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Economic Sector

Last updated: Tuesday, November 21, 2017

 

Vietnam Economy Faces Risk of Lagging behind

Posted: Tuesday, June 20, 2017


At the International Conference themed "Economic Governance for a Facilitating State” held recently in Hanoi, former Minister of Planning and Investment Bui Quang Vinh assessed, given existing economic difficulties, the Vietnamese economy is facing the risk of lagging behind.

The economy is facing numerous challenges
Former Minister Bui Quang Vinh said that, in the 30 years of doi moi (renovation), Vietnam has obtained many outstanding achievements. Regarding economic growth, Vietnam has attained the biggest gains. For example, the rapid economic growth quickly turned Vietnam from a poor country into a low middle income country in 2009. Thus, after three decades, the size of the economy expanded 31 times, the poverty rate dropped rapidly and the income inequality index increased a little.

At the macro level, Vietnam’s economic growth was very impressive. However, what concerned Mr Vinh was that the Vietnamese economy is increasingly lagging behind in income and size relative to other developed economies. He explained that although Vietnam’s GDP grew at an average annual rate of 6-7 per cent a year, the absolute value was small compared to countries because it had a low starting point.

He added that Vietnam's per capita income increased slowly in comparison with other countries. After 15 years, Vietnam's per capita income increased by only US$1,600 while Thailand saw an increment of US$3,600; Malaysia, US$6,500; and South Korea, US$16,000 in the same duration. The gap median income gap between Vietnamese people with others is getting wider.

With respect to GDP, after 15 years, Vietnam’s GDP added by US$160 billion while Thailand, Malaysia, Indonesia and South Korea witnessed an increase of US$270 billion, US$200 billion, US$700 billion and US$850 billion, respectively.

These data showed that Vietnam's economy is facing many difficulties, challenges and risks and is increasingly lagging behind other countries. The first challenge is Vietnam's golden age population will elapse in 5-10 years, a short time for economic development.

The next challenge that Vietnam is facing is the decrease of driving forces of doi moi. Particularly, Vietnam shifted from a centrally planned, subsidised economy to a market economy. Although it was somewhat inadequate, it also created a lot of momentum for development, stimulated the economic development to the today scale, develop monetary and commodity markets and eliminated the obsession with “stamp” period.

However, those drives are fading. What Vietnam needs to do now is to find out new fundamental motivations, especially in terms of institutions. This is an opportunity and space of development.

The third challenge, according to Mr Vinh, is Vietnam's economy is integrating deeper and deeper into the world economy, which brings both opportunities and challenges to Vietnam. If we make good use of scientific and technological advances, Vietnam's competitiveness will increase and create leaps forward. Conversely, if we cannot take advantage of the Industrial Revolution 4.0, Vietnam's economy will be lagging farther behind other countries.

An equally important challenge is the strong rise of the Chinese economy, which has a huge impact on Vietnam, according to Mr Vinh. The rapid growth of the middle class has created many opportunities and challenges as well. Productivity growth declining to only 4.5 per cent now has become a challenge to growth and employment until 2035.

Ensuring equality for all businesses
Remarking on the administration on economic governance, Dr Nguyen Si Dung, Former Vice Chairman of the Office of National Assembly, said, that hindrances to economic growth were resulted from the existence of so many sub-licenses and business conditions imposed by ministries and other State bodies. At present, the Government and National Assembly are assessing and refining these business conditions in order to abolish unnecessary barriers and prohibitions against businesses and citizens people. The cost of law enforcement remains high even though the Government is trying to cut costs for businesses, citizens and society.

“Overlapping” decentralisation of central and local powers inhibited the formation of a facilitating state. Mr Dung said the overlapping decentralisation exists from the grassroots to central levels. As a result, it is very difficult to define accountability and responsibility.

According to Mr Dung, the key is ensuring equality for all businesses. Resources must be equally distributed. No barriers or incentives are created to prevent or separate businesses.

In order to build a facilitating state, former Minister Bui Quang Vinh recommended strengthening the competence of the State to play a constructive role. The State should avoid intervening in the economy because a deep involvement will harm the economy. In addition, it should restrict monopoly and overlapping to quicken decision-making to grasp opportunities; and build a reasonable and comprehensive legal framework to make necessary adjustments in the event that development process goes on the wrong track.

Dinh Thanh








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