Three strategic breakthroughs to escape the middle-income trap

Nguyen, Hoang Ha Development Strategy Institute

Vietnam

Content

• Vietnam’s Economic Condition • Three strategic breakthroughs • New Challenges

I. Vietnam’s Condition (1)

• Vietnam has just joined the middle-income group with GDP per capita (2012) about USD 1,700.

• Continuing accelerating industrialization, modernization, and rapid and sustainable development; targeting to become an industrialized country.

• Economic growth has slowed down since global crisis. • Questions about the growth economic model and the

necessity of structural reform. • Switching the focus from robust growth to stabilzing

economy in 2011-2015 period. • Proposing three strategic breakthroughs to 2020

M/GDP (%)

gM (%)

4.7 4.8 gGDP (%) 5.3 5.0

GCF/GDP (%)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

1985 86 87 88 89 90 91 92 93 94 95 96 97 98 99

2000 01 02 03 04 05 06 07 08 09 10 11 12

Manufacturing/GDP (%) growth rate of Manufacturing (%)growth rate of GDP (%) Gross Capital Formation/GDP (%)

I. Vietnam’s Condition (2)

ACHIEVEMENTS CHALLENGES 2012 & 2013

1 digit inflation Long spell of slow growth

Robust in export Economic growth

less than Indonesia and Philippines

since 1994

More diversification in export goods

Decreasing in Investment to GDP Ratio

Still attracting to foreign investors, 2nd in ASEAN

Surplus in Current Accounts

After 2 years, tncreasing in

Reserves: 12 weeks of

imports

Bankcruptcies

Low Growth in Retail Sector

Imports from the domestic

sector contracted by

7%

II. Three strategic breakthroughs

1. Improve the socialist oriented market economy institution, focusing on creation of an environment for equal competition, and administrative reforms;

2. Develop rapidly human resources, notably high quality human resources, focusing on comprehensive renovation of the national education;

3. Develop a synchronous infrastructure system incorporating modern facilities, focusing on the transportation network and major urban infrastructures (total 9 critical infrastructures)

Institutions

• Exercise properly State functions, handle judiciously State-market relationship;

• Improve the State apparatus, and make vigorous progress in administrative reform;

• Push up the struggle against corruption and wastefulness.

• Enhance the Party’s leadership and promote the people’s right as the master in State apparatus building

Human Resources

• Improve human resource quality, renovate comprehensively and develop rapidly education and training: (i) market-oriented policy; (ii) a top national policy

• Develop science and technology as really a key driving force for rapid and sustainable development;

• By 2020, 96.2 million of people with more 63 million in working ages=> Aging population after 2020

Infrastructure

• Focus on reviewing and finalizing country-wide and region-specific infrastructure development master plans, especially in relation to transport, hydropower and irrigation, ensuring economical utilization of resources, socio-economic efficiency, and environmental protection.

• Develop synchronously and modernize gradually irrigation systems, with importance attached to building and consolidating the networks of sea dykes, river dykes, pumping stations, and salinity control and flash flood discharge facilities

• Priorities for 9 critical infrastructues

No.1

New Challenges to Overcome

• Restructuring three nodes: public investments, commercial banking system, and SOEs.

• Government Structure (Silo system) & Devolution.

• Legislation System. • Iron Political Will to eliminate “interest groups”.

THANK YOU FOR YOUR ATTENTION!