Vietnam's National Competitiveness - A Burning Issue
Vietnam will reach an economic growth of 7.2 per cent in 2004, ranking 4th among global economies, according to a recent World Bank report. However, the World Economic Forum's (WEF) annual report has announced that Vietnam's Growth Competitiveness Index (GCI) decreased by 17 places from 60th in 2003 to 77th this year. This is reason why the Central Economics Management & Research Institute cooperated with the Vietnam Competitive Initiative (VNCI) to hold a workshop on Vietnam’s national competitiveness in Hanoi on November 19 to find out reasons for the lower ranking and directions for enhancement of the country’s competitiveness in the future.
David Ray, economic expert and Deputy Manager of the VNCI project, which was backed by the USAID for economic development purpose, said Vietnam’s dramatic slip of 17 places in the Growth Competitiveness Index (GCI) in 2004 has attracted a lot of attention from Vietnamese people.
"We who are working for the VNCI project don't think that the lower Growth Competitiveness Index in 2004 mean Vietnam is less competitive," he said.
Explaining for his view of point, Mr. Ray said there were three reasons for the wrong rating. First, he was sceptical of the World Economic Forum's 2004 report rankings due to the method for sample selection that the WEF uses which could lead to an erroneously lower GCI.
Second, Mr. Ray said that Vietnam’s encouraging achievements in regulations and institutional reform towards the market economy have not been considered in grading.
Moreover, the environment for private sector operation has been considerably improved since the 2000 Enterprises Law, reflected by the continuous increase of registered investment capital in the sector. Bills on bankruptcy and competition have been discussed for the National Assembly’s approval, a trend of further improvement in the business environment.
The third reason is that Vietnam reached many economic achievements over the past few years. This was the most important point that Mr. Ray paid attention to. According to his point of view, there are very few countries that could experience this rate of growth, and this is not the picture of an economy that is less competitive.
The World Bank has recently forecast a 7.2 per cent GDP growth for Vietnam in 2004, ranking 4th among global economies. The continuous economic growth brought about higher income and more jobs for local people.
According to a fast survey conducted by the Vietnam Chamber of Commerce and Industry (VCCI) and backed by the VNCI with 230 enterprises in five localities on business climate and competitive capability, it showed that most enterprises maintain a positive outlook over competitiveness with optimism in business prospects for the next three years. Most of the enterprises said they expected to expand their scope of business.
In Vietnam's case, export ability is also considered one of the factors for the calculation of competitiveness. According to statistics, Vietnam's export revenues in 2003 doubled from that of 1999 to reach around US$20 billion. The ratio of Vietnam’s export revenues/total world export revenues rose by 0.2-0.3 per cent in the same period. In the 2001-2003 period, Vietnam’s exports to the US increased by around 350 per cent, thanks to fast growth in the private economic sector after the Business Law took effect in 2000. The law opened up development of the private sector, especially for the development of small- and medium-sized enterprises. However, Mr. Ray emphasized that Vietnam must maintain ongoing reforms. Improving business sentiment, setting up a fair business field for all economic sectors, and further strengthening the private sector are the main tasks for Vietnam's economic reform. The private sector must be encouraged to participate in important parts of the economy such as infrastructure construction. It must become an important driving force behind the development of Vietnam’s economy.
Vice head of Department for Macroeconomic Policies under the Central Economics Management & Research Institute, Phan Thanh Ha said, Vietnam reached a high mark in terms of macroeconomic environment (38 in 2002, 37 in 2003 and 58 in 2004), but got a low mark in institutional environment (62 in 2002, 63 in 2003 and 82 in 2004). Ms. Ha also analysed Vietnam’s less competitive factors. However, according to Mr. Ray, Vietnam should focus on answering detailed questions relating to Vietnam’s competitiveness rather than just thinking about the rating.
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