Change to come (07/3)
07/03/2011 - 11 Lượt xem
Change usually occurs when enough people feel a sufficient sense of urgency. Three years since Vietnam joined the WTO, calls for the country to reshape its existing development model to enhance its competitive capacity have been coming at greater frequency from both foreign and local analysts. In particular, creating a new economic model centred on higher productivity and the leveraged role of the private sector were among the recommendations put forward by Professor Michael Porter, a world expert in competitiveness, at a recent conference in Hanoi.
Need for change
Vietnam is considered to have performed well over the years as far as economic indicators are concerned. Despite fairly impressive growth that averaged 7 per cent, the quality of this growth has recently emerged as an area of much debate, especially over the last two years. The global economic crisis forced many to look beyond the headline figures.
But according to Mr Nguyen Dinh Cung, Vice President of the Central Institute for Economic Management (CIEM), a crisis wasn’t needed to see that the existing development model has its limitations. “Even in 2006 and 2007, when the economy achieved the highest GDP growth in ten years, the limitations of the development model had been identified,” he said. “Everyone now knows that it is unsustainable if the country’s growth continues to primarily rely on exploiting natural resources and cheap labour.”
But according to Mr Nguyen Dinh Cung, Vice President of the Central Institute for Economic Management (CIEM), a crisis wasn’t needed to see that the existing development model has its limitations. “Even in 2006 and 2007, when the economy achieved the highest GDP growth in ten years, the limitations of the development model had been identified,” he said. “Everyone now knows that it is unsustainable if the country’s growth continues to primarily rely on exploiting natural resources and cheap labour.”
A country’s competitive advantages are reflected in factors such as labour, capital, natural resources and technology levels. Vietnam’s export-oriented economy has been based largely on natural resources, while it has also tried to take advantage of its low labour costs and provided investment incentives to attract foreign investment.
This model was, in fact, successful to begin with but has become increasingly inappropriate. According to Mr Nguyen Duc Kien, Member of the National Assembly’s Economic Committee (NAEC), the current economic development model has gradually lost its advantages.
Mr Cung said that the export-oriented model has dominated the growth strategy of not only Vietnam but also other regional countries and it’s time for a rethink. “Reshaping the economic model has become a must, given the fact that developing countries like Vietnam will no longer be able to depend as much on the US or the EU as their main export markets in the near future,” he said. “ Vietnam should redirect the economy towards domestic demand.”
Economists’ calls for change, to some extent, reflect the decision that Vietnamese authorities and policymakers should make in order to ensure that the country’s growth will continue for years to come. But how to reshape the current economic model is a crucial question in itself. Mr Cung is of the opinion that although the reshaping is one of the country’s most urgent requirements, it must be undertaken gradually.
“Before carrying out the reshaping process, Vietnam needs a period of time to accumulate capital and train human resources,” he said. “The important thing is that reshaping the economic model must be based on the existing state of the economy and what Vietnam is aiming for.”
Meanwhile, Mr Kien believes that the reshaping process requires a change in thinking by authorities. “It seems that Vietnam is now paying too much attention on increases in GDP,” he said. “Economic growth means more than GDP, as it also reflects income, employment and, in general, the well being of the people. Economic growth must also be about the economy taking full advantage of its potential and opportunities to move forward.”
He also sees quality of economic growth as being determined by three factors: the rate of poverty reduction, income per capita, and the employment rate. “Any growth considered to be ‘quality’ must reduce poverty, produce less inequality and create more jobs,” he said. For these reasons, he agrees that a long term socio-economic plan in which reshaping the economic model is brought to the centre stage should be carried out for the next five- or ten-year period and beyond.
Change for the better
2010 officially sees the end of the 2006-2010 five-year socio-economic plan. This means that Vietnam is now at a decisive moment as regards the future, and any hesitation or delay in adopting change could do more harm than good to growth momentum.
According to Mr Cung, to reshape the economic model, the most important thing is to create a healthy competitive environment among economic components. “Under these circumstances, the possibility of reshaping the economic model will depend on our capacity for making the private sector a driving force in economic development,” he believes. “Similarly, it is also a task of redefining the State sector’s role in the economy.”
Of a similar view, Professor Porter, though acknowledging the importance of the country’s state-owned enterprises (SOEs), believes that the private sector should become the main engine of growth and development in the economy. “Current policies regarding SOE management still make it difficult to create the strong enterprises with high competitiveness expected by policymakers,” he told the conference.
In addition to changing the model and to guarantee stable growth, Mr Truong Dinh Tuyen, former Minister of Trade, advised Vietnam to quickly resolve bottlenecks such as underdeveloped infrastructure and energy shortages to assist enterprises to cut costs and, therefore, improve the overall competitiveness of Vietnamese products in international markets.
Regarding human resources, he believes that building competitive capacity based on cheap labour can only be a short term strategy and Vietnam should not depend on it so heavily. “Recent surveys show that Vietnam is beginning to lose its advantage in cheap labour over other regional countries,” he told local media. “So a long term plan is to invest in education and training for young people to ensure that they can work at their utmost efficiency in the future.”
For many reasons, the existing economic model is in need of replacement to meet the country’s requirements. But how and when to get started is a patience game. Mr Cung expects to see Vietnam continue to stabilise its macro economy and resolve outstanding economic shortcomings in 2011. “There is a need to reshape the economic model, but everything needs to be in order,” he concluded.
A crisis wasn’t needed to see that the existing development model has its limitations. Even in 2006 and 2007, when the economy achieved its highest GDP growth in ten years, the limitations of the development model had been identified. Everyone now knows that it is unsustainable if the country’s growth continues to primarily rely on exploiting natural resources and cheap labour.
Mr Nguyen Dinh Cung, Vice President, Central Institute for Economic Management
Economic growth must also be about the economy taking full advantage of its potential and opportunities to move forward. The quality of economic growth is determined by three factors: the rate of poverty reduction, income per capita, and the employment rate. Any growth considered to be ‘quality’ must reduce poverty, produce less inequality and create more jobs.
Mr Nguyen Duc Kien, Member of the National Assembly’s Economic Committee
Source: VNEconomy.
Source: VNEconomy.
