Many challenges to escape the middle-income trap

DNVN - Minister of Planning and Investment Nguyen Chi Dung said that Vietnam is facing many difficulties and challenges to achieve the goal of escaping the middle-income trap. Among them are the internal weaknesses of the economy that are slowly being overcome; the production capacity and autonomy of the economy are not high.

According to Minister of Planning and Investment Nguyen Chi Dung, the World Bank's World Development Report 2024 states that since 1990, 34 economies have escaped the middle-income trap, including economies in the Asian region.

In Vietnam, the country's position and strength for development after nearly 40 years of renovation have been completely different with many potentials opened up and still much room for development. This is a favorable condition for us to escape the middle-income trap.

It is political stability; the foundation of economic growth is quite solid. Vietnam is internationally recognized as one of the few countries that have achieved high growth coupled with social equality. Vietnam's position in the international arena is constantly increasing.

Vietnam's economic growth rate in recent times has been below potential and tends to slow down.

However, Mr. Dung emphasized that Vietnam also faces many difficulties and challenges that need to be overcome to achieve the goal of escaping the middle-income trap. These include the internal weaknesses of the economy that are slowly being overcome; the production capacity and autonomy of the economy are not high.

The growth rate in recent times has remained below potential and is showing signs of slowing down. Economic restructuring associated with growth model innovation has been slow; productivity, quality, efficiency and competitiveness of the economy are not high.

“Some key industries are heavily dependent on the foreign direct investment sector. The industrialization and modernization foundation is not yet solid, and the technological autonomy of many industries has not been improved. New economic models are slow to be deployed and replicated,” said Mr. Dung.

Due to its large openness, the domestic economy is affected by the world economic situation more quickly and strongly. Meanwhile, the global competitiveness of the economy is slowly improving, especially in terms of institutions, infrastructure and human resources.

Science, technology and innovation are not really important driving forces for changing the growth model. Social issues such as rapid population aging, the gap between rich and poor, and the development gap between regions also put great pressure on socio-economic development.

Sharing about the Government's direction and guidance to help Vietnam escape the middle-income trap, Mr. Dung emphasized that many documents of the Party and State have identified the middle-income trap as one of the major and top challenges.

Among them, there are three important breakthroughs identified in the 10-year Socio-Economic Development Strategy 2021-2030. These are perfecting and improving the quality of socialist-oriented market economic institutions; developing human resources, education and training, science, technology, innovation and digital transformation; and developing infrastructure.

“Institutional breakthrough is the first and most important breakthrough, creating the foundation and premise for other breakthroughs to succeed. To realize this breakthrough, it is necessary to continue to innovate the thinking of institution building.

How can institutions keep up with and meet the requirements of the times in a proactive, scientific, practical and long-term, global way? Institutional building is not only from the top down or from the bottom up, but is interwoven and multi-dimensional, ensuring high practicality and sufficient strength,” said Mr. Dung.

At the same time, the investment and business environment needs to be paid attention to in the new context. It is not just about good tax incentives for businesses, or a one-stop shop for administrative procedures, but also requires remarkable development in human resources, science and technology, and the innovation ecosystem.

As an advisory body to the Government on socio-economic development strategies, the Ministry of Planning and Investment has proposed a new development mindset - seizing and realizing opportunities to overcome challenges. The Ministry also advises on breakthrough solutions, focusing on mobilizing and effectively using resources for development, using development to maintain stability to achieve strategic goals.

For example, Vietnam can loosen the public debt ceiling to create room to mobilize resources in the current context, when the public debt-to-GDP ratio is still very low compared to other countries in the region and the world.

“The Ministry of Planning and Investment is determined to further promote innovation, digital transformation, green transformation, and circular economic development. At the same time, it considers this a decisive factor to improve productivity, quality, efficiency, and competitiveness of the economy,” said Mr. Dung.

Hoai Anh

Source: https://doanhnghiepvn.vn/kinh-te/phan-tich/nhieu-thach-thuc-de-thoat-bay-thu-nhap-trung-binh/20240831012903824