Institutional innovation is the driving force for economic growth

Your Excellencies, what are the implications of the results of economic development in 2017 and the early months of 2018 for the economic growth in 2018 and the following years?

The most outstanding achievement of 2017 was that for the first time in many years we have completed all socio-economic targets assigned by the National Assembly. This was the most important achievement, creating a favorable momentum to fulfill the tasks and objectives of the 2018 Plan, the 5-year Plan of 2016-2020 and the 10-year Strategy of 2011-2020.

Following the development of 2017, the results of socio-economic development in the first months of 2018 were very positive. GDP growth was 7.38% - the highest level in the first quarter of 10 years. The macroeconomics continued to be stable, inflation was under control. The FDI disbursements were estimated at 5.1 billion USD, up 6.3%. The number of newly established enterprises reached over 41.2 thousand with the registered capital of about 412 trillion VND. The total export value was estimated at 73.76 billion USD, up 19%; and the trade surplus was estimated at 3.39 billion USD...

These are encouraging signs, especially in the domestic and international context that contains many favorable factors, creating positive impact on the economy. Vietnam’s economy has been integrating more and more deeply. Along with that, many policies of reform and innovation in the country continue to promote their efficiency; business environment and domestic demand continue to improve; positive impacts from FTAs, CPTPP agreement,… There are a number of reasons why we can fully believe in the prospects of Vietnam’s economy in the last months of 2018 and the years ahead. However, we all know that to achieve our goals and expectations there is a lot of work to be done to keep up the momentum for growth, not just for 2018 but for the next few years.

What are the important tasks the Government has been implementing to realize the drivers of economic growth in 2018 as well as the last two years of the 2016-2020 cycle?

The most important task is institutional reform, which is seen as a fundamental driving force for economic growth. It is both the need for innovation in the context of rapid change and a mandatory requirement for development.

There have seen many positive changes in the institutional reform process. Many legal documents on investment and business have been built on the spirit of strong reforms such as: the Law on Planning, Law on Support for Small- and Medium-sized Enterprises, Law on Special Administrative-Economic Units, Law amending and supplementing a number of articles of the Law on Public Investment... creating a strict and favorable legal corridor to promote all advantages for fast and sustainable development.

Typically, the Law on Special Administrative-Economic Units is built with the view to make full use of the country's resources, creating superior and competitive mechanisms with other countries in the world and in the region, creating a new international playground in Vietnam, promoting all economic sectors involved.

This draft law will be considered and approved by the National Assembly at its fifth session, creating a legal basis in time for the formation and development of three special administrative-economic units to become the driving force and growth pole of the whole economy soon. However, these are only the first steps. Looking at the overall institutional reform agenda, we still have a lot of work to do. The task of institutional improvement should continue to accelerate, creating a clear change in growth, forming mechanisms to release development resources. All economic sectors must actively participate in contributing to the reform process.

Institutional reforms need the movement of the whole system to facilitate a favorable business environment for businesses. Photo: S.T.

How are the labor productivity issues being implemented by the Government, sir?

Improving labor productivity is the most important factor in improving the quality of growth and accelerating the reform of the growth model, in which taking advantage of the opportunities of the 4.0 industrial revolution is considered the most effective solution to improve labor productivity, helping Vietnam accelerate the pace and narrow the gap with developed countries. This is a one-on-one chance, if we cannot utilize it, it will take many years to regain this opportunity.

By 2017, Vietnam labor productivity increased by 5.9% compared to 2016 (the average growth rate in the period of 2011-2017 is 4.7%/year). The good news is that labor productivity tends to increase each year. However, we have not been satisfied yet, because Vietnam labor productivity is still very low compared to the region (only 7% in Singapore, 17.6% in Malaysia, 36.5% in Thailand,…).

For this reason, MPI is carrying out the tasks assigned by the Government, which are developing proposals on solutions to promote the growth model, improve the quality of growth, productivity and competitiveness of the economy. At the same time, we are working hard to soon complete the National Strategy about the 4.0 Industrial Revolution with the focus on mobilizing the broad participation of a whole generation of Vietnamese people, who have been very successful in the areas of technology, artificial intelligence, internet of things (IoT)... together with the formation of the most modern technology and innovation centers in the world to support start ups, 4.0 businesses for their development. These are top priority tasks and if we do them successfully, they will be the decisive factor for breakthrough development in the sectors and the whole economy.

In addition to the two tasks above, the development of the private sector combined with the strong linkage between the domestic economic sector and the foreign invested sector is also a problem that the Government has been paying close attention to because the FDI sector is also an important growth driver.

What is the Minister's assessment of the economic outlook for 2018 and by 2020?

In addition to the growth drivers from institutional reform, labor productivity, private sector, there are many other motivational factors to illustrate the positive prospects for Vietnam’s economy in 2018 as well as in the following years, such as infrastructure, high quality human resource development, economic restructuring, etc. The problem is how to exploit these resources quickly and efficiently. The socio-economic situation in the first months of the year was very positive. But this is the first step, the task until the end of the year is very heavy, requiring all of us to make effort, continue implementing fast, drastic and effective tasks and solutions set out, especially in the fields that are directly related to production, business and investment of enterprises and people. Besides the favorable factors, we should not ignore the immediate and long term difficulties and challenges.

In the medium and long term, Vietnam’s economy in the coming years promises both opportunities and challenges. Some forecasts suggest that the average GDP growth of Vietnam in the 2018-2020 period may reach 6.85%, or over 7% in some years. Nevertheless, the Government has always been aware of internal problems as well as external impacts that may affect the development of the Vietnamese economy. The goal that we aim to achieve is a breakthrough, rapid and sustainable growth on the basis of making use of scientific and technological achievements, especially the 4.0 industrial revolution, making Vietnam a modern industrialized country having an advanced market economy with rapid and sustainable development.

Thank you Minister!