Vice Advice: Unleashing Vietnam's Economic Potential
Development of numerous ventures delayed due to legal complications, obstructing progression.
Hey there! A massive stalemate is slowing down thousands of projects in Vietnam, burning through a staggering VNĐ5.9 quadrillion (US$235 billion) and gobbling up over 347,000 hectares of land. This is according to economists and industry insiders, and it's commanding attention because it's not just rodeo clowns and cotton candy we're frittering away, but Việt Nam's long-term growth ambitions.
Take a gander at the 9th session of the 15th National Assembly—our government dished the sobering news that a whopping 2,200 projects nationwide are on ice, thanks to some serious legal and bureaucratic roadblocks.
Economist Trần Đình Thiên isn't beating around the bush: "We're our own worst enemies. We're passing up golden development opportunities by allowing stacks of cash and vast resources to go to waste."
Avoiding the middle-income trap is crucial for Vietnam, and Thiên reckons it requires a fresh take on economic growth. Unfortunately, we're dealing with weak private investment, slow public investment, and limited FDI in tech chops. The money's monetary circulation rate is a measly 0.55 to 0.65 turns per year—that's painfully slow, dude!
The post-COVID-19 landscape sees domestic demand staying lackluster while exports are dominated by the FDI sector—accounting for 72 to 75 per cent of total export value. Oh, and would you look at that? The number of businesses quitting the market is nearing the number of new ones that are popping up.
Đậu Anh Tuấn, Deputy Secretary General of the Việt Nam Chamber of Commerce and Industry (VCCI), points the finger at institutional obstacles. According to the freshest Provincial Competitiveness Index (PCI) survey, plenty of private firms are wasting time navigating administrative hoops before launching projects.
"Listen up! A road infrastructure company can churn out a highway in six moons, but the red tape can take years. And don't forget about R&D projects—despite getting a thumbs-up, they can still face land procedures hopping up for three years," Tuấn grumbles.
Tuấn also gives a shout-out to Vietnam's enormous 'grey zone' economy. This area's brimming with household businesses that are too often underrepresented in national data and ill-suited to policy frameworks.
So what's the fix? Tuấn advocates strategic policies to weld local enterprises deeper into global supply chains, especially in major markets like the United States. This means plugging in strong commitments from FDI enterprises and ironclad regulations for industries such as chemicals and energy.
According to the Chief Economist at BIDV, Dr Cấn Văn Lực, Vietnam needs to adopt a new investment strategy that focuses on effectiveness and sustainability, not just sheer volume of capital. He suggests juggling three pillars: investment, tech absorption, and innovation, to uptick returns and reduce the need for capital.
"Here's the deal: We gotta make each đồng count. And the only way is to boost the business environment," Lực says. "While the whole world is swinging into bold reforms and groundbreaking fiscal and monetary measures, we're plodding along at a snail's pace."
Unblocking stalled projects should be the number-one priority to jumpstart capital flows and investor confidence.
Dr Thiên emphasizes the necessity for shaking off Vietnam's outdated bureaucratic mindset, which revolves around asking for permission and giving excuses.
"This ain't just about rules, but a cultural shift. Vietnam needs to step out of its comfort zone and adapt to a rapidly changing world," he says.
Associate Professor Dr Lê Bộ Lĩnh, former Vice Chairman of the National Assembly's Committee on Science, Technology and Environment, discusses the absence of a unified national strategy on science and innovation.
"We've got a bunch of scattered strategies on green growth, innovation, AI, and digital transformation. But they're underfunded, and there's no alignment," he says.
He advises Vietnam to adopt a similar focus, with clear priorities and resources, while allowing the market to lead innovation.
"Without market incentives, no amount of public funding will conjure up breakthrough technologies. The government should lay out the direction, but private enterprises have to be the spearhead," Lĩnh says.
Lĩnh also calls for a governance overhaul in science and technology, shifting budget allocation from direct planning to competitive funding through dedicated funds. Education and public science literacy have to improve, and administrative procedures have to be streamlined, including permits for international conferences or visas for foreign experts.
Nguyễn Văn Phúc, a former Vice Chairman of the National Assembly's Economic Committee, raises concerns about urban administrative reforms. Vietnam aims to have around 1,000 urban centers by 2025 and 1,200 by 2030, generating over 80 per cent of national GDP. However, the restructuring of provincial cities and towns into wards could dilute their role as growth engines.
"There's been scant discussion about how these changes will impact development. Without a clear urban core, the whole growth model may require a rethink," Phúc says.
TL;DR Addressing the stagnation of projects calls for a mix of reforms, stretching from streamlining procedures and improving the legal framework to boosting private investment and encouraging innovation. The current challenges constitute an opportunity for Vietnam to break free from outdated norms and adapt to a swiftly-changing world.
Fun Facts:
- Did you know that Vietnam's 'grey zone' economy represents around 20% of the official GDP and accounts for over 70% of total employment?
- Infrastructure bottlenecks are a major drag on economic growth in developing countries, costing them around 4% of GDP annually.
- Vietnam jumped 14 spots in the World Bank's Ease of Doing Business rankings in 2020, from 68th to 54th place. This signifies progress in the country's journey to create a friendlier business environment.
A resettlement area under construction in the southern province of Bà Rịa-Vũng Tàu. -VNA/VNS Photo Hoàng Nhị
Read More:
- Why Vietnam's urban planning reforms are necessary but risky
- Vietnam's Private Sector Tries to Find Its Footing
- Vietnam's Ease of Doing Business Improves: World Bank
- The government's disclosure of over 2,200 stalled projects nationwide highlights the need to unravel the legal and bureaucratic roadblocks that hinder economic growth in Vietnam.
- Dr Cãn Văn Lực, the Chief Economist at BIDV, proposed an investment strategy focused on effectiveness and sustainability, emphasizing the need to boost the business environment for investments to prosper.
- Economist Trân Đình Thiên stressed the importance of a fresh approach to economic growth to help Vietnam avoid the middle-income trap, as the current situation suffers from weak private investment, slow public investment, and limited FDI in tech chops.
- Đậu Anh Tuấn, Deputy Secretary General of the Việt Nam Chamber of Commerce and Industry (VCCI), advocated strategic policies to establish stronger ties with global supply chains, particularly in major markets like the United States, to stimulate the economy.
- Lê Bộ Lĩnh, former Vice Chairman of the National Assembly's Committee on Science, Technology and Environment, called for a unified national strategy on science and innovation, focusing on clear priorities, market incentives, and streamlining administrative procedures for international conferences and visas for foreign experts.
- Nguyễn Văn Phúc, a former Vice Chairman of the National Assembly's Economic Committee, expressed concerns about urban administrative reforms, suggesting a reconsideration of the restructuring of provincial cities and towns into wards to maintain their roles as growth engines.
- Associate Professor Dr Lê Bộ Lĩnh also advocated for governance overhaul in science and technology, recommending a shift in budget allocation from direct planning to competitive funding through dedicated funds, improved public science literacy, and streamlined administrative procedures.
