Progress in service sector unsatisfactory

In the economic structure, service sector has always been regarded as one of the important sectors, contributing the most to the economic growth, supporting for the development of other sectors. So, in the five year economic development plan during 2006 – 2010, the National Assembly has set a clear requirements and development criteria for service sector. However, until now the progress in the services sector has not been unsatisfactory.

Logistics, education and training, health care and services of agricultural production should be considered as the prioritised services for the development to restructure.

According to the statistics from Ministry of Planning and Investment (MoPI), the contribution of service sector to the country’s overall economic growth in the period 2006 – 2010 reached about 45.1 percent, still lower than the industry and construction sectors (46.1 percent) but significantly higher than that of the period 2001 – 2005 (37.7 percent). But the average growth for five years, was only equivalent to the lower bound of the target as planned in this period (from 7.7 to 8.2 percent). More remarkable, though in 2010, growth of service sector is estimated at about 7.5 percent, however for several years ago: from 2008 to 2009, growth of service sector is declining: in 2008 it rose only by 7.37 percent and it was only 6.63 percent in 2009. The proportion of services sector in 2010 reached only 38.6 percent, significantly lower compared with the target in the five year plan (40-41 percent).

Notably, in the service sector, the supporting services for the business and production such as transportation, warehousing, communications, finance – credit have gained very high growth during the period 2006 – 2009. Particularly, according to MoPI, services for transport, warehousing and communications posted an average growth of 10.47 percent, and average financial-credit growth was at 8.97 percent.

However, as assessed by an expert of MoPI, the quite exciting activities in the banking-financial sector are less transformed into the real economy. Business activities of hotels and restaurants also saw high growth: average 8.98 percent during period 2006-2009. Service activities on asset business and consulting are usually very strong in foreign country, but in Vietnam, in past five years, it has grown only more than 3 percent, the lowest growth in the service sector.

Additionally, services of high added value that are very important for the business and production and improving the competitiveness of the economy, see a slow development and account for very small percentage in gross domestic product (GDP) such as science and technology accounting for only 0.6 percent, finance and banking for 1.8-1.9 percent during the years 2006 to 2009. Hence the quality of service growth has not been significantly improved yet.

The reason was due to the investment in this sector remained low in comparison with the requirements. Statistics from MoPI showed that, amongst the total investments for 2006-2009 period, investments in finance and credit accounted for only 1.7 percent and it was 0.7 percent for science and technology. The investment for other essential services to improve the quality of human resource such as education and health care also declined, lower than the planned target.

Although still making high appreciation on the role and importance of the service sector, in the economic restructuring plan approved by the government recently, MoPI has set targets for 2020 that both fields of industry, construction and services must account for at least 85 percent of GDP, but it also offered some very faint suggestions on solutions to develop this sector. As proposed by MoPI, in the coming years, services of trade, hotels, restaurants, tourism, telecommunications, finance – banking, logistics, education and training, health care, and services for agricultural production should be considered as the prioritised services for the development to restructure. But, the ministry has not offered specific prioritised investment plans for the development of this sector. – Saigon Tiepthi

Tags: Vietnam service sector