Vietnam’s economic outlook through prism of int’l experts
Much remains to be done for Vietnam to reach the goal of becoming a developed country by 2045, but it is moving in the right direction.
After a difficult year and on the eve of the Year of the Cat, international experts told The Hanoi Times about Vietnam’s economic performance and their expectations for the country ahead.
Carolyn Turk, World Bank Country Director to Vietnam:
Vietnam’s economy bounces back well
We all recognize that Vietnam has bounced back very well, partly driven by rising demand from domestic consumption and investment. But behind the steady growth, I would say there are some concerns. It should be noted that Vietnam’s economy is driven by global demand, so a scenario of global economic slowdown would be a huge challenge.
Vietnam has a foreign trade size of an estimated 200% of GDP, so it is an open economy, and we cannot dissociate the fortunes of Vietnam from the levels of activity and the vibrancy in the global economy.
And our suggestion here, I think, is for the government of Vietnam, perhaps, to consider investments that can help diversify the economy’s export base at the moment, focusing on garment, electronics, manufacturing, and processing.
But in the future, the economy has to involve a more diversified export base, and we encourage the Government to think that this is the moment to look forward to trade diversification. And this moment of global uncertainty is the moment to be investing in activities that can help promote that diversification.
Coming on to the opportunity side, I think with the high growth rates and the robust rebound that Vietnam is seeing, the country has the luxury to think a little bit not just about immediate recovery but also about longer-term growth.
Vietnam has the fiscal space to start making the necessary investments to build future competitiveness. And here, I’d like to highlight a couple of areas that we think are important to ensure investment efficiency. The first area would be in the lower carbon decarbonized growth path, which will be fundamental to Vietnam’s competitiveness from now on.
FDI companies that come into Vietnam are looking to sell its product based on quality, not just quantity, and increasingly, the global demands for quality would include a low carbon footprint. Until now, public investments in the low-carbon transition have been relatively small, and we believe these activities can be accelerated very quickly with some changes.
The second area of investment that we suggest that the Government consider immediately will be in the digital transformation sector. This will underpin the productivity-like growth that the country will need to drive it toward high-income status in 2045.
And it implies that the economy will have to continue growing above six and a half percent every year between now and 2045. So, it is a challenging task ahead.
And to realize this ambitious plan, the government will need to invest in skills and in the infrastructure that the digital industries need so badly. In this context, the government should focus on improving investment efficiency and addressing shortcomings in planning preparation, appraisal, and implementation of investment policies, ensuring legal compatibility with Vietnam’s green growth targets and net-zero carbon emissions by 2050.
ADB Country Director to Vietnam Andrew Jeffries:
Vietnam to stay among the favorite destination of the FDI
Our forecast for Vietnam’s GDP growth in 2023 would be 6.7%. However, the risks we have highlighted include global economic slowdowns that could affect Vietnam’s exports, which remain a key driver of Vietnam’s high economic growth.
There has already been some evidence of a slowdown in orders for future delivery to various regions or countries due to slowdowns in those locations, but it is too early to predict if they will be serious recessions around the world.
Meanwhile, Vietnam has a wide range of free trade agreements and access to all the major countries and markets, so a slowdown in some doesn’t mean severe impacts on Vietnam’s exports.
For Vietnam to realize its ambitious development vision by 2045, it should maintain a sustainable growth rate of 6.5-7.5% from now until 2045. In this regard, the role of science-technology, innovation, expansion of the middle class, and supporting the business community are among the priorities.
I expect Vietnam to stay among the favorite destination of the FDI. At a time when a growing number of multinationals are providing strong commitments for green development and actively searching for investment destinations in line with their vision for green growth, Vietnam is in a favorable position to attract green capital via the Government’s strong commitments.
Vietnam should prioritize attracting high-quality FDI to support local businesses further integrating into the value chains, eventually improving its stance in the global production chains.
Karl-Uwe Bütof – Commissioner for the Economic Relations to South-East Asia of the German state of North Rhine-Westphalia:
Vietnam and Germany share the same sustainable goals
Vietnam has changed so much since the last time I was here – ten years ago. I was the representative of the Ministry for Economic Affairs at that time.
The economy is developing more and more in this country, which strikes me so much though I prepared myself psychologically when I came here. And the good thing is that Vietnam and Germany have the same political goals in the field of sustainability, including climate protection, CO2 reduction, and circular economy, and in the long term, we both aspire to say goodbye to fossil energy. We want to be climate neutral in 2045. For Vietnam, I think is enormously ambitious the fact that you aim to phase out fossil energy by 2050.
The situation is harder for Vietnam because your share of renewable energies is lower than ours. But it is fantastic that you have a vision. So we must develop business models to change that (increasing the share of renewable energies). We have environments for young startups to think about this issue. And they try to work together with startups in other countries. Our delegation had talks with Vietnam’s Ministry of Industry and Trade. And we wanted to invite them to join a kind of startup program.
I was honored to participate in the Green Economic Forum in Washington, D.C., where I spoke about the frame conditions which must be fulfilled for companies to invest more in lower carbon production. The most important thing is, also here in Vietnam, to bring together new ideas from startups, large companies, research institutes, and universities. They have to cooperate, and there must be, as in Germany, knowledge transfer from universities to companies. And, for example, in Germany, we fund any cooperative project between companies and research institutes. We will give them grants if they have a new idea or a solution with great economic benefit. So my task is just to try to build up this network as a fundamental for future economic activities.
Marc Knapper – United States Ambassador to Vietnam:
“It’s like night and day in terms of people’s lives and livelihoods in Vietnam compared to 15 years ago”
Regarding three areas, including health, climate, and infrastructure, it’s like night and day in terms of people’s lives and livelihoods compared to 15 years ago.
Take an example, US-Vietnam health cooperation. More than a decade ago, we were getting PEPFAR [the US President’s Emergency Plan for AIDS Relief] off the ground in our efforts to combat the scourge of HIV/AIDS. Vietnam was the only country in the PEPFAR program to be located in Asia. But now, the commitment of the two countries’ governments has spread far beyond that, pushing health to become one of the main pillars of the US-Vietnam relationship of cooperation.
The United States was proud to provide Vietnam with 40 million vaccine doses. We could do that because of the highly efficient and organized manner in which we knew the government of Vietnam would be able to vaccinate its population.
Regarding climate, when Prime Minister Pham Minh Chinh traveled to Glasgow, Scotland, last year for COP 26, he made a very bold commitment for Vietnam to be net zero emissions by 2050. It reflects not only Vietnam’s leadership role, not just regionally but globally but also the recognition that Vietnam is among the most vulnerable countries in the world to the effects of climate change.
Traveling to places like Mekong Delta or central Vietnam’s coastline and talking to the provincial leaders there, I think we have gotten the message. They are working very hard to do what they can to assist the lives and livelihoods of people within their provinces to not only mitigate against the effects of climate change but also take steps to help accelerate Vietnam zone energy transition to renewables such as solar and wind and move away from coal.
In terms of infrastructure, when I was here before, to go to Ha Long Bay, it took four and a half hours over a very bumpy and dangerous two-lane road. Now, as we all know, it’s two hours on a beautiful six-lane highway, and this kind of infrastructure development is allowing communities to grow economically, draw more tourists and investment, and I think it’s been really good for the lives and livelihoods of the people who live there.
