Obstacles hampering Vietnam’s economic growth

Many “hot questions” on the growth issue have been posed at the international scientific conference on the quality of Vietnam’s economic growth in 2001-2010 period and orientation by 2020

Why the quality of economic growth is low?

According to figures of the general Department of Statistics, the average growth of 2001-2010 period is 7.25 percent, 7.51 percent in 2001-2005 period and down to seven percent in 2006-2010.

Speaking at the conference, experts shared a common point that the quality of Vietnam’s economic growth has still been low and not achieved sustainability. The low quality reflects in slow economic restructuring, low economic efficiency, and the weak competitiveness of the economy.

To demonstrate the unsustainable quality of economic growth, experts said that in Vietnam, jobs, poverty reduction, social justice, etc. are currently the burning issues, and environmental issue is alarming. According to experts, environmental damage caused by economic activities is approximately 5.5 percent of GDP annually.

Experts said there are many causes affecting the quality of economic growth of Vietnam. However, the key issue focuses on some major reasons such as low labour productivity and low efficiency of material and energy capital use. With growth rate of 5.13 percent in 2001-2010 period, the growth of productivity in Vietnam is considered low compared to other regional countries, while that figure is doubled in China, 4.5 times in Thailand, 12 times in Malaysia and 23.5 times in Korea.

Regarding the efficiency of capital use, Prof Dr Nguyen Van Nam, Rector of National Economics University said over the years, the economic growth model of Vietnam has only focused on width growth, based on investment capital increase, resource exploitation and labour, not yet focused on growth in depth.

According to calculations, the ratio of total social investment has continuously increased over the last decade, from 28.4 percent of GDP in 1996 to the record high of 43.1 percent in 2007 and 42.2 percent in 2008. If Vietnam’s economy grew by 8.2 percent in 1997 with total social investment of 28.7 percent of GDP, in 2008, the economic growth rate was similar at 8.5 percent but social investment reached 43.1 percent of GDP.

In addition, the competitiveness of the economy is low, and there has almost no improvement from 2001 to present. In 2009, Vietnam’s competitiveness fell by five grades compared to 2008, while other countries in the region improved their position in the ranking. Moreover, the input structure of growth, environmental uncertainties, decreasing coefficient of elasticity of poverty reduction and inequality tend to grow significantly.

Speaking at the conference, former minister of Trade Truong Dinh Tuyen said that in order to enhance the quality of economic growth, Vietnam should remove the issues in economic thinking, put the economy in a competitive environment even for state-owned enterprises.

Prof Dr Kenichi Ohno from National Graduate Institute for Policy Studies of Japan said that Vietnam should study the typical examples in the world about economic development strategy to find the way that suits thr country. For example, Singapore established the National Productivity and Continuing Education Council (NPCEC), aiming to form a high productivity economy. Other countries such as Korea, Malaysia, and Thailand, etc. were previously successful with economic councils, committees, or high-level advisory groups.

Representing the companies, Cao Si Kiem, Chair of Vietnam Association of Small and Medium Enterprises said inflation, interest rate and exchange rate issues must be solved in order to solve the problem of the quality of economic growth.

Concerning the role of enterprises in developing policies, Dr Pham Thi Thu Hang, director of the Small and Medium Enterprise Promotion Centre of The Vietnam Chamber of Commerce and Industry (VCCI) said that previously, businesses often stand outside when the state built economic policies. This is also the reason why many policies were issued but they are not really feasible, Dr Hang stressed. - Laodong

Tags: Vietnam economic, Vietnam economic growth, Vietnam economy, Vietnam economy 2011