Vietnamese businesses need to learn to "dance" through storms, said Dr. Vu Tien Loc, a member of the National Assembly’s Economic Committee and president of the Vietnam International Arbitration Center (VIAC).
Many experts say that businesses play an important role as the driving force of development, and labor productivity is the deciding factor for the success or failure of development. What do you think about this view?
Over the past 30 years, Vietnam has told the world a great story of escaping poverty. The formation and development of an increasingly large business force in the economy and the improvement of labor productivity with the shifting of tens of millions of people from rural agricultural areas with low productivity to higher-productivity industry, trade and services sectors are among the most important achievements of the country's reform.
What is the current state of Vietnam’s business and labor productivity in your view?
Currently, both businesses and labor productivity show shortcomings. The private business sector, after a period of booming development, is weakening. Vietnam’s labor productivity improvements are very slow compared to the world and the region, and lag behind many other countries.
In the new stage of development, whether we become rich or not, once again the keywords of “businesses” and “labor productivity” must be emphasized. So I think making breakthroughs in these two areas is very important, in order to hit the critical point of the economy.
Regarding demand, Vietnam's economy is a three-horse carriage driven by three growth drivers: export, investment and consumption. Over the past 30 years, the country’s economic growth has achieved positive results based on these main driving forces. But now all of them are weakening as the world economy and market are slowing down.
Both the Government and the National Assembly are making great efforts, with unprecedented decisive policies, to maintain these driving forces, but we are still facing a sea of difficulties and challenges. The growth target set by the National Assembly and the Government is extremely challenging. And what we need to do now is not just to restore and maintain these growth drivers in the old structure, but to upgrade them plus promoting innovation, digital transformation, green transition, and more effective engagement in the global supply chain.
Obviously, the road ahead is extremely rough. This global economic crisis does not only come from economic and financial issues, but is the integrated and synergistic impact of many factors: climate change, epidemics, and geopolitical and geo-economic conflicts, wars and even science and technology that lead to the need for restructuring supply chains and not re-establishing a new equilibrium in a few years like in previous major crises. So it is completely grounded when people mention a decade of loss, not just a few years, of the world economy. And the world economy will not see a V-shaped recovery or a normal U-shaped recovery, but the letter U with a very long bottom.
In that context, does the Vietnamese economy also have many new opportunities?
In the process of shifting supply chains by transnational corporations, we boast many advantages such as geopolitical and geo-economic position, and a flexible foreign economic policy that enables Vietnam to befriend the rest of the world.
We are a medium-sized economy, with the levels of development and technology complementary with major powers. This is also an advantage. For a long time we have been talking about the advantages of small- and medium-sized enterprises, but there have not been many studies on the advantages of medium-sized economies: big enough to be effective and small enough to not compete for dominance, with no risks to harm others.
When it comes to improving endogenous capacity and enhancing self-reliance, are multilateralization, diversification, and making friends with other countries, including major powers, an important direction?
It is clearly important because it contributes to improving competitiveness, and ensuring the sovereignty and economic security of the country. In my opinion, endogenous capacity also features an effective symbiotic capacity between the private sector and FDI enterprises from countries around the world. Playing with giants, through symbiotic cooperation, our businesses have grown and matured. But currently this symbiotic capacity is very weak. FDI enterprises, basically, are still oases in the Vietnamese economy, with loose relationships with local peers.
Another endogenous capacity that I think is important is the public-private partnership (PPP) model. PPPs are formed not only in infrastructure development and socio-economic projects, but also in the development of industries, especially the core industries related to the country's self-reliance, self-resilience, and national security. The current powerful semiconductor industry of the U.S. is the product of the PPP program between the government and the private sector.
Vietnam needs to implement such programs, and the Government will submit to the National Assembly the draft Industrial Development Law for consideration. With state support, Vietnamese major private enterprises will do many things.
Many experts believe that to have strong businesses and a strong private sector, making breakthroughs in institutional reform is extremely important. What do you think about this?
It is right. To have strong businesses and a strong private sector, making breakthroughs in institutional reform is very important. 70% of real estate projects encountering legal difficulties signals that the institutional environment and institutional enforcement show shortcomings that need special attention from the National Assembly and the Government.
Businesses are feeling insecure because the business and development environments have many potential risks. Particularly, the Government should pay attention to institutions paving the way for the digital economy, green economy, energy transition and new business models. Regarding labor productivity, it is necessary to have a national program on raising productivity associated with a national program on improving the quality of human resources and upgrading Vietnamese enterprises. We have nearly 900,000 enterprises, 5.2 million business households and more than 6 million business entities, but quality is problematic. We should heed Japan's experience in this field.
Regarding digital transformation, green transition, and energy transition, projects in this field are large-scale projects with the potential to attract private investment, FDI and public-private partnerships. But more importantly, the development of these projects will pave the way for transparent, green, and environmentally friendly investment capital flows that characterize international investment and trade capital flows in the new era. Therefore, they need to be treated as pioneering projects to upgrade the quality of Vietnam’s growth on all three pillars of export, investment and consumption.
The world economy is facing many difficulties and will continue to struggle, but we have many great opportunities in the global transition process and especially we still have a lot of room for institutional reform. Institutions stimulate new driving forces and growth for the digital economy, green economy, and energy transition. Continued innovation and reform to strengthen public-private partnerships, and effective cooperation and symbiosis with FDI enterprises in global supply chains will open up breakthrough opportunities for Vietnam's development in the coming years.
The world will still have to go through months and years of unpredictable changes. The global economy will be like a ship on the ocean without a predetermined itinerary. Therefore, improving endogenous capacity and resilience will be the core for each economy in these stormy times. If in politics, we have the “bamboo diplomacy” (a flexible and steadfast foreign policy which is resilient and determined but not rigid), in the market, our businesses also need to learn to "dance" to weather storms. I think it cannot be otherwise.
* Dr. Vu Tien Loc used to be president of the Vietnam Chamber of Commerce and Industry.