VietNamNet Bridge - Economists said that Vietnam’s GDP growth of 6.68% in 2015 was impressive but the average growth rate of the past five years was still much lower than the previous periods. The growth model is still unsustainable, they said.

Analysis of the situation in 2015 by Dr. Tran Tho Dat and Dr. To Trung Thanh (National Economic University) at a recent seminar revealed many uncertainties in the model of economic growth of Vietnam.

In 2015, economic growth reached the highest level in the 2010-2015 period (6.68%) and this was considered a bright spot in the macroeconomic management. However, according to the analysis of this group of experts, Vietnam's economy is still in a declining trend and lacks motivation to overcome that trend.

The reason cited by Dr. Trung Thanh is that growth in 2015 was high but the average rate for the entire five years was only 5.8%, lower than the average of 2006-2010 and far below 7.61% of the pre-crisis period of 2000-2006.

Dr. Trung Thanh said that the 2015 GDP growth rate was highest in five years but the quality of growth was still low. A clear evidence for that was that Vietnam’s labor productivity was lagging far behind other countries in the region. He cited data showing that the added industrial value per worker (GDP per worker) of Vietnam is just half of the Philippines and a quarter of China.

Dr. Ngo Thang Loi and Dr. Tran Thi Van Hoa (National Economics University) argued that economic growth was not yet of a high quality as the economy still relies on processing.

"The trend of processing is common in industry but also spreads to agriculture. In agricultural production, now there is the trend of processing and importing fertilizers, pesticides, seeds, livestock and others," they said.

In addition, the growth structure is unreasonable as growth is mainly in industry and construction materials and tends to fall in the service sector; growth in the FDI sector increased rapidly while it was too low in the domestic sector.

Experts also discussed the dependence of the Vietnamese economy on China. According to Dr. Trung Thanh, even when Vietnam “escapes” from that dependence, Vietnam's economy will be still dependent on another country, probably South Korea or any other country because the economic structure relies on FDI businesses.

The contribution of FDI to the economy is huge, accounting for 18% of the output of the entire economy, but this group mainly focuses on the processing sector, not positively contributing to technology improvement. Currently, only 5-6% of FDI firms use high-tech in Vietnam. The majority (80%) still use the average technology. This sector creates only around 5% jobs for the economy.

Analysis of the experts from the National Economics University showed that import trends from China and South Korea will continue, not only because Vietnam’s input materials depend largely from these countries. Indeed, Vietnam is participating in the global value chain, but only contributes to the last position in that chain.

The strategy called "China +1" or "Thailand +1" are being pursued by many multinational corporations to find a place outside these countries to base their factories to avoid the increasing labor costs in China. Also, the location is still close enough to export back to China or Thailand. With this criterion, Vietnam is the top choice.

"But Vietnam is only engaged in a specific stage, the end of this production chain - assembling imported parts and lack of participation of local businesses," said Dr. Trung Thanh.

At the seminar, experts recommended that the Government should have a mechanism to attract small- and medium-sized businesses from Japan, Taiwan, South Korea, and other countries to invest in supporting industries instead of focusing on luring capital from multinational corporations.

VNE