In Race against Risk of Lagging Behind

In 2016, there will be two growth scenarios of the Vietnam's economy in the process of evolution: one is a continuing sustainable development while the other is a fall into the middle income trap and little chance to grow.

 

According to an overall assessment of economic growth in 2011-2015, the General Statistics Office said that in 2011-2015, Vietnam’s economy obtained significant achievements contributing to stabilising the macro economy and creating conditions for sustainable development. The GDP growth reached 5.91 per cent in the 2011-2015 period, in which the first sector of agriculture, forestry and fisheries reached 3.12 per cent; the second sector of industry and construction reached 7.22 per cent and the third sector of service reached 6.68 per cent; the product tax increased by 4.02 per cent per year. Thus, the growth is based primarily on the second and third sectors. This shows good signs for development trends of the economy as committed by the Party, the State and the Government. The product tax has lower rate than the economic growth due to the implementation of the tax reduction policies of the Government.

 

According to the General Statistics Office, a number of indicators of economic growth efficiency in 2011-2015 demonstrated remarkable improvements. Specifically, social labour productivity in 2015 at current prices of the whole economy was estimated at VND79.3 million (equivalent US$3,657) per employee. As calculated at constant prices of 2010, labour productivity across the economy in 2015 is estimated to rise by 6.4 per cent compared to 2014.

 

The data analysis of labour productivity recorded in Vietnam has significantly improved, with a steady increase over the years; an average productivity growth of the period 2006-2015 has increased by 3.9 per cent per year; 2011-2015, an increase of 4.2 per cent per year. An increase of 23.6 per cent in 2015 compared with 2010 is lower than the set target of an increase of 29-32 per cent; however, the growth rate of labour productivity is higher than that of the 2006-2010 period, which helps narrow the gap of labour productivity with ASEAN countries.

 

In terms of total factor productivity (TFP), the TFP indicator with higher contribution to the GDP growth in recent years proves effectiveness of the investment in machinery, equipment and new science and technology, which helps improve productivity and skill levels of workers.

 

However, the study by the General Statistics still shows that labour productivity in Vietnam is still low compared with other countries in the region, and uneven across sectors and fields. The relative gap in labour productivity has been reduced significantly, but the absolute gap (the difference in labour productivity levels) between Vietnam and other ASEAN countries such as Singapore, Malaysia, Thailand and Indonesia, has increased.

 

According to Minister of Planning and Investment Bui Quang Vinh, Vietnam's economic situation, particularly from 2008 to present, has exposed its shortage of resources for development after benefiting from the reforms since 1986. Many major barriers to economic institutions have emerged; the current economic institutions leave the gap from those of other market economies like Europe, the US and many countries in the region", Minister Vinh specified.

 

Given the Macroeconomic Report 2015 of the Central Institute for Economic Management (CIEM) announced on January 28, 2016, although Vietnam's economy has many bright spots, reflecting its recovery, the growth of Vietnam's GDP is still lower than Laos, Cambodia, Myanmar and lower than the average level among ASEAN countries. According to the analysis of Director of CIEM Nguyen Dinh Cung, based the World Development Indicators (WDI), Vietnam's GDP growth rate has been almost the lowest in the area since 2007; although the growth rate has slightly increased, its growth rate on average is still lower than average for the region. And the quality of the growth of Vietnam's economy tends to weaken," he warned.

 

Facing this reality, Minister Bui Quang Vinh said that the country must continue reforming and renewing the role of the State and the market, upgrading the institutional market economy, creating impetus promotion systems with new incentives under modern market economy standards, reallocating and using national resources more effectively to truly escape the risk of lagging behind, and develop faster and more sustainably.