Comment on “Challenges in Searching for Vietnam's Growth Drivers Through 2030”

Abstract

Starting as one of the poorest countries in the world in the late 1980s, Vietnam has grown remarkably over the past decades. The country now aims to become a developing country with modern industry and be an upper-middle-income country by 2030 and a high-income country by 2045. Against this backdrop, Can and Dang's (2024) timely and comprehensive account of the economic policy issues faced by Vietnam is highly welcome. Can and Dang's main argument is that Vietnam needs not only to extend the existing growth drivers but also initiate new ones. I have found the proposed list of new drivers as well as the set of recommendations both exhaustive and up to date, reflecting the latest changes such as US–China tensions, the digital transformation, and the green transformation. In the following, I would like to look at the macropicture offered by Can and Dang (2024) from somewhat different angles, focusing on the ways for moving the policy debate forward.

To start with, Vietnam's effort to revamp its model of economic growth is not new. On the contrary, efforts to build new growth drivers have been going on for more than a decade. A brief discussion of the historical context would be useful. Traditionally, the country's economic growth had been largely dependent on low-cost labor and, in the late 2000s, increasingly on intensive capital investment. This happened in the context of economic reforms and international economic integration which provided Vietnam access to the global market. By around 2010, the sustainability of this traditional growth model had already been called into question, which led to the launching of “renovation of the economic growth model” into one which emphasizes quality, productivity, efficiency, and competitiveness. This was clearly highlighted in the socioeconomic development strategy 2011–2020 and further in the succeeding 10-year strategy for 2021–2030. Policy efforts have been ongoing with respect to most of the new growth drivers pointed out by Can and Dang (2024).

Indeed, if we look closely into each of these areas, we find that Vietnam has made step-by-step yet considerable strides in policy formulation and implementation. Let us take the case of private sector development. Since 2014, the Vietnamese government started to issue annual “resolutions” aimed at improving the business environment, setting specific targets according to the World Bank's “Doing business” rankings. The steady progress in the reduction and simplification of business conditions and administrative procedures is demonstrated by a recent report based on annual survey of private enterprises, showing that the businesses' burden of regulatory compliance has been on a decreasing trend since 2014, though further improvement is needed with respect to issues such as informal charges (Malesky et al., 2022). Beyond policy developments, the realities of the private sector also indicate continuity and change. As Can and Dang (2024) argue, the country's business sector still consists overwhelmingly of small, micro and household enterprises, in which low technology adoption inhibits productivity improvement. Nevertheless, Vietnam has also witnessed the rise of domestic private firms not only in traditional sectors such as real estate and domestic trade but also in automobile production and information technology. The key agendas for Vietnam, then, would be to promote the formalization of businesses and healthy competition so as to raise the overall productivity levels whilst driving the innovation-led development of large enterprises, in particular. While I recognize that what I have discussed is too specific and is outside the scope of the paper, as Can and Dang (2024) refrain from going deeply into the situation surrounding each of the new growth drivers, I still believe insights such as these would be crucial in making real policy improvements.

Seen in this light, I wonder how much contribution presenting a broad range of very general policy prescriptions, such as adhering to the reforms of SOEs, deregulating the private sector and streamlining business conditions, boosting competitiveness, and encouraging private investment in infrastructure and delivering certain public services,  would make in moving the policy debate forward. If problems remain despite all the policies, we need to think why previous efforts have produced limited results. The country has already produced so many strategies, masterplans, and policies that look good on paper but are too general and ambiguous to be effective. Vietnam's weakness in policy performance is not only about organizations, the allocation of tasks, or coordination; Vietnam also suffers from a shortage of resources and capabilities that can be devoted to policy formulation and implementation. Under these circumstances, simply adding new sets of issues is expected to have a limited impact. Saying everything is important is essentially the same as saying that nothing is important. What Vietnam needs for generating a set of policies that are truly effective would be setting clear priorities and narrowing the focus.