Actions for Sustainable Growth Recovery

"Vietnam: Actions for making growth recovery rapid, inclusive and sustainable in the context of COVID-19 pandemic" is the theme of the annual Vietnam Reform and Development Forum (VRDF) 2020. The forum is organized, online and in person, by the Ministry of Planning and Investment in collaboration with the World Bank (WB) in Hanoi.

According to Minister of Planning and Investment Nguyen Chi Dung, on the eve of the 13th Congress of the Communist Party of Vietnam, Vietnam has made strong and steady development steps, obtaining many great and comprehensive achievements. The size of the economy today has increased more than 40 times compared to that of before 1990. Per capita income has increased from about US$100 before 1990 to nearly US$2,800. The quality of life of the people has been significantly improved. However, these achievements are threatened by the great challenge of the COVID-19 pandemic.

Thanks to the effort of the entire political system, Vietnam has well controlled the pandemic, but still faces significant difficulties and challenges in the coming time. To overcome the pandemic and develop rapidly and sustainably, Vietnam needs to make the most of its advantages, and clearly identify existing opportunities; especially, it is necessary to "think ahead".

Vietnam has obtained certain achievements in the containment of the COVID-19 pandemic. As a middle-income country, GDP has grown steadily and continuously, but the impact of COVID-19 has affected the whole economy. Many businesses stop working, workers lose their jobs, affecting the general development of the economy. Vietnam's economic loss is also caused by the decline of global trade as an open economy and the growth is heavily dependent on exports and trade exchange with countries in the region and the world.

In the context of having to implement the dual goal of both effectively controlling the COVID-19 and ensuring economic growth, from the beginning of the year until now, Vietnam has reached a trade surplus of US$12 billion and enjoyed positive growth. The economy has attracted US$20 billion of foreign direct investment (FDI).

In the face of potential negative impacts such as trade tensions between major global partners and internal constraints of the economy that make growth rate slow and the economy heavily dependent on capital and cheap labor, Minister Chi Dung emphasized that Vietnam urgently needed consultation from scientists, ministries, sectors, development partners, and international organizations to propose policies and make adjustments to ensure an early recovery with macro balances moving toward sustainable and inclusive growth.

According to Ms. Robyn Mudie, Australian Ambassador to Vietnam, the commitment to inclusive and sustainable growth will help Vietnam overcome the economic challenges created by COVID-19, and help the economy thrive in a post-COVID world.

Aside from the challenges, the COVID-19 pandemic can also provide beneficial opportunities for developing countries. Forum participants, including policymakers, economists and private sector regulators, identified the two major trends that matter most for Vietnam, namely, the shift of the global value chain and investment system and the resurgence of the contactless economy.

There are two trends that are not entirely new but accelerating thanks to COVID-19, said Ms. Carolyn Turk, Country Director of the World Bank in Vietnam. “If Vietnam implements the reforms in these two areas as drastically and effectively as the way it handled the COVID-19 health crisis, then it can completely take advantage of these two trends to return to the path of rapid growth and achieving the goal of becoming a high-income country by 2045,” said Ms. Carolyn Turk.

COVID-19 reveals fragility of global value chains that are over-concentrated in certain locations. The pandemic created a new impetus for reshaping the global production network in a more flexible direction. This trend has already occurred before due to increasing protectionism. Shortening the global value chain and diversifying its supply points provide special opportunities for Vietnam to participate more deeply in global and regional value chains. The World Bank estimates that increasing participation in the value chain by 1% will increase per capita income by more than 1% - twice as much as engaging in normal trade.

At the same time, COVID-19 can permanently change human behavior toward the use of digital technology and make lasting changes in the way businesses operate. COVID-19 acts as a catalyst to accelerate the digital transformation that took place before COVID-19 in Vietnam.

VRDP 2020 is the biggest policy dialogue of the year between the Government of Vietnam and development partners. The forum this year continues to be funded by the Australia-World Bank Group Strategic Partnership - Phase 2 (ABP2).

Quynh Chi (Vietnam Business Forum)