Innovation in economic growth model: Keeping pace with the times requires both running and doing

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Research on microchip production at the Ho Chi Minh City Hi-Tech Park. Photo: Hoang Hung

Opportunity to catch up with the world

The policy of innovating the economic growth model was proposed at the 11th National Congress of the Communist Party and further developed during the 12th and 13th Congresses. Recently, on July 10, 2024, the Government issued Resolution No. 108/NQ-CP (at the June 2024 regular Government meeting and the online conference between the Government and localities). In this resolution, the Government emphasized prioritizing growth promotion alongside macroeconomic stability, controlling inflation, ensuring the economy's major balances, and effectively restructuring the economy in line with the renewal of the growth model to enhance productivity, quality, efficiency, and competitiveness.

In the first half of 2024, Vietnam's economy was considered one of the fastest-growing, with GDP growth reaching 6.42% compared to the same period in 2023. The full-year forecast for 2024 could approach 7%. However, amid rapidly changing global economic conditions, Vietnam's growth model has not yet achieved fundamental changes, with productivity, quality, efficiency, and competitiveness still low, and the economy remains vulnerable due to its dependence on imported raw materials.

Discussing the innovation of the growth model, economic expert Vo Tri Thanh noted that the issue of the economic growth model has been raised for more than a decade. Since 2012, the National Assembly has approved a restructuring program in three areas: public investment; credit, financial, and banking systems; and State-owned enterprises. Later, the focus shifted to the Fourth Industrial Revolution in 2015, and then to green growth and digital transformation. However, the "aspiration" for this innovation has not been easy to realize.

"If we want to narrow the gap and 'keep pace with the times,' we must both run and do; otherwise, time will run out. Developing policies and a comprehensive legal framework in a short time is impossible. Therefore, Vietnam must learn and develop policies simultaneously rather than waiting for a complete legal framework. Notably, before a policy framework is established, we have seen successful initiatives begin at the enterprise level, attracting many investors. Take the examples of Vinamilk, FPT... there have been many innovations and initiatives that have emerged from real life. The most successful initiative is the Ecological Industrial Park. This model has been quite successful in attracting investors. Even without a complete legal framework from authorities, businesses have already started with this model and have achieved certain successes," said Thanh.

He added that digital and green transformation within innovation is the last opportunity for Vietnam to catch up with the world. This revolution offers various models suitable for the capabilities, mindsets, and occupational cultures of the Vietnamese people. Therefore, Vietnam needs to be proactive and not wait if it hopes to catch up with the world.

Innovating the growth model linked to economic restructuring

According to Dr. Chu Duc Hoang from the National Technology Innovation Fund (NATIF) under the Ministry of Science and Technology, the current transformation trend is to increase the industrial and construction sectors' share from 32.1% (2010) to 38.1% (2023), with a target of 40% by 2030. Services will maintain a leading role, accounting for about 50% of GDP throughout the period, and are expected to stabilize at this level by 2030. The share of processing and manufacturing industries in GDP rose from 13% (2010) to 25% (2023), with a goal of over 30% by 2030. The digital economy accounted for about 14.3% of GDP in 2023, with targets of 20% by 2025 and 30% by 2030. The green and circular economies are in their early development stages, with the goal of becoming increasingly significant contributors to GDP by 2030.

However, Dr. Hoang pointed out that Vietnam faced numerous challenges in the transition process. These include low labor productivity compared to many regional countries, limited adoption of new technologies in production, heavy reliance on foreign investment and exports, complex and opaque administrative procedures, and underdeveloped transportation and logistics systems in many areas. Additionally, uneven regional development, coupled with rapid industrial growth, has led to increased pollution. The workforce has not yet met the demands of a modern economy, necessitating reforms in education and training to improve quality.

To accelerate the dual (green and digital) transformation for Vietnam, Dr. Hoang suggested solutions such as establishing legal regulations on digital transformation and the environment; promoting clean energy; protecting the environment; striving for green industries; investing in smart transportation and sustainable development; leading green transformation trends; eliminating pollution; and ensuring a fair transition for all.

Prof. Dr. Hoang Van Cuong, a member of the National Assembly's Finance and Budget Committee, stated that "Innovating the growth model must be closely linked to restructuring the economy, from the macroeconomic perspective down to each enterprise, deciding what to retain and what to discard. This is essential as the economic context has clearly changed. If Vietnam's growth previously relied on resources and labor, it now must depend on science and technology, shifting to clean and green development."

Notably, restructuring public investment is the most critical issue in economic restructuring. In recent years, the government has shifted investment from scattered and fragmented projects to more focused investments, following a five-year roadmap. Recently, the government has concentrated resources on core infrastructure, especially transportation, highways, and logistics hubs. Additionally, Prof. Dr. Cuong emphasized that public investment should not only follow traditional methods but should also focus on creating transformations in models. For instance, the current trend encourages green and clean production models.

In the future, Vietnam must continue to implement solutions to innovate its growth model, focusing on high technology development, encouraging creative startups, and transitioning to a green economy. Only by doing so can Vietnam achieve sustainable development and improve the quality of life for its people.