietnam 3.2.1. Situation of elaborating strategies and plannings on investment by state budget capital in the field of defense industry Strategies, master plans and investment plans with state budget capital in the field of defense industry determine the strategic goals for the period 2011-2020 of the defense industry, that are: to build and develop the defense industry into an important part of the national defense-security potential; the organizational structure and management mechanism need to be implemented in the direction of a combined model: a model combining technical development with modern technology development; combining the management mechanism with strategic planning, focusing on the market mechanism, with the macro management and regulation of the State and with the participation of all economic sectors. 3.2.2. Situation of promulgating mechanisms and policies on investment by the state budget capital in the field of defense industry In order to implement the strategies invested by the State budget in the defense industry sector, in the period of 2011-2020, investment mechanisms and policies have been issued synchronously with the strategic system and plannings, the system of the State budget law, the Law on public investment and ordinances of the Standing Committee of the National Assembly. 3.2.3. Situation of organizing the implementation of investment by the state budget capital in the field of defense industry The organization of state budget investment in the field of defense industry is implemented under annual approved investment projects in the period of 2013-2015 and approved under the medium-term investment plan for the 2016-2017 period. . The process of investing in projects complies with the provisions of the 2014 Law on Public Investment, the 2015 SBL and Resolution No. 73 / NQ-CP / 2016 providing the target program for defense industry. The Government Resolution on allocation of public investment capital according to medium- term plan (Resolution No. 73 / NQ-CP / 2016 providing for the target program of defense industry to implement Resolution No. 06-NQ / TW / 2013 of the Politburo is specified in the medium-term portfolio 2016- 2020). Table 3.4: Investment by state budget capital in the field of Vietnam's defense industry in the period of 2013-2017 10 Targets Unit of calculation 2013 2014 2015 2016 2017 Total expenditure for Defense Million 78,024 90,000 99,000 110,000 113,534 Spending expenditure on the state's defense industry from the state budget Million 1,568.3 1,845.0 2,039.4 3,311.0 3,462.8 Percentage of investment spending for defense industry / defense expenditure % 2.01 2.05 2.06 3.01 3.05 Source: Author's calculations based on SPRIS and World Bank data State budget expenditure on the field of defense industry is allocated according to investment projects in three main expenditure items, especially, for investment in chains and technical infrastructure in service of weapons production, repair and improvement, technical equipment accounted for an average of 74.8%, spending on scientific research, manufacturing of defense technology accounted for an average of 22.8% and about 2.4% spent on quality improvement training, human resources in the defense industry. 3.2.4. Situation of examination and inspection of investment by the state budget capital in the field of defense industry In the period of 2016 - 2018, the Inspection Department of the General Department of Defense Industry has carried out many inspections performed on such aspects as: financial management and use; production - business activities; capital construction investment; management and use of defense land. Table 3.7:Situation of inspections of defense industry sector Targets 2016 2017 2018 Number of inspections 17 18 21 Total number of complaints 113 127 211 The number of letters has been resolved 98 112 198 Number of citizen reception 115 145 232 Source: Electronic Journal of Inspection 3.2.5. Quantitative analysis of the impact of the components of the State's role on state budget investment in the field of defense industry in Vietnam Regression analysis results show that, based on the track and the magnitude of State budget capital in the field of defense industry is the variable KHCLCS (with beta coefficient is 0.558), followed by the TCNL variable (beta factor is 0.360), followed by the TCBM variable (beta factor is 0.279) and finally TTKT variable (beta coefficient is 0.138). The sig value of all 4 variables is <0.05, so it can be concluded that all 4 hypotheses are statistically significant at the 5% level. 3.3. General assessment of the status of the role of the state on investment by state budget capital in the field of defense industry 3.3.1. Achieved results - The formulation and promulgation of investment strategies and plannings are generally carried out scientifically according to strict and logical procedures. - The system of mechanisms and policies to invest state budget capital in the defense industry sector basically specifies investment strategies and plannings, and is active, autonomous and proactive. - The process of disbursing investment capital from the state budget for investment projects in the field of defense industry is carried out in a spirit of compliance with the Law on Public Investment and the State Budget Law; transparency, suitability, efficiency, and effectiveness in investment projects of interest. - The inspection and examination work was strengthened on the basis of clearly defining the inspection tasks of the state management agencies in the field of defense industry. 3.3.2. Limitations and causes of restrictions 3.3.2.1. Limitations - The formulation of investment strategies and plannings is not really scientific and not timely with practical changes. 11 - The development of investment mechanisms and policies is still not very appropriate; issued policies have not really created a breakthrough in promoting the development of defense industry. - The organization of investment implementation is not transparent, implementation is slow, the efficiency is not high. - Checking and inspecting not regularly, promptly, yet resolutely and strictly in handling violations. 3.3.2.2. Causes of the restrictions - Domestic and international economic and political environment has many complicated developments. - There are State guidelines on investment with state budget capital in the field of defense industry, which have not been deployed timely. - The effectiveness of the apparatus of implementing investment by the state budget capital in the field of defense industry is not high - The qualification of the contingent of personnel in the organizational structure of implementing state budget investment in the field of defense industry is still low compared to some countries in the region. - Facilities serving the fulfillment of the State's role on state budget investment in the field of defense industry are not comprehensive and modern compared to countries with developed defense industry. CONCLUSION OF CHAPTER III In chapter 3 of the thesis, the author analyzed and clarified the status of the role of the State on state budget investment in defense industry in Vietnam during 2013-2018. The chapter also assesses the situation, draws out the achieved results, the limitations and the causes of the limitations on the role of the State on state budget investment in defense industry in Vietnam as a basis for proposing some solutions in the next chapter. 12 CHAPTER IV VIEWPOINTS AND SOLUTIONS TO STRENGTHEN THE ROLE OF THE STATE IN INVESTMENT BY STATE BUDGET CAPITAL IN THE FIELD OF DEFENSE INDUSTRY IN VIETNAM 4.1. Background and development orientation of defense industry in Vietnam to 2025 and vision to 2030 4.1.1. International and domestic contexts related to Vietnam's defense industry 4.1.1.1. International context There are high requirements for the protection of national territorial integrity, protection of national core interests in the context of ASEAN region, East Sea and the world which have many complicated and unpredictable happenings. International integration is increasingly deep and wide into the field of defense, the trend of cooperation and integration including weapons procurement and technology transfer in the field of defense industry is increasing. 4.0 industrial revolution requires a strong shift in industrial defense investment, a trend of shifting investment into high-tech weapons research and production. State budget spending on defense and public investment is required by international financial institutions to increase transparency and accountability. 4.1.1.2. Domestic context Maintaining political stability, national defense and security, protecting the integrity of borders, territories and national core interests. Ensuring the maintenance of high and sustainable growth of the economy, enhancing deep and broad integration into the international economy. The economy continues to grow, the country's industry will have new developments. Supporting industries and high-tech industries will have landmark changes, creating favorable conditions for the implementation of the tasks of building and developing the defense industry in order to enhance defense potential to protect the country in the new situation. 4.1.2. Orientation for development of defense industry in Vietnam - Continuing to renovate and perfect institutions, policies, plannings to build and develop defense industry in order to achieve the set strategic objectives as "to really become a spearhead of the national industry". - Enhancing the integration of plannings, policies and legal documents on the development of defense industry must be suitable to the national industrial development till 2030 with a vision to 2045. - Strengthening the expansion of international cooperation on defense industry in a more substantive and effective manner. - Attaching the development of the defense industry and investing in the development of the defense industry with the context of the 4.0 industrial revolution. - Step by step forming a complex of defense industry with the participation of many types of businesses. 4.2. Viewpoint on strengthening the role of the State on investing with state budget capital in the field of defense industry in Vietnam • Increasing the role of the State on investing with state budget capital in the field of defense industry which must be consistent with the principles of a socialist-oriented market economy. • Strength