What is the driving force for Vietnam's sustainable growth and development?

To achieve the goals and targets set by the Resolution of the 13th Party Congress and the National Assembly, restoring existing growth drivers and finding new drivers is both an urgent and strategic issue for Vietnam in the current context as well as by 2025 and 2030.

Triển khai thuế tối thiểu toàn cầu: Cần trao đổi, học hỏi kinh nghiệm từ phương Tây và ASEAN

In order for growth drivers to be most effective, the Government, the National Assembly, ministries, sectors and localities need to consistently develop and implement policies and solutions. Illustrative photo. (Source: Vietnamnet)

Half term overcoming difficulties

Since the 13th National Party Congress, the world and regional situation has undergone rapid, complex and unpredictable developments. New difficulties and challenges have emerged more than opportunities, and are more severe than forecasts, as well as compared to recent terms: the Russia-Ukraine conflict, the Covid-19 pandemic, erratic and harsh climate and more natural disasters. This period of “misfortunes never come singly” has made the world and Vietnam’s socio-economy more unusual, precarious and risky - what the business community still calls the VUCA world (volatile, uncertain, complex and ambiguous).

In that context, Vietnam must achieve multiple goals: focusing on solving newly arising complex problems, dealing with long-standing weaknesses and shortcomings, and recovering and developing quickly and sustainably.

With the consensus and high determination of the entire political system, the leadership of the Party, the support of the National Assembly, and the determination of the Government, many drastic and large-scale policies and solutions, including unprecedented ones, have been issued by competent authorities, along with the establishment and consolidation of the organization and apparatus for direction and implementation.

These include: directions and instructions of the Secretariat, the Politburo, Resolution 30/2021/QH15 of the National Assembly, Resolution 86/2021/NQ-CP, Resolution 128/2021/NQ-CP on disease prevention and control; resolutions of the National Assembly and the Government on the 2022-2023 Socio-Economic Recovery and Development Program, on fiscal policies allowing tax and fee deferral and reduction for businesses and people with a total value of tax and fee exemptions of about 210 trillion VND, a total extension value of more than 430 trillion VND (according to the Ministry of Finance) in four years (2020-2023); implementing monetary policies allowing debt restructuring, reducing interest rates, service fees, preferential credit packages, etc.; Along with many directives, resolutions, and policies to promote public investment, remove difficulties and obstacles for the land, real estate, construction, and tourism markets, capital was issued promptly, removing bottlenecks.

Thanks to that, Vietnam has basically steadfastly overcome difficulties and challenges and achieved many important and quite comprehensive results, recognized internationally and domestically. The economy has maintained its growth momentum and is a bright spot "in the gray picture" of the global economy (according to the IMF).

Economic growth in 2021 reached 2.6%, in 2022 it reached 8.02%, much higher than the plan of 6-6.5%, the first six months of 2023 reached 3.72%, the whole year is forecast to increase by about 5-5.5% (the average of three years is about 5.4%, 1.7 times higher than the world average of 3.2%). National credit rating and international position continue to improve.

In the first eight months of this year, although Vietnam's economy was negatively affected by the global economic context as well as some of the internal issues mentioned above, it still achieved a growth rate of 3.72% in the first six months of the year and is recovering positively: major balances were ensured, the macro economy was stable, inflation was controlled at an appropriate level, interest rates decreased, and exchange rates were quite stable.

The socio-economic development results of the last half term are commendable; however, there are still many difficulties and challenges. In order to achieve the goals and targets set by the Resolution of the 13th National Party Congress, restoring existing growth drivers and finding new drivers is both an urgent and strategic issue for Vietnam.

New growth drivers

Over the past years, the work of perfecting and improving the quality of Vietnam's economic institutions has achieved important results, recognized and highly appreciated by the international community: (i) the legal system, mechanisms and policies are increasingly perfected and more suitable to practical requirements and commitments to international integration; the investment and business environment is improved; the right to freedom of business and equal competition among types of enterprises are better guaranteed, gradually adapting to international principles and standards; (ii) the ownership regime, economic sectors and types of enterprises are diversified; property rights and obligations are more fully institutionalized; (iii) market factors and types of markets are formed more synchronously, linked with regional and world markets when most prices of goods and services are established according to market mechanisms and Vietnam plays an increasingly larger role in the global value chain; is a strategic investment choice of many multinational corporations; (iv) Mechanisms and policies have paid more attention to combining economic development with social progress and equity, environmental protection, and creating opportunities for people to participate in and enjoy the fruits of development.

Since 2020, the world economy has changed rapidly, with the two biggest causes being the Covid-19 pandemic and the conflict in Ukraine. Accordingly, investment and consumption needs and behaviors have changed towards greater savings and health protection, many new business models and technology trends have developed faster than expected. From there, these new trends can become new driving forces for Vietnam's economic growth in the medium and long term.

Firstly, the driving force from the strong development trend of the digital economy, with the completion of the legal corridor; overcoming limitations in infrastructure, digital human resources, innovation ecosystem, cyber security and information and data security; Vietnam's digital economy is forecast to continue to grow strongly in both quantity and quality by 2025 and 2030, contributing to increasing the scale and growth rate, increasing labor productivity, efficiency and sustainability. It is forecasted that the digital economy will contribute about 25-30% of GDP and about 0.63-1.35 percentage points to annual GDP growth.

Second, the driving force comes from improving labor productivity and TFP (or increasing quality). This is both the driving force and the solution for Vietnam's economy to improve efficiency and quality in the coming years. In fact, Vietnam's labor productivity is lower than many Asian countries (only 12.2% of Singapore, 63.9% of Thailand, 94.2% of the Philippines, 24.4% of South Korea, 58.9% of China, etc.); meanwhile, Vietnam's TFP in 2022 will only contribute 43.8% to GDP growth, lower than the average of 45.7% in the 2016-2020 period.

Third, the driving force from the private economic sector is increasingly important to the economy, supplementing and enriching resources that the State sector cannot or does not do.

Fourth, the driving force from perfecting and improving the quality of economic institutions. This can be considered a breakthrough driving force but is also difficult to implement and may require the most time because this driving force helps create new mechanisms, new operating methods, creating an attractive and transparent business and investment environment.

Fifth, the driving force from the practical benefits of Vietnam's green economy and proactive adaptation to climate change. Green economy is an economy based on the efficient use of resources and minimizing negative impacts on the environment. The national strategy on green growth also identifies goals and solutions to enhance the role and contribution of green growth.

Sixth, the driving force comes from the determination to improve Vietnam's position in the global value chain. This is also one of the important goals of the Socio-Economic Development Strategy for the 2021-2030 period. Vietnam's deeper participation in the global value chain helps Vietnamese enterprises access capital, technology, management skills, markets and new partners; thereby, improving competitiveness, increasing the value of products, goods and services. As a result, Vietnam's economic growth is driven by increased production, exports, income, employment and international economic integration.

In addition to consolidating traditional growth drivers, promoting and exploiting new growth drivers for rapid, sustainable, inclusive development, achieving the set strategic goals; in which it is necessary to accelerate the process of perfecting institutions (especially laws on land, housing, real estate business, bidding, etc.), including removing barriers, focusing on policy implementation and coordination; paying attention to building institutions for the development of digital economy, green economy, circular economy. Developing a project to improve national labor productivity (along with digital transformation will contribute to increasing the contribution of TFP to growth); at the same time promoting the private economic sector to develop more strongly and sustainably...

In order for growth drivers to maximize their effectiveness, the Government, the National Assembly, ministries, sectors and localities need to consistently develop and implement policies and solutions to consolidate current growth drivers and effectively discover and exploit new drivers as well as interactions and resonances between these old and new drivers, contributing significantly to rapid, sustainable and inclusive recovery and development in the coming time.

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