Vietnam economy could grow 6% in 2024 as exports, manufacturing improve: UOB exec

What are your expectations of Vietnam's economic prospects this year?

This year, we have set our Vietnam GDP growth forecast at 6%. This should be doable because exports and the manufacturing sector should improve, and lower interest rates will help. The State Bank of Vietnam (SBV) is also supporting the economy.

China's economy should stabilize so demand will return and more outbound tourists are expected. Last year, Vietnam welcomed 12.6 million tourists, still lower than the peak in 2019 of 18 million. Looking at 2022, for many countries including Thailand, Singapore, Indonesia, and Malaysia, the number of Chinese tourists reached only about 5-36% of pre-Covid levels. So I think it's on the right track towards pre-Covid levels, with China acting as one of the key sources.

For 2024, I think growth of 6% is doable, versus the National Assembly's target of 6-6.5%. Next year, it should exceed 6%. The figures are not high, as the country's GDP growth was 7-8% before the Covid-19 pandemic.

What are your recommendations for Vietnam to sustain and further improve its economy?

For Vietnam, exports are very dependent on tax. As Vietnam's biggest export market is the U.S., falling demand in the powerhouse will hit Vietnam directly. One way to handle this is to diversify our export markets and products.

Vietnam has signed many free trade agreements (FTA). All companies will have to move and explore new markets, sometimes with the help of the government. For example, in Singapore, help is available with the Trade Development Board. This agency has offices in different parts of the world to help promote Singapore and look for opportunities to support companies.

The government can also support its core industries (such as phones, electronic goods, textiles, garments) by pushing research & development (R&D) innovation and productivity.

In November, the Vietnamese parliament passed a resolution on the global minimum tax (GMT) which will become effective on January 1, 2024. Tax payments per the scheme will be applied from fiscal year 2025. What are the impacts on Vietnam and your recommendations?

Developing countries use tax incentives to attract firms to set up businesses. But under the Global Minimum Tax scheme, you have to charge a minimum amount of tax to these companies, especially multinational firms. We should help businesses in order to sustain foreign investment attraction.

As authorities will gain additional tax revenue, some should be allocated to help businesses. For Vietnam, the focus you need to start thinking about and what the government is already thinking about is Industry 4.0, such as automation, big data analysis, and artificial intelligence (AI). What will happen to the workers? If I adopt automation, my workers will lose their jobs, right? So it's important for the education and training sector ensure the appropriate skills are being taught.

We always use this term, upskill. It's not just upskill, it's to reskill. That is the focus that the government has to think about in its education policy.

For example, right now factories find it difficult to recruit workers despite the big labor force because the education system is missing its target. Too many students go to universities. After graduation, they don't want to go to factories to work. But there are not enough other jobs for them and at the same time, factories still do not have enough workers.

You would want to make sure that part of the education system is able to establish technical (vocational) schools to supply factories. For example, Singapore learns from the German system with technical schools. You need technical schools to support the manufacturing industry. Universities can offer support, but in a different way, so the education system must be structured properly.