Experts: Vietnam needs reform for growth
VietNamNet Bridge – Economic experts have underscored the need for Vietnam to speed up reform to fuel economic growth and well ingrate into the world economy.
Vietnam has reached a critical juncture, heard a forum on trade policy for the Trans-Pacific Partnership (TPP) and the bilateral free trade agreement (FTA) between Vietnam and the European Union (EU).
Speaking at the forum held by the Vietnam Trade Promotion Agency under the Ministry of Industry and Trade Ministry in Hanoi last week, expert Vo Tri Thanh said this is a break-or-make moment. The growth model should be changed to avoid falling into a middle-income trap, he noted.
Thanh emphasized the urgency to have new impetus for Vietnam to step up reform to enable the country to fulfill its commitments to its FTAs with foreign partners.
Thanh said after 30 years of doi moi (renovation) and market openness, Vietnam has become a middle-income country. However, the nation is coping with a slew of challenges such as the inefficiency of State-run enterprises and public investment.
He pointed out one of the major challenges for Vietnam as how the country can retain high economic growth while ensuring environmental and social sustainability.
Thanh said the TPP would enable Vietnam to increase exports to other Pacific Rim countries including the United States, which is among Vietnam’s biggest export markets. The TPP countries account for 28% of the world’s trade and 37% of the world’s gross domestic product (GDP). The EU makes up around 30% of world trade and 30% of global GDP.
Economic expert Pham Chi Lan said the TPP and the Vietnam-EU FTA will create big opportunities for Vietnam to grow and also put pressure on the country to boost reform. However, whether the country can make the most of these opportunities depends on its own effort.
Lan said Vietnam has drawn up a clear roadmap for reform. She said Vietnam does not lack resources for reform but a strong determination. “Time waits for no one and opportunities will slip away soon in this rapidly changing world. We must take action right now.”
She said the new FTAs will bring opportunities for Vietnam to reform institutions and build a model for a market-oriented economy. The Government should launch a national program to inspire entrepreneurship among the Vietnamese.
As most Vietnamese enterprises are small, their participation in the global supply chain is limited. Only 36% of domestic firms have been able to join the world’s production network while the percentage is 60% in Malaysia and Thailand.
Around 21% of small and medium enterprises (SMEs) in Vietnam take park in the global supply chain compared to 30% in Thailand and 46% in Malaysia. This is why Vietnamese SMEs can benefit little from foreign direct investment (FDI) projects in terms of technology transfer, and productivity improvement.
Miriam Garcia Ferrer, head of the Trade and Economic Section of the Delegation of the EU to Vietnam in Hanoi, said Vietnam will have to face many challenges when the Vietnam-EU FTA comes into force. Such challenges include the restructuring of State-owned enterprises (SOEs), government procurement, institutional reforms, geographical indications, transparency and investor protection.
She said institutional reforms are pivotal to improve the business environment and the legal system, and that Vietnam must respect intellectual property rights, restructure SOEs, remove subsidies and foster competition, among others.