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Last week I attended the Vietnam Summit organised by the Economist magazine. I was a little surprised by the limited attendance but the quality of the speakers was good. Originally it been expected the Prime Minister Phuc would make the opening address but his place was taken by Deputy PM Minh. Below are some of the key highlights from the address.
DPM Minh reasoned that the relatively high and constant GDP growth over the last 20 years was attributable to: Vietnam’s transition to a market economy; maximising Vietnam’s competitive advantages (Cheap and abundant labour and a strong agricultural sector); and International economic integration, increased foreign trade and adapting to international norms.
Vietnam is reforming and equitisation is moving ahead but it is important improve governance and performance of State Owned Enterprises in order for the Government to reduce their stake.
The Government, which he described as an enabling Government, is looking to increase investment in Hi tech industries, protect the environment, increase reginal integration and connectivity and reduce inefficiency.
Historically growth has been based on labour intensive industries but Vietnam is now moving to a new era dedicated to transforming the growth model to look at improved productivity using knowledge and creativity. The Agricultural sector, in particular, will develop in an intensive not extensive manner using the land to create large scale farming not fragmented farming.
The plan is to reduce the percentage of population engaged in agriculture from the current 70% to 40% and to improve efficiency through high tech thus transferring labour to manufacturing and service industries. However to do this there is a need to invest in human resources and vocational training.
The Country’s education policy has contributed to the success of the last 30 years partly due to the level of education and the high literacy rate. (KMA -The literacy rate in Vietnam is the same as in Singapore).
The manufacturing sector needs automation and faster growth, through adopting modern science and technology and improving quality. (KMA -This is in line with recent surveys which show that Vietnam’s growth in productivity has been slowing and is now one of the lowest in the region). Automation will of course mean more unemployment so absorbing workers into new jobs and retraining will be a significant challenge. At the present time Vietnam needs to create 1.5 million new jobs a year to absorb the new people joining the labour market.
The new growth model will have many elements including quality and competitiveness. Technology will be a key as labour intensive industry is not a way forward for the future.
Trade is still the key to Vietnam’s future however as we all know global growth is slowing and this is having an impact on Vietnam’s economy. However, Vietnam is amongst a few countries signing Free Trade Agreements and Vietnam has FTA’s with 55 trade partners. The EU Vietnam FTA, which will come into effect in 2018, is expected to have a major positive impact on trade with the EU. The Trans Pacific Partnership still has clouds hanging over it but with a Trump presidency is looking more and more unlikely.