Vietnam could become upper-middle income nation

 

Victoria Kwakwa, vice deputy president for World Bank’s East Asia and Pacific Region, cited the key opportunities outlined in the WB’s Vietnam 2035 Report, which include trade agreements like the Asean Economic Community, Trans-Pacific Partnership and EU-Vietnam Free Trade Agreement.

 

Within 10 years, China is expected to have a billion-strong middle class, while facing rapidly rising wages.

 

The country will see a flight of lower-end manufacturing go to other countries, Kwakwa told participants at a seminar on Vietnam’s economic prospects, held by consulting firm Deloitte Vietnam in Ho Chi Minh City yesterday.

 

“Perhaps the biggest opportunity lies in completing the unfinished economic modernisation agenda, led by the private sector and with a focus on boosting productivity,” she said.

 

She noted, however, that declining productivity growth might be the biggest challenge to 2035 income aspirations.

 

The growth rate fluctuated from the peak of almost 7 per cent in 1995 to around 3.5 per cent in 2013.

 

Weakening growth has been caused by public investment decisions that were inefficient due to fragmented state institutions and uncoordinated decision making, and by state-owned enterprises making unproductive use of scarce resources.

 

Meanwhile, the domestic private sector has become unproductive, with the commercialisation of state institutions being a key contributing factor.

 

An immediate priority should be given to boosting productivity of the domestic private sector by strengthening micro institutions of the market economy and competition policy and its enforcement.

 

A commercial approach to state ownership should also be adopted, she said.

 

Equitisation should be accelerated, and the playing field for the private sector leveled. Consolidation of corporate governance is also needed, she said.

 

Regarding the business environment, Bui Quang Vinh, former minister of planning and investment, said there was still “not a small” gap between the Government’s instructions on reform procedures and the implementation by lower levels, such as in the field of customs.

 

He said recent regulations still enabled sub-licensing, which hinders creativity, negatively affects businesses and weakens competitiveness.

 

He also noted that access to capital sources, and land and mineral resources, by the private sector has not conformed to the market economy, causing difficulties to decent private businesses.

 

The fact that people having been putting their money in banking deposits indicates that the business start-up environment is not favourable, he said.

 

Vinh called on FDI businesses to implement their promises in various fields, including technology transfer, human resource development and research and development activities.