Vietnam Needs to Continue Efforts toward Macroeconomic Stability

Vietnam has improved in 10 of the 12 GCI pillars. The GCI is based on 12 pillars of competitiveness, providing a comprehensive picture of the competitiveness landscape in countries around the world at different stages of economic development.

 

Among the country’s competitive strengths are its efficient labor market (30th) and its impressive innovation potential given its stage of development (49th), including its relatively large market size (35th) with a particularly large export market.

 

However, trade remains hindered by very high import tariffs (8.2 %, 90th), other trade barriers (112th), and burdensome customs procedures (106th).

 

Following a hectic period marked by high inflation, a dramatic fall in the dong, and large swings in interest rates, the macroeconomic situation improved sharply (85th, up 27). Yet the government budget deficit remains one of the highest in the world, contributing to rising public debt and pointing to a need to continue efforts toward macroeconomic stability.

 

In addition, infrastructure, strained by rapid economic growth, remains a major challenge for the country despite some improvement in recent years, with particular concerns about the quality of roads (117th) and ports (97th). And while there is a sense that the quality of education is improving, enrollment rates at all levels remain low (ranked 71st, 102nd, and 109th for primary, secondary, and tertiary enrollments, respectively).

 

In order to further improve its competitiveness, Vietnam must also continue to strengthen its institutional environment. Regulation is perceived as burdensome (120th), with the number of procedures (11, 110th) and time (50 days, 118th) required to start a business making this a daunting process. In addition, there are concerns regarding the level of intellectual property protection (109th) and to a lesser extent the respect of property rights (81st).

 

Corruption is considered frequent and pervasive (107th). On the corporate governance side, the private sector is not seen as being sufficiently accountable (124th), partly because of the weakness of investor protection in the country (133^rd - third to last).

 

This year, over 13,500 business leaders in 139 economies were polled. The survey is designed to capture a broad range of factors affecting an economy’s business climate.

 

Vietnam’s improvement in trade environment reflects that the country has realized its commitments to the World Trade Organization to gradually open up its goods and services markets, showed the Global Enabling Trade Report 2010, published by the WEF on its website.

 

Though the Southeast Asian nation has leaped 10 positions in terms of the effectiveness of the customs sector, it has reported low ranking in the transparency of its border management, the WEF noted, adding that Vietnam needs to quickly improve its customs procedures and infrastructure to boost trade with other countries.