UNDP economic experts warn that Vietnam's investment in research, development, and innovation is very low and needs improvement to avoid falling into the middle-income trap.
During the second thematic discussion on labor productivity at the 2023 Socio-Economic Forum on September 19th, Jonathan Pincus, an international economist at the United Nations Development Organization (UNDP) in Vietnam, stated that increasing labor productivity needs to be viewed in the long term rather than in the short term.
Citing the examples of Thailand and Malaysia in the late 20th century, Pincus noted that both achieved impressive productivity growth rates of 5.6-16.3% per year between 1989 and 1999. However, this growth slowed significantly after the Asian financial crisis.
"It's very difficult for a country to achieve rapid productivity growth over a long period; that's the middle-productivity trap," Pincus concluded, calling it a major threat.
These countries fell into the middle-productivity trap because they failed to upgrade their development strategies and were slow to leverage their national innovation systems. They primarily pursued a strategy of increasing productivity through low-value export products and failed to apply inventions to bring about fundamental changes in their industries.
Mr. Pincus stated that Vietnam, a lower-middle-income country, has achieved a high level of labor productivity growth for a long time. He expressed concern that Vietnam could fall into the middle-productivity trap, similar to what Malaysia and Thailand experienced. "Can Vietnam effectively apply its national innovation system to change its development strategy after reaching middle-productivity levels?" the expert questioned.
International economist Jonathan Pincus discusses the topic at the thematic session on the morning of September 19. Photo: National Assembly Media
According to this expert, the relatively low cost of research and development (R&D) in Vietnam, only one-third that of China and half that of Thailand and Malaysia, is concerning. R&D spending is a key indicator of productivity growth through technological innovation.
UNDP experts have pointed out two problems in Vietnam's investment in research and development: insufficient spending and overly scattered spending. Currently, Vietnam's investment in innovation and research and development is very low, especially in the public sector, while private research institutes are not encouraged to develop. This is because private export businesses are mainly FDI companies and multinational corporations, while domestic businesses are mostly small and medium-sized, making it difficult for them to have sufficient resources for research and development.
Mr. Pincus suggested that the Vietnamese government should create significant impetus for national innovation, invest heavily in R&D, and develop high-quality human resources for the long term. In addition, Vietnam is currently one of the leading countries worldwide in the number of students studying in the US and Europe. Mr. Pincus believes this is a highly skilled workforce, proficient in technology, and promising to become leading scientists . "They need to be attracted back to domestic research institutes and universities to truly contribute to development," he proposed.
Felix Weidencaff, Employment Specialist at the International Labour Organization (ILO) Asia-Pacific Regional Office, noted that Vietnam has achieved unprecedented economic growth over the past decade, but still lags behind other ASEAN countries and some nations in the region.
According to Felix Weidencaff, Vietnam needs to develop human resources suitable for the market and the knowledge-based economy, technology, and Industry 4.0; establish an effective labor market information system; and increase productivity for small and medium-sized enterprises.
The Vietnam Economic and Social Forum 2023, themed "Strengthening Endogenous Capacity, Creating Momentum for Sustainable Growth and Development," comprises two thematic discussion sessions: "Strengthening Internal Capacity, Unlocking Resources, and Supporting Businesses to Overcome Difficulties"; and "Improving Labor Productivity and Ensuring Social Security in the New Context," as well as a plenary session. This event is jointly organized by the National Assembly's Economic Committee, the Central Economic Committee, the Ho Chi Minh National Academy of Politics, and the Vietnam Academy of Social Sciences.
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