Minister of Planning and Investment Nguyen Chi Dung recently set an ambitious target for Vietnam: achieving an average annual growth rate of over 10% for the next two decades to become a high-income nation by 2045.

A challenging, unprecedented goal

The aspiration to sustain double-digit economic growth is undoubtedly bold. However, there has been no mention of concrete scenarios or methodologies to achieve this target.

As of now, the Ministry of Planning and Investment (MPI) has not released a detailed proposal or roadmap, even though the merger of MPI and the Ministry of Finance is just weeks away.

Globally, no nation has achieved continuous double-digit growth over a 20-year period.

Case studies of rapid economic growth reveal shorter durations.

South Korea, for instance, recorded average GDP growth of 9.58% annually from 1960 to 1990. During this period, it achieved over 10% growth for 14 years, with a peak of 14.8% in 1973.

China, during its 30 years of reform (1977–2007), averaged 10.02% annual growth. It exceeded 10% in 15 years, peaking at 15.14% in 1984.

For Vietnam, the historical growth trajectory reflects a downward trend.

From 1991 to 2000, GDP grew at an average of 7.56%. This decreased to 7.26% between 2001 and 2010 and further to 5.95% between 2011 and 2020, according to the General Statistics Office (GSO).

The growth target set by the 13th National Congress for 2021–2025 is 6.5–7% per year, far below the proposed double-digit rates.

Vietnam has yet to achieve 10% annual growth for even a few consecutive years since Đổi Mới (economic reforms).

Challenges in meeting growth aspirations

The ambition to sustain over 10% growth for two decades surpasses existing targets and highlights the urgency of bridging Vietnam’s development gap with other nations.

However, the challenges are significant, both domestically and internationally.

Historically, Vietnam’s economic growth has relied on a “three-horse chariot” of exports, investments, and consumption.

1.     Consumption: In the first 11 months of 2024, inflation-adjusted consumption grew by only 5.8%, about half the rate seen before the pandemic.

2.     Investment: Public investment has been slow, with only 73.5% of the budget disbursed in the first 11 months of 2024. Private investment grew at a modest 7.1% during the first nine months of the year.

3.     Exports: Export growth rebounded in 2024, with shipments to the U.S. increasing by 24.2% and to the EU by 16.4%. However, much of this growth offset significant declines from the previous year.

Vietnam is now the third-largest exporter to the U.S., raising questions about how much further this growth can go in a competitive market.

The combined challenges indicate that the "three-horse chariot" may struggle to sustain the pace required for 10% growth over two decades.

Unlocking growth potential

Minister Nguyen Chi Dung emphasized the critical role of private enterprises in driving long-term economic growth.

Private enterprises currently contribute over 50% of GDP, far surpassing the contributions of the state (20.54%) and foreign-invested sectors (20.45%).

They also account for 82.1% of employment, compared to 7.9% for the state sector and 10% for foreign-invested businesses.

Despite these contributions, private enterprises have not grown significantly.

Vietnam has over 100 million citizens but only 930,000 officially registered private businesses.

The combined assets of Vietnam’s leading private firms are approximately USD 70 billion, comparable to a single Indian conglomerate like Infosys.

This highlights the underdevelopment of the private sector, underscoring the need for reform.

Proposed structural reforms

Reform at the policy and governance levels is essential to unlock private sector potential.

General Secretary To Lam and Prime Minister Pham Minh Chinh have urged a shift in governance philosophy:

“If it cannot be managed, do not ban it. Citizens and businesses should be free to do anything not explicitly prohibited by law.”

Key reforms include: Removing legal barriers, such as bans on tax-debtors traveling abroad. Preventing the criminalization of economic disputes. Reducing the frequency of administrative inspections during economic downturns.

Additionally, the government must redefine the roles of the state and market to empower businesses and encourage innovation.

Bold reforms and a strong focus on private enterprise can help Vietnam achieve sustained, high growth rates.

While the target of over 10% annual growth for 20 years is ambitious, leveraging private enterprise, fostering innovation, and reforming structural bottlenecks will be key to achieving the 2045 high-income goal.

Tu Giang