The idea for an in-depth study of Vietnam’s competitiveness emerged from a meeting between Prime Minister Nguyen Tan Dung and Professor Michael E. Porter in Hanoi in late 2008. Professor Porter had been impressed by the high growth and significant reduction in poverty in Vietnam, but was concerned that Vietnam’s position in many international rankings of competitiveness had remained stagnant.
In 2009, Deputy Prime Minister Hoang Trung Hai asked Vietnam’s Central Institute for Economic Management (CIEM) and the Singapore-based Asia Competitiveness Institute (ACI) to develop the first ever National Competitiveness Report for Vietnam. The Report contains a broad assessment of Vietnam’s current competitiveness, an analysis of the key challenges and opportunities ahead, and a proposal for an economic strategy to enable Vietnam to reach a higher level of sustainable growth.
Summary and Conclusion
Vietnam’s growth since the mid-1980s has been driven by transition and structural change. Transition has transformed the governance of the economy from plan to market, opening up Vietnam for integration with the global economy. Structural change has transformed the composition of the economy, moving millions from subsistence agriculture into capital-intensive manufacturing and services. Both of these changes have enabled underlying competitiveness, essentially the presence of low cost labor, to be revealed. Growth has been fueled by these macroeconomic, “systemic” changes. More recently, the policy response mainly focuses on intensifying investment, especially in SOEs and infrastructure, to generate growth rather than on upgrading productivity and efficiency.
However, the economic logic behind this growth model ultimately has limited potential. The highest level of prosperity that Vietnam can reach given this approach is defined by the level of productivity unskilled workers can reach in manufacturing. If Vietnam is not able to move beyond this model, it will be stuck at lower middle income level, with poorer economies threatening its position. Furthermore, the over-reliance on externally-financed investment as a driver of growth is generating dangerous macro-imbalances which may ignite crises.
It is widely acknowledged that Vietnam needs to move beyond the current economic growth model which is based on low labor cost and intensive capital investment towards productivity and competitiveness as the core of growth. Vietnam’s future growth has to move beyond providing access to and leveraging existing economic fundamentals. It needs to be based on a consistent upgrading of these fundamentals and creating new advantages. This will require changes on both macroeconomic and microeconomic conditions driving productivity. This new vision is a critical perquisite for Vietnam to move up sustainably to the next stage of development.
Main Findings of the Report
The Report is organized in four main chapters:
Chapter 1 provides a background on the methodology;
Chapter 2 looks at economic outcomes as indicators of revealed competitiveness;
Chapter 3 provides the assessment of the competitiveness fundamentals that underpin the observed economic outcomes;
Chapter 4 identifies the three most critical tasks Vietnam is currently facing based on this assessment, and makes concrete action recommendations on how to address them.
Please click these links to download and view the
Vietnam Competitiveness Report, 2010 (Full Report), 124 pp, 6.8 MB pdf
Vietnam Competitiveness Report, 2010 (Executive Summary), 7 pp, 93K pdf
Vietnam Competitiveness Report, 2010 (Presentation), 68 pp, 871K pdf
Development of Vietnam Electronics Cluster, May 2008 (Full Report), 38 pp, 1 MB pdf
Posted: Mar 30, 2011; Updated: Apr 29, 2015.