Vietnam's economy needs new drivers for growth

Hue said that the economy was growing but uncertainty about the future lingers, given the challenges posed by trade liberalisation, technological change, the impacts of climate change and constraints on fiscal and monetary policies.

“There’s no other way but to transform to an innovation-led growth model and hasten economic restructuring,” he said. “We’ve talked a lot but little has been done.”

Vietnam has strengths in many sectors, such as agriculture, the digital economy and tourism. “But if we choose too many sectors to be spearheads, there will be no spearhead at all,” Hue said. “Will agriculture be the new driver?”

Vegetables grown in a glass house

Hue also expressed concerns about the lack of linkage between the foreign direct investment (FDI) and domestic sectors, adding that there was disparity in the developments of the two sectors.

The policies for attracting FDI must aim at promoting the domestic sector and establishing value chains to prevent the development of two sectors in one economy, or even two economies in one country, he said.

In addition, he said, there is a lack of indicators to evaluate growth quality, as statistical figures still lacked reliability.

Tran Dinh Thien, Director of the Vietnam Institute of Economics, said Vietnam should not chase growth targets every single year but rather focus on the growth quality of a whole period. “The new period will need new drivers,” Thien said. “We need comprehensive changes in thinking and methods.”

Targets should be based on the international commitments and technology advancements, he added.

Thien added that the most important goal is building a transparent Government.

According to Sebastian Eckardt, the World Bank’s Lead Economist for Vietnam, the Vietnamese economy was experiencing a cyclical uptick in growth accompanied by macroeconomic stability. But it also faces emerging structural headwinds, including slower labour force growth, weaker investment and lower productivity growth.

Vietnam should take advantage of cyclical uptick to strengthen macroeconomic resilience and enhance structural reforms to boost productivity growth and lift potential growth, he said.

Eckardt said that it was critical to enhance the business environment, deepen State-owned enterprise reforms and develop effective factor markets to modernise institutions and create a level playing field, including for the domestic private sector.

Besides, investing in people and innovation is important to meet the demands of a modern industrial and increasingly knowledge-based economy, he said.

According to Nguyen Dinh Cung, Director of the Central Institute for Economic Management, ministries should abolish at least one third to half of existing business prerequisites in 2018. They should also cut in half the number of items subjected to specialised checks for import and export.

“2018 should continue to be the year of cost cutting for businesses,” Cung said, adding that further cuts in interest rates and logistics costs must be put into consideration.