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Economic Sector

Last updated: Friday, October 19, 2018

 

Vietnam Needs to Increase Domestic Competitiveness

Posted: Friday, January 05, 2018


Vietnam needs to increase its competitiveness for the economy, turning challenges into opportunities. External factors such as FDI, opening up markets to attract foreign investors are important, but we need a “do-it-ourselves” approach for development. These are experts' contributions at the Vietnam International Economic Integration Forum 2017 under the theme "Reinforcing momentum for a new development phase", recently held in Hanoi.

Vietnam's integration into the international arena
According to Prime Minister Nguyen Xuan Phuc, Head of the National Steering Committee for International Integration, Vietnam has been successfully implementing policies on international economic integration. Specifically, with many achievements recorded as in the period 1997-2017, the economy has maintained continuous growth, with GDP increasing eight times from US$27 billion in 1997 to an estimated figure of over US$220 billion in 2017, and US$300 billion by 2020.

Since Vietnam's accession to the World Trade Organisation (WTO) in 2007, Vietnam has actively negotiated and signed new generation FTAs. Vietnam is also a member of prestigious international organisations such as WTO, ASEAN, APEC, ASEM, and many others. Especially, Vietnam was the the host country in coordinating and organising bilateral and multilateral economic forums at the APEC 2017 Summit. These are important axioms for improving the competitiveness of the economy, expanding the market for Vietnamese enterprises, accessing foreign investment capital, and contributing to the macro-economic restructuring and annual GDP growth, Prime Minister Nguyen Xuan Phuc emphasised.

At the forum, Deputy Prime Minister Vuong Dinh Hue also pointed out that despite great achievements in the process of international economic integration, some methodological approaches are still limited, one-sided, short-term and local, thus not fully utilising opportunities and responding effectively to challenges. The process of international economic integration and the process of domestic renovation, especially the renewal and improvement of institutions, first of all the laws, mechanisms and policies have not been implemented in a synchronous manner and unconnected to the process of enhancing the competitiveness of the economy.

Considered the "driving force" of the economy, small and medium enterprises, accounting for over 90 per cent, still face many limitations and shortcomings such as lack of strategic thinking, low technological level and weak ability to compete when implementing commitments to the integration. The coordination in the process of integration among ministries has not synchronised, leading to the reduction of the effectiveness of the mechanism and policies set out, said Deputy Prime Minister Vuong Dinh Hue.

Concerns remained
Expressing policy gaps in Vietnam's international integration process, Dr Vu Thanh Tu Anh, Fulbright School of Public Policy, said that the integration process is very important and necessary, but more importantly is the integration approach. If the integration process of Vietnam is only for FDI enterprises to export, it is not good. It has to go together with increasing labour productivity, increasing competition and raising people's standard of living.

In addition, Dr Anh also warned of heavy dependence on foreign investment and trade that is the “normal new” trend of world economic growth is down and protectionism is back. Accordingly, Dr Anh analysed that there is a tendency for global trade growth to outstrip global GDP growth, whereas trade has previously doubled. This is an important message Vietnam cannot ignore, a warning to a country depending heavily on trade such as Vietnam. Vietnam must integrate and care for the domestic market, otherwise the Vietnamese businesses will lose ground at home, Dr Vu Thanh Tu Anh stressed.

Meanwhile, Dr Nguyen Dinh Cung, President of the Central Institute for Economic Management (CIEM) said that Vietnam is facing a dilemma. Without FDI, the economy will lack capital; otherwise there are also problems. Currently, FDI accounts for about three quarters of the export turnover and contributes a great deal to growth, but it does not create a spillover of technology and is still far from the domestic market, which is still weak and fragmented, backward management and weak staff and insufficient capital reserves, Dr Cung pointed out.

Minister of Industry and Trade Tran Tuan Anh said that Vietnam has wasted many opportunities to power up the economy. In fact, Vietnam's competitiveness has not kept pace with the world's integration trend. The level of spillover, technology sharing and training of high-level human resources between the domestic and foreign enterprises have not been cohesive. Vietnam has met the standards of business environment reform in ASEAN but failed to meet those of Organisation for Economic Co-operation and Development (OECD). Therefore, in the coming time, the Government should continue to attach importance to the policy of economic integration, considering it a driving force to reform and promote economic growth in the direction of its strategy. By working hard to perfect the institution, the enabling government is managing to build a more open and transparent business environment, said Minister Tran Tuan Anh.

Anh Phuong








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