|To avoid middle-income traps, experts contend that Vietnam will have to maintain a growth rate in the range of 7-7.5 per cent for the 2021-30 period, higher than the average rate of 6.3 per cent of the last ten years.
This is among the major suggestions cited from a joint report between the World Bank and the Vietnam Academy of Social Sciences featuring the new economic model to help Vietnam achieve high-quality growth for the 2021-30 period.
The report, which is being prepared with support from the Australian Government, highlights the new economic model that focuses on around three breakthroughs, including innovation and entrepreneurship, human capital, and modern institutions.
“This report will help begin an exciting new chapter in Vietnam’s economic growth story,” said Craig Chittick, Australian Ambassador to Vietnam. “A chapter that embraces innovation, promotes bold reform, and helps Vietnam achieve its ambitious development goals.”
To avoid the middle-income traps, experts contend that Vietnam will have to maintain a growth rate in the range of 7-7.5 per cent for the 2021-30 period, higher than the average rate of 6.3 per cent of the last ten years.
The report indicates that the labor-intensive, export-led growth model Vietnam pursued during 2011 – 2020 has increasingly become obsolete against the context of Industrial Revolution 4.0, maturing global value chains, premature deindustrialization, and rising role of services.
“We are living in the era of disruptive technologies that presents both challenges as well as opportunities – I would like to call it ‘Doi Moi (renewal) 4.0’,” said Ousmane Dione, Country Director for the World Bank (WB) in Vietnam.
To mitigate these risks and seize the opportunities, Vietnam needs to accelerate reforms that boost productivity and innovation as key drivers of growth in the coming decade including steps to remove bottlenecks for private sector investment, enhance public sector institutions and invest in 21st century skills of the workforce, added Dione.
Addressing a workshop themed “Vietnam Economic Growth Model for 2021-30, with a vision to 2045” held in Hanoi on March 20, Dione delighted that since “Doi Moi” took place in the late 1980s, Vietnam has reaped remarkable economic growth while the economy has expanded at an average of nearly 7 percent annually.
However, he noted that Vietnam’s journey to become a high-income economy has only just begun. “In this new journey, what has been working in the past 30 years may not necessarily work in the future.”
Whilst the impacts of initial institutional and structural reforms seem to have reached their limit, adjustments and changes to the growth model are urgently needed if Vietnam aspires to become a successful upper middle-income country by 2030 and a high-income country by 2045.
Dione highlighted two factors that are key for Vietnam’s future successes, regardless of the growth model that it will adopt.
The first one is quality. Preliminary simulations indicate that Vietnam needs to move to a productivity-led growth, with substantial increase in the average growth rate of productivity, an achievement that has been attained by only a few countries to date.
But, raising productivity would require substantial improvement in all quality aspects of growth. These include efficient resource allocation, improved quality of human capital, improved quality investment in infrastructure and service delivery, as well as innovation, making them all conducive for improved productivity, the WB country director said.
He voiced his belief that Vietnam can still enjoy significant gains from technology transfers and adoption, and firms should be placed at center in the innovation agenda. Having a business environment conducive to firm innovation would work better for Vietnam now than common supply-driven measures such as increased spending for R&D or focus on invention activities.
Implementation is the second factor. Vietnam’s development challenges today are far more complex than the past 30 years.
A part of the complexity results from the fact that development issues are increasingly becoming multi-sectoral. Poverty reduction does not only require improved economic livelihood but also improved basic services and human capital development.
“Addressing these complex issues requires a strong leadership and determination. It also requires effective and sophisticated governance system that ensures smooth coordination both horizontally across government ministries and vertically between different levels of the government.”
He called for continued strong institutional reforms that help to tackle the fundamental weaknesses relating to how the government provides services to businesses while citizens would be key to successful implementation of the strategies.
Deputy Prime Minister Vuong Dinh Hue said that economic efficiency should be measured via labor productivity and the nation’s economic competitiveness, based on the increasing number of input factors, improved workforce productivity, and the enhanced application of scientific and technological advances for the purpose of boosting innovation.