TIME FOR A TWEAK OR CHANGE TO THE ECONOMIC MODEL

Vietnam’s shift from a centrally planned to a market economy has transformed the country from one of the poorest in the world into a lower middle-income country. Vietnam is now considered one of the most dynamic emerging countries in East Asia.[1] Vietnam is one of the greatest development success stories of our time.[2]

Vietnam’s development over the last 30 plus years since Doi Moi, in 1986, has been quite remarkable with average per capita increasing from US$ 200 to US$2800 in 2018 and the poverty rates reduced from 70% in 1996 to below 6% in 2019. GDP growth exceeded 7% in both 2018 and 2019, one of the fastest in the region and globally.  GDP was projected at close to 7% for 2020 but due to the impact of Covid 19 first quarter GDP fell to 3.8% and World bank recently revised their GDP growth projection to 4.9% for 2020.

In a recent release from World Bank (“WB”)  on May 27th 2020[3] the WB warned that Vietnam is now at a ‘turning point” and some of the traditional drivers are gradually weakening. Vietnam now needs a productivity-driven model combining innovation and balanced development and allocation of private, public, human and natural capital will be the key for Vietnam to achieve its goal of becoming a high-income economy by 2045.

The WB report argues that to thrive Vietnam needs to give priority to 4 areas:

Dynamic Business: encouraging competition and easing the conditions for establishing and operating businesses will ensure the flow of resources and the most innovative and productive firms. This will only happen if Vietnam meets its repeated promises to ensure easier access to finance, transparency, reduced conditions for businesses and legal protections.

Efficient Infrastructure: Vietnam needs to focus on improving efficiency and sustainability of infrastructure services including financing and operational maintenance.

Skilled workers and opportunities for all: Whilst the country scores well on basic education it will now need to promote university and vocational-technical skills which are badly needed to increase productivity. This in conjunction with faster automation.

Green economy: Sustainable development requires more effective management of renewable natural resources and stricter pollution controls, particularly major urban centres.

I believe that the relevant Government authorities fully appreciate the need to adapt, as outlined in the report, as supported by Vu Viet Ngoan former head of the Economic Advisory Group[4].

Kenneth M Atkinson

Founder and Senior Board Adviser

Grant Thornton Vietnam

[1] World Bank April 27th 2020

[2] Ousmane Dione World Bank country Director Vietnam

[3] Vibrant Vietnam, Forging the Foundation of a High Income Economy. World Bank

[4] Vietnam Express May 28th 2020.

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