February 25, 2024

The years 2024 – 2025 play a vital role in the aspiration of Vietnam to transform into a dragon by 2045 / Prof. Nguyen Duc Khuong

Three Bright Points in the First Half of the Term:

At the Vietnam Economic Forum during the mid-term of the 13th Party Congress recently, there was an opinion from experts that economic diplomacy has helped Vietnam attract many global corporations. However, there was also a contrasting view that the presence of these corporations in Vietnam is solely due to political factors. How do you assess this?
Since the reunification of the country in 1975, Vietnam has proactively sought to reestablish diplomatic relations and cooperation with numerous major countries, simultaneously fostering collaborations with new nations. To date, Vietnam has established diplomatic relations with nearly 200 countries, maintaining strategic/comprehensive partnerships with 33 nations, including all major powers, and comprehensive strategic partnerships with India, South Korea, the United States, Russia, Japan, and China. A distinctive feature of Vietnam’s diplomatic strategy is the steadfast pursuit of independence, autonomy, and multilateralization. This has helped the country escape isolation after the war and gradually establish amicable diplomatic relations and economic cooperation through both bilateral and multilateral mechanisms.
Economic and cultural diplomacy balances the impact of economic and political factors globally, providing Vietnam with an opportunity to proactively strategize. It is an invitation for guests to visit, explore collaboration opportunities, and actively propose methods for mutual development. It must be acknowledged that some corporations come to Vietnam because of this openness and the dynamic development opportunities here.
However, these corporations will only truly come and stay when they find all the necessary conditions they require, balancing benefits on multiple aspects. Conversely, attracting foreign investment is part of the overall socioeconomic development and diplomatic relations between Vietnam and the international community. This ensures the long-term and sustainable interests of all parties involved.
Looking back at Vietnam’s economic results during the mid-term of the 13th Party Congress, according to the professor, what are the major bright spots?
Firstly, I think the most notable achievement is that Vietnam has maintained and expanded its export markets and international economic cooperation mechanisms. Bilateral and multilateral free trade agreements such as CPTPP, EVFTA, and UKVFTA are proving effective, opening up significant markets for businesses and increasing Vietnam’s two-way trade with its partners. Thanks to EVFTA, Vietnam has become the EU’s largest trading partner in ASEAN, with bilateral trade reaching $62.24 billion in 2022, a 9.2% increase from 2021.
The second bright spot is that Vietnam has created a new atmosphere and momentum for development in society. Every economic entity aspires to rise and shorten the gap with developed countries. Particularly noteworthy is the entrepreneurial spirit and the increasing presence of innovative and creative enterprises (startups). Vietnam ranks third in the Southeast Asia region in terms of the dynamism of the startup ecosystem.
Thirdly, Vietnam is making significant efforts to transparentize its economy, protecting the rights of citizens and economic entities participating in socio-economic activities. This process may cause some unintended impacts on the market, creating a sense that the market has issues, but I believe it is a necessary step. These weaknesses cannot be allowed to persist indefinitely, as letting them reach a “too big to fail” situation would be too late to intervene, becoming a systemic error with negative effects on the growth trajectory.

Things not to be forgotten when facing opportunities:

After the visits of leaders from developed industrialized countries, there has been much discussion in the media about the opportunities opening up for Vietnam in new, especially high-value sectors such as semiconductors. How do you assess this?
The semiconductor industry is still new and undeveloped in Vietnam, but it is a highly promising sector for the future. Currently, developed countries like the United States or Europe invest heavily in research and development, particularly increasing production capacity for semiconductor components in their leading technology corporations.
Major corporations in Taiwan (China), South Korea, Japan, or the United States all want to find countries with stable political factors, a workforce with high professional qualifications, and the ability to adapt to high technology to relocate their manufacturing bases. Vietnam is being chosen by many countries as a destination for this purpose.
However, becoming a semiconductor or chip production center is just one of the opportunities. We are still in the early stages and will need a lot of effort to seize these opportunities. Besides, there are still many other areas with room for improvement and development. For example, integrating new fields like digital technology, applying AI, big data, and machine learning into business operations. Or in sectors where Vietnam has great potential, advancing up the value chain and building a brand systematically, such as agriculture. With the world’s green transformation trend, it is essential to focus on researching and developing technologies that minimize negative environmental impacts, combat climate change, and help all sectors adapt to climate change.
How can we turn opportunities from both abroad and domestically into benefits for Vietnam?
The number one factor is infrastructure, both physical and soft infrastructure. In the short term, it is crucial to build physical infrastructure to connect ports, docks, roads, and solve transportation, electricity, and water supply issues. These are essential needs for large corporations relocating their production bases. Many investment memoranda have been signed, but if the actual infrastructure conditions are not met, it will create difficulties, and investors may hesitate in making decisions.
Soft infrastructure includes policy support, administrative procedures, investor selection methods, and solutions for developing the auxiliary business support system. This support system determines which components of the value chain Vietnamese businesses and corporations can participate in.
The second extremely important factor is the quality of the labor force and managerial capabilities. Currently, we are lacking both highly skilled engineers, technical workers, and managers with high international management standards. These are the two biggest challenges for transforming potential into opportunities and turning opportunities into success.
Returning to the story of the semiconductor industry, human resources challenges are also similar. To turn the semiconductor industry into one of Vietnam’s key economic sectors in the future, we need to address these human resources challenges early in 2024-2025. We must find ways to leverage internal capabilities, combine with expert exchanges, and international cooperation for self-training instead of relying on the world to help us. Other countries are also facing shortages in resources for education and research.
Looking more broadly, when facing opportunities, we must not forget the story of restructuring the economy, guiding technological innovation, and developing and improving the quality of human resources, incorporating knowledge into the development model.

Shifting Mindsets towards Innovation and Creativity

Promoting innovation has been one of the consistent focuses emphasized by the Government, and it has gradually become evident through major projects and events in recent years.
Vietnam is among the countries concentrating heavily on building a policy environment for the development of innovation. The country shows great interest in cultivating an innovative workforce, supporting businesses in organizing R&D activities, and engaging in various research activities to promote international cooperation at different levels.
In recent years, Vietnam’s innovation index has been maintained in the top 45-47 globally. Considering that Vietnam only began building a culture of innovation in 2017, while many other countries already have a strong foundation and continuous efforts to promote innovation, this ranking is encouraging.
The establishment of the National Innovation Center symbolizes the government’s desire to make innovation a central focus for the country’s socio-economic development strategy in the coming years, promoting the role of knowledge and technology in transforming Vietnam’s growth model.
Beyond being a symbol, to further enhance innovation in the future, what aspects should we focus on?
When discussing innovation, many people may perceive it as something lofty and distant, rather than recognizing that finding new solutions to old problems from a fresh perspective is also a form of innovation.
In reality, innovation operates on various levels. At the basic level, applied innovation reduces costs, directly serving the needs of life and business operations.
The second level involves combining technology and organizational process improvements to enhance efficiency. Businesses and organizations redesign their operational systems to create more efficient and seamless workflows.
The highest level is breakthrough innovation in new technologies (deep tech), surpassing current technical and technological limitations. This requires high-level technological expertise to lead and innovate in new and future technologies. This is a specific challenge for experts and researchers in companies and large corporations like Viettel and FPT, especially in highly specialized areas such as semiconductor chips or artificial intelligence.
It is crucial to understand and delve deep into the reality to make innovation effective. If everyone thinks that innovation means becoming a deep tech company, and we and others cannot do it, where will the motivation for innovation come from?
Another reality is that many companies and corporations have advanced technological ideas but are reluctant to invest heavily with public financial resources. Research and development investments always come with a risk of failure or uncertainty regarding the immediate or future necessity of the developed technology. If there are too strict regulations on research and development results, companies may hesitate to invest public financial resources, fearing it could be seen as wasting state resources.
In the coming years, to promote innovation and research development in businesses and society, appropriate mechanisms must be in place. Overseas, when they invest in research, especially in areas like aerospace, space, missiles, satellites, chips, the results are not always as expected, and breakthroughs are not guaranteed. If it were easy, every country would be like the United States.
Additionally, a focus should be placed on supporting corporations to attract technology talent both domestically and internationally. While there is talent within the country, attracting technology experts from abroad will help Vietnam access new technologies more rapidly.

Net zero and novel challenges to the goal of “transforming into a dragon”

In 2023, Vietnam set ambitious commitments and goals for growth, green transformation, and more. With multiple challenging objectives set simultaneously, what should be considered in investing for the future?
Setting high goals serves as a directional guideline, encouraging the entire political system and economic entities to make concerted efforts, coupled with expectations for breakthroughs. Each economic entity is expected to strive from various perspectives to contribute to the overall economic breakthrough, bridging the gap with other countries in the region. However, it’s crucial to carefully plan resource allocation and necessary conditions to realize these goals. High goals can provide both significant motivation and pressure, especially if not thoroughly calculated for resource allocation and the conditions required to achieve the goals. Goals should be practical, adjusted according to the domestic socio-economic situation, compatible with the allocated resources, and adaptable to political and economic conditions.
Recently, the Prime Minister emphasized the importance of building autonomous mechanisms, ensuring that “the Central government does not replace local authorities.” What should be noted to avoid replacing local authorities while achieving challenging goals?
Localities need to be proactive in executing strategies and policies. They can learn from international experiences regarding decentralized management models and apply them to key economic regions and localities. It’s crucial to distinguish the scope of local, regional, and central government authorities. The central government should oversee comprehensive national economic and social development planning, guiding the development of industries and a common development model for a harmonious and cohesive economic picture.
These are two critical aspects needed for a breakthrough and creating new development spaces. Conducting experiments in specific regions or cities (preferably in a high-growth dynamic region like the Southeast) and then calculating the unique factors of different regions and localities (scale, needs, roles, and responsibilities within the region and the overall national economy) for replication is essential.
What important considerations should be made in the remaining half of the term, from your perspective?
In recent months, the global economy has shown positive signals but remains fragile. Short-term trends suggest that interest rates will remain relatively high, central banks will not use credit expansion extensively to stimulate economic growth due to the lingering risk of inflation, political risks are still significant, and international trade barriers are challenging to control. Many developed countries are still struggling with low growth rates. With these complex factors, the global growth forecast for 2024 is not optimistic, and consumer spending in developed countries may remain low.
Therefore, Vietnam needs to focus on effective management, particularly by stabilizing the banking system, financial markets, and improving export quality. Strong commitments to achieving net-zero emissions by 2050 require finding a model that combines high growth with sustainability to avoid the middle-income trap that many countries have faced.
The middle-income trap occurs when a country with an average income fails to transition to a high-income economy due to diminishing comparative advantages, low investment rates, a static labor market, and high production costs.
In the coming years, Vietnam must pay special attention to effective governance, with a focus on stabilizing the banking system, financial markets, and export quality. Strong commitments to achieving net-zero emissions by 2050 require finding a model that combines high growth with sustainability to avoid the middle-income trap.
2024-2025 is a pivotal period not to be missed for building a launching pad. Vietnam needs to transition its growth model more rapidly, accumulate resources successfully, enhance technological expertise, improve institutional quality, etc., to achieve the goal of becoming a high-income country by 2045. This period is crucial, given the world’s current turbulence, and a smart strategy can help shape Vietnam’s development path more clearly and change its position on the international stage.
Thank you, sir!
Article: Thái Trang – Hoàng Ly
Design: Hương Xuân
Photos: NVCC – Việt Hùng
Source: http://surl.li/qwuih
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