Ousmane Dione – Country director for Vietnam, World Bank
We note that trade is slowing, which generates greater competition for countries like Vietnam. Vietnam has benefitted from a robust foreign direct investment (FDI) sector that has directly employed about 2.4 million workers. Yet neighbouring countries, such as Cambodia and Myanmar, are emerging as competitors for low-skilled production jobs. In some cases, rapid technological change is even resulting in reshoring of jobs back to the home countries of FDI.
Vietnam can harness the shifting trade patterns to its advantage. For example, there will be increasing demand for manufactured goods from an expanding consumer class in Asia. The share of households with income for extra consumption in developing Asian countries is projected to rise from 20 per cent in 2002 to 80 per cent in 2030. Here in Hanoi, we see shopping malls like AEON, Royal City, and Lotte packed with families on the weekends. Middle-class families now have time and money for shopping and leisure activities, and this will only expand in the coming years.
Nena Stoiljkovic – Vice president for Asia and the Pacific, IFC
Vietnam’s development record over the past 30 years is remarkable. Economic and political reforms under doi moi policy, launched in 1986, have spurred rapid economic growth and development, transforming Vietnam from one of the world’s poorest nations to a lower middle-income country.
Now, with the nation transitioning to a market-based economy, Vietnam needs to ensure sustainable growth by exploiting the scope of the Fourth Industrial Revolution. This is a golden opportunity for the country to harness disruptive technology for development and be on par with technological and economic trends globally.
With 54 per cent of the population using the internet – higher than the global average of 46.46 per cent – Vietnam has been researching and transferring new technologies such as the Internet of Things, big data, and robotics to improve its labour productivity and competitiveness.
As technology becomes pivotal in furthering the nation’s development objectives, it can significantly improve Vietnam’s agricultural productivity, water conservation, and greenhouse gas reduction, among other things. At this juncture, when technology has disrupted every sector including retail, transportation, education, and healthcare, it is important to bring all stakeholders together to facilitate collaboration between the public and private sectors.
It is perhaps also the right time for Vietnam to invest in information infrastructure and a high-quality workforce while continuing with administrative reform and efforts to enhance competitiveness.
Going ahead, the nation can maximise its growth potential by building a legal corridor for the digitalised economy and prepare for the transition to digitalisation – from public governance to business models for a digital economy and society.
Finally, Vietnam should aspire to a business environment that is in sync with the digital age. This will create a superior investment climate, helping the nation to move up the global value chain and sustain its rapid economic development.
Eric Sidgwick – Country director for Vietnam, ADB
Aided by able macro-economic management, economic growth will spurt in 2018, with Vietnam becoming one of the strongest performers in the region. Vietnam’s robust economic growth will be driven by vigorous manufacturing and export expansion, rising domestic consumption, strong investment fuelled by FDI and domestic enterprises, and an improving agriculture sector. A broad-based increase in the government revenue effort in 2017 helped curtail the budget deficit and reduce total public debt to 61.3 per cent of GDP by the end of 2017, from 63.6 per cent a year earlier. This fiscal consolidation combined with moderate inflation should provide for continued macro-economic stability.
Vietnam has been able to mobilise an abundant supply of young, well-educated workers to attract foreign investment into labour-intensive manufacturing over the last decade. However, a gap between worker qualifications and business needs has emerged and is widening. If not addressed, this skills gap could become a major obstacle to Vietnam’s development aspirations.
Nihad Ahmed – Vietnam senior economist, FocusEconomics
Investors were drawn to Vietnam’s enormous untapped potential promising high returns, along with a low-cost workforce and high endowment of natural resources. A seismic shift in Vietnam’s economic structure from agriculture to industry has spurred a massive movement of workers from one sector to the other, encouraging the emergence of private domestic and foreign firms. Lauded as one of East Asia’s new economic tigers, Vietnam has achieved the second-fastest growth rate per capita worldwide since 1990, behind only China. A surge in government revenues through strong exports and higher average household incomes has enabled transformative social development over the last two decades.
Notably, the proportion of people living below the national poverty line has plummeted, and access to healthcare, education, and infrastructure has significantly improved, drastically reducing mortality rates, advancing learning outcomes, and improving the quality of life.
Vietnam’s business environment has significantly improved, propelling the country to number 68 out of 190 in the World Bank’s 2018 “Ease of Doing Business” report, a major jump up from a ranking of 82 just one year ago.
Raymond Mallon – Senior economic advisor, Australia-Vietnam Economic Reform Programme
I am increasingly optimistic about the short- to medium-term prospects for the Vietnamese economy because of recent improvements in building the foundations for macro-economic stability (including better revenue performance and a declining fiscal deficit), as well as sustained progress in improving the investment climate and in reducing barriers to fair competition.
The Central Institute for Economic Management estimates that the level of domestic private investment grew by 17.5 per cent in the first six months of 2018 compared to 8.5 per cent growth in FDI, and only 3 per cent growth in state investment.
Strong private sector investment is helping generate strong employment and income growth. Despite a difficult and uncertain external environment, Vietnam continues to record strong trade growth and impressive inflows of FDI. While some progress is being made in strengthening vocational and higher education, many Vietnamese families continue to invest considerable resources into sending their children overseas for higher education. And, while progress is being made in addressing key infrastructure bottlenecks, urban congestion remains a problem.
Nevertheless, Vietnam’s competitiveness continues to improve – for example recently jumping 25 places to rank 39th out of 160 countries in terms of the World Bank Logistics Performance Index in 2018.
Despite this general optimism, challenges remain. The efficiency of state expenditure remains a particular concern. More needs to be done to restructure and expose remaining state-owned enterprises to competitive market forces. It is especially important to improve the competitiveness of those underperforming state utilities providing public infrastructure and services.
Accelerated investments are needed to address environmental and urban congestion concerns. More concrete action is needed to ensure more efficient planning and utilisation of public investment.
Education expenditure needs to be better targeted to meet the needs of an increasingly creative and knowledge-based economy. Efforts to strengthen transparency and accountability in the planning and utilisation of state expenditure remain a key issue in terms of improving overall investment efficiency.
And more needs to be done to build on recent efforts to improve public revenue collection efficiency.
Despite these challenges, the prospects for sustained and sustainable economic growth are improving.
Pham Hong Hai – CEO, HSBC Vietnam
Hosting the World Economic Forum (WEF) in Hanoi this September speaks for Vietnam’s strong will to continue integrating into and keeping pace with the world’s economic and social development. The theme this year is “ASEAN 4.0: Entrepreneurship and the Fourth Industrial Revolution”, which is very relevant to the government’s focus on building a national strategy for Industry 4.0. The revolution will start a new era for the country, impacting all aspects of its life, from economic to social development. It’s an opportunity that the country should embark on to pull ourselves into pace with other countries in the region and the world. The Fourth Industrial Revolution technologies including Internet of Things, artificial intelligence, robotics, and additive manufacturing will fundamentally transform global production systems, including ours. With this revolution, we can enhance our technological and manufacturing capability in the global value chain, creating new sustainable business models for startsups, shortening our journey in industrialisation, and critically improving our competitiveness in the future.
The Minister of Planning and Investment once mentioned that Industry 4.0 can help Vietnam’s GDP increase by $8-18 billion per year, a number much worth our consideration. In the WEF’s “Readiness for the Future of Production 2018” report, Vietnam scores 5.0 in terms of production structure, and 4.9 in terms of drivers of production, falling behind Singapore, Malaysia, Indonesia, and Thailand in the ASEAN group.
Being in the nascent group, though we are quite close to high potential, we have to admit that there is still a lot to do if we don’t want to miss the opportunities of this revolution. We have to look at this fact and be determined to make our best efforts to turn the country’s potential into reality.
I totally agree with Prime Minister Nguyen Xuan Phuc that the government needs to adapt in order to govern the country in this digital age and, more importantly, to take every opportunity afforded to us. We fortunately have people who are technologically smart and focused, one competitive advantage we cannot overlook. In 2017, 67 per cent of the Vietnamese population had access to the internet, putting Vietnam 13th among the top 20 countries for internet usage. I really hope the government can create a nurturing eco-system for startups, pushing up research and development, applications, and technology transfer, building a healthy co-operating culture to turn research results into real applications.
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