VN needs long-term strategy: economic expert

VietNamNet Bridge – While Viet Nam has experienced impressive growth over the last two decades, its reforms have been insufficient to move the country to a middle income economy, said a leading expert.

Michael E. Porter. (Photo: www.vinnova.se)

In his presentation at the international seminar entitled Global Competitiveness and Competitive Advantage of Viet Nam held in HCM City yesterday, Michael E. Porter, who is one of the world’s most influential thinkers on management, said Viet Nam’s reforms have been “piecemeal”.

To truly improve its standard of living, the country must adopt a long-term economic strategy, he told some 700 local and foreign participants, including business leaders, Government officials, researchers and policy makers.

Viet Nam boasted a host of competitive advantages, such as political stability, the increased decentralisation of economic policymaking responsibilities, and an acceptable level of debt.

However, he also said that Viet Nam’s lack of openness would retard further competitive upgrading. The country is currently ranked 120th out of 157 nations in the Heritage Foundation’s Index of Economic Freedom, which ranks openness to trade.

Sophistication

“Successful economic development is a process of successive upgrading, in which the business environment improves to enable increasingly sophisticated ways of competing,” Porter said.

He added that the Vietnamese Government largely followed an evolutionary and reactive approach in responding to crises and specific problems, while inflows of foreign aid are fragmented and driven by donor-priorities. “This approach has been successful in achieving success in factor-based economic development, but it will be insufficient to move to a new stage,” he said.

Therefore, said Porter, the Government needed to lead broad-based dis-cussion on a new economic strategy that sets priorities for improvements in the business environment and institutions.

Internally, the Government needed to increase its technical capacity to support such a strategic dialogue, an example being an economic strat-egy unit in the Prime Minister’s office.

This unit should make regular updates on progress and lead a formal planning and programme management process involving all agencies.

The keynote speaker said that State-owned enterprises (SOE) continued to play a dominant role in the Vietnamese economy, despite the commitment to privatisation.

“The costs of slow progress on privatisation are high for Viet Nam’s competitiveness, which will retard entry of new private companies, create risks of corruption and can exacerbate economic volatility through excessive investment financed through soft credit.”

He said an effective privatisation strategy for Viet Nam must shift economic structure, not just change ownership.

“Privatisation must go hand-in-hand with the market opening and policies to curtail anti-competitive practices.”

Viet Nam should also continue existing efforts to reduce corruption, improve infrastructure, deepen financial market reforms and impose regulatory attractiveness while making fundamental reforms in human resource development, reform of SOEs and cluster development.

“Viet Nam needs to target corruption as a crucial barrier for growth and design an integrated strategy to tackle its occurrence.”

Corruption potentially could be reduced through simplified regulations, use of modern information technology, and improved SOE governance and privatisation.

Transparency

The country must also demonstrate a commitment for transparency, including support for a strong press.

He also stated Viet Nam needed to better target infrastructure investments to meet the demands of its growing economy, develop a modern regulatory and institutional structure to enable an effective financial system, and a fundamentally new approach to regulatory reform and assessment of new regulations.

For better infrastructure investment, he said, priorities should be given to establish a national fund for key infrastructure projects to be implemented under the supervision of the Prime Minister’ s office; utilise matching funds incentives to improve the effectiveness of investments by provincial governments; and create a public-private council to advise on spending priorities.

To develop a modern regulatory and institutional structure, Viet Nam should continue opening up its financial markets in line with WTO commitments; create an effective, independent financial regulator; and establish a development bank to develop financing tools for private SMEs.

He said university enrolment rates had increased significantly but quality was low and skills failed to meet company needs.

“Viet Nam needs to dramatically improve educational quality through setting standards, improving curricula, and involving the private sector in governance.”

“[It] also needs a clear programme for cluster-based workforce development given its lack of a skills-training system”, he added.

(Source: Viet Nam News)

Update from: http://english.vietnamnet.vn//reports/2008/12/816496/