Mekong Delta Seizing Opportunities, Reversing Downward Spiral

9:38:08 AM | 8/8/2022

The Annual Economic Report 2022 of the Mekong Delta, themed "Development Model Transformation and Integrated Planning", gives the message: Mekong Delta is facing great opportunities and let’s seize these opportunities and promote cooperation for rapid but sustainable development.

This information was announced at the release event of the Annual Economic Report 2022 of the Mekong Delta held by the Vietnam Chamber of Commerce and Industry (VCCI) on August 1 in Can Tho City.

Mekong Delta is facing downward spirals

Dr. Vu Thanh Tu Anh, lecturer at Fulbright University, co-author (with Mr. Nguyen Phuong Lam, Director of VCCI Can Tho), summarized the report and its key messages. Representing the research team, he said, the Mekong Delta is heavily impacted by the COVID-19 pandemic. In 2021, the country had nine localities suffering a negative growth, six of which come from the Mekong Delta. The region's GRDP growth was second worst in the country, just above the Southeast region where the COVID-19 pandemic was the most devastating. The two years of the pandemic is like a chance to reveal both socioeconomic strengths and weaknesses of the Mekong Delta.

The brightest spot of the Mekong Delta in 2020-2021 was agriculture. The region's agricultural and aquatic exports played a key role in maintaining a trade surplus for the nation. However, agriculture alone was not enough to revive the Mekong Delta economy as the industrial and service sectors - together accounting for more than 70% of the region's GRDP - both posted negative growth, estimated to contract at 0.8% and 1.8%, respectively.

Remarkably, the average agricultural labor productivity growth was very high, staging an annual growth of 9.03% in 2015-2020, more than doubling the industrial sector (4.39%) and the service sector (3.82%). This showed that the Mekong Delta still had vast room for structural transformation and productivity growth. However, paradoxically, agricultural labor productivity was much higher than that of the industry and service sectors.

In the long term, economic growth and prosperity will not come from agriculture but from industry and services. Therefore, clearly figuring out and gradually removing bottlenecks in industrial and service development is necessary for Mekong Delta development.

Economically, the Mekong Delta is facing at least three "downward spirals" including "budget spiral", "labor spiral" and "economic structural spiral".

A bottleneck that appears in all discussions of annual reports 2020 and 2022 is governance, coordination and regional connectivity mechanisms which are currently ineffective while the "centrifugal" force of regional connectivity is strong and the "radial" force is very weak.

In that context, the Mekong Delta Integrated Plan comes as a legal foundation for creating and fostering regional cooperation and linkage. This plan, once implemented, will produce an inclusive impact on the regional economy, especially on the transformation of agriculture, infrastructure and logistics systems.

To carry out new orientations of Integrated Planning, many prerequisite conditions are required, with the most important being fundamental changes in development thinking and vision. It is necessary to build substantive and effective regional governance and linkage institutions.

To develop the Mekong Delta, it is important to remove bottlenecks and necessarily search for new development drivers. In 2020 and 2021, the energy industry of the region emerged as a leading light, which accounts for less than 10% of total licensed projects but takes more than 60% of the total FDI fund.

However, according to experts, Mekong Delta localities need to think over energy development plans and projects. Meanwhile, gas thermal power is facing many risks, solar power is confronting policy changes and biomass energy does not have an appropriate policy framework.

"The Government has also approved the Integrated Master Plan for the Mekong Delta in 2021-2030, with a vision to 2050," announced in June. But what concerns now is how Mekong Delta localities can cooperate to take advantage. If development is sporadic or caught into a race to the bottom, it will be very difficult for them to take an opportunity to make breakthrough development," said Mr. Vu Thanh Tu Anh. 

Strengthening connectivity, sustainability

VCCI President Pham Tan Cong highly appreciated the thorough efforts of VCCI Can Tho Branch as well as the cooperation of Fulbright University Vietnam and experts to compile the report.

He said, the Mekong Delta is facing great challenges due to climate change, economic decline, labor shortage due to migration and substandard inputs for export. The region was further aggravated by the COVID-19 pandemic.

Before these challenges and difficulties, the Party, the National Assembly and Government have introduced many guidelines and policies for this region's development. The latest is Resolution 13-NQ/TW dated April 2, 2022 of the Politburo on directions for socioeconomic development, national defense and security of the Mekong Delta to 2030, with a vision to 2045. The Government approved the Integrated Master Plan for the Mekong Delta in the 2021-2030 period, with a vision to 2050 in February 2022 and announced it in June 2022. These lay the groundwork for planning and reshaping production, economic and social development processes of the Mekong Delta by fostering sustainable development, turning challenges into opportunities, transforming the growth model to enhance effectiveness and performance, shifting from fragmentation to concentration, and strengthening connectivity with Ho Chi Minh City and the Southeast region. "This is undoubtedly an opportunity and a new foundation for the Mekong Delta to shape and establish a new development pattern," said Mr. Cong.

VCCI President Cong said, to realize resolutions, guidelines and policies of the Party, the National Assembly and the Government, local authorities need to take concrete steps and the business community needs to approach consistent development orientations and strategies.

"From the Annual Economic Report 2022 of the Mekong Delta, VCCI wants to deliver to local governments, international organizations, donors, domestic and foreign businesses the message: The Mekong Delta is seeing great opportunities, let's seize these opportunities and join hands for rapid but sustainable development," he emphasized.

From a local perspective, Mr. Tran Viet Truong, Chairman of Can Tho City People's Committee, said, the city determined that the logistics system is considered the "backbone" to create competitiveness for enterprises in the Mekong Delta. Therefore, Can Tho City is completing a plan for a 242-ha regional logistics center to facilitate the agricultural and aquatic processing industry to improve competitiveness and drive manufacturing industries.

"Can Tho is also completing a project for the establishment of Mekong Delta Center for Agricultural Cooperation, Production, Processing and Consumption and submit it to the Prime Minister for approval to modernize the agricultural sector in the Mekong Delta," he added.

From an international perspective, Madam Caitlin Wiesen, Chief Representative of the United Nations Development Program (UNDP) in Vietnam, said, this report came at a time when provincial authorities in the Mekong Delta were starting to design their provincial plans following the Government-adopted regional master plan last month.

The report provides rich and valuable data and information for planning purposes. Provinces need to act together to achieve economies of scale in public investment, logistics, water conservation, flood control and agricultural production system development. In particular, they need to share information on risks of saltwater intrusion and drought in agricultural, forestry and fishery development plans in ecological sub-regions.

"Social, economic, environmental and climate challenges cannot be addressed separately but localities must act together," she recommended.

Representing development partners, Madam Carolyn Turk, WB Country Director for Vietnam, emphasized the importance of the private sector in mobilizing resources for the implementation of the Regional Master Plan. She estimated that at least US$57 billion will be needed to finance necessary investments in the region identified in the master plan between now and 2030. With this huge financial need, the public budget can only meet 21% while 79% will come from other sources, and private finance must be the main contributor.

"VCCI needs to promote its role as an important focal point for policymakers and the business community, coordinate with important researchers and consultants and the WB is willing to join to provide technical support and financial consulting," she said.

Source:  Vietnam Business Forum