Many exaggerations about Vietnam's economy

In the reviews that we often see in the press and even in academic journals, there is a lot of exaggeration, one moment they say Vietnam is a new model, a few months later they say Vietnam's model is a disaster and no longer effective.

Dr. Thomas Jandl of American University said so in an interview with VNA reporter stationed in Washington.

Dr. Thomas Jandl of American University. Photo: VNA

Developing well

Regarding Vietnam's economy, Dr. Thomas Jandl said: In the assessments that we often see in the press and even in academic journals, there is a lot of exaggeration. At one point, they say Vietnam is a new model, but a few months later, they say Vietnam's model is a disaster and no longer effective.

“I always strongly oppose such views because I think that if we look at Vietnam in a long-term process, we will see that Vietnam has been developing very well,” said Dr. Thomas Jandl.

For example, before 1996, 70% of Vietnamese people lived below the poverty line, now this number is only under 20%. The expert affirmed: Vietnam is a success story. Because, if we look at the slowdown in growth from 7% to 5% and say that there is a huge problem, it is not right. But if we say that Vietnam is a miracle model, able to grow 10-15%, it is also not right. Vietnam has done quite well, one could say very well, since Doi Moi.

And it could be even better.

However, Vietnam is currently facing many challenges. These challenges come partly from the impact of the global economy and partly from the fact that Vietnam is having to transform from an agricultural economy to an industrialized economy.

As Vietnam grows to become a middle-income country, it needs a different economic model and therefore it needs to change. But those changes do not mean disaster or that Vietnam is in crisis. 5% growth is good and Vietnam can do better.

According to Dr. Thomas Jandl, the problem for Vietnam is what needs to be done in the long term to maintain the growth rate while being able to transform the economic model from the industrialization stage to the knowledge economy stage. Vietnam is entering or maybe it is in the "middle income trap", which is a problem but not a disaster or crisis. The Vietnamese government needs to solve it in the medium and long term.

“The real urgency is that the Vietnamese government needs to start now and I see the Vietnamese government doing that.”

Need to change growth model

Assessing the Vietnamese Government's efforts to restructure and transform the growth model, Dr. Thomas Jandl said: Most Vietnamese officials I have met understand the importance of restructuring the economy. But restructuring is a very difficult problem, not only in Vietnam but also in the US...

According to Dr. Thomas Jandl, the Vietnamese government has done quite well in maintaining the growth rate of an export-oriented economy. The next challenge is how Vietnam can transition to an economy based on labor productivity instead of a model based on hours worked and investment.

That means Vietnam needs to shift to a more efficient growth model, based on more skilled labor, creating products with higher added value. That is an issue that needs to be addressed in the coming time if Vietnam wants to escape the "middle-income trap".

Accordingly, what the Vietnamese government needs to do is amend the Foreign Investment Law. This law has helped bring many investors to Vietnam but it does not target any type of investor. The Vietnamese government is trying to change this. For example, Intel Corporation has invested in large factories producing high value-added products. What needs to be done immediately while waiting for the TPP is that Vietnam needs to make efforts to attract investors to help upgrade the quality of human resources.

In addition, Vietnam also has the opportunity and is implementing the transfer of labor-intensive industries in Ho Chi Minh City, Binh Duong, Dong Nai... to some neighboring localities with much cheaper land and labor prices. The same can be done for the Hanoi-Hai Phong economic corridor. For example, these factories can be transferred from Binh Duong to Long An, then focus on factories that create products with high added value.

The central government has done this by creating industrial zones. However, local governments can do this too. For example, Ho Chi Minh City is actively working with Long An to move labor-intensive factories to Long An. This is a very meaningful story. It is not about pushing these factories out of Vietnam. Vietnam still has many localities that have room to grow. Many workers want to return to their hometowns to work from industrial zones. This is something that Vietnam can and should really focus on doing.

Forecasting the Vietnamese and world economies in 2015, Dr. Thomas Jandl said that the American Chamber of Commerce (Amcham) said that Vietnam will be the leading supplier of products to the US. This is good news for Vietnam because the US economy is growing quite well and there is no reason to think that it will grow worse than this year. The problem is in Europe. Europe seems to have no common action.

If Europe really goes back into recession, the global economy will be at a disadvantage. However, Vietnam is heavily focused on the US and has a strong ASEAN market plus the East Asian market. This is good for Vietnam. Therefore, the Vietnamese economy in 2015 will be quite good. The global economy will be quite good too.

According to chinhphu.vn/TTXVN