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Policy Dialogue Examines Role of Productivity in Sustaining Viet Nam's Economic Miracle

17 February 2023
EconomicViet Nam

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Ha Noi, 17 February 2023: The Central Institute for Economic Management (CIEM), Viet Nam, and the Economic Research Institute for ASEAN and East Asia (ERIA) hosted a policy dialogue on the topic Sustaining Viet Nam’s Economic Miracle: The Role of Productivity. The event aimed to share the results of an ERIA research project and foster exchange of ideas between ERIA project members and policy staff of the Viet Nam Government. It was attended by international and Vietnamese academics, and policy officials of Viet Nam’s ministries of planning and investment, industry and trade, education and training, and agriculture and rural development.

Dr Tran Thi Hong Minh, President of CIEM, and Prof Fukunari Kimura, Chief Economist of ERIA, delivered welcoming remarks. Dr Tran emphasised the crucial role of productivity growth in Viet Nam and described the government’s aim to increase the contribution of total factor productivity to account for 4.6% of gross domestic product (GDP) to narrow the country’s development gap with the world and increase the competitiveness of Viet Nam’s industries and economy. Prof Kimura elaborated on how the rigorous analytical works and findings of the project can be utilised to provide insights for policymakers in several critical areas related to productivity. Dr Tran welcomed policy recommendations from ERIA on how to improve productivity growth in Viet Nam.

Dr Ian Coxhead, Senior Research Fellow at the Inter-disciplinary Center, Institute of Developing Economies–Japan External Trade Organization, remarked on the overall theme of the project to inform the ensuing discussion by showing that productivity growth has contributed little to GDP growth in Viet Nam and that most of it has come from sector and labour reallocations. He said that for productivity growth to be sustained, more of it should come instead from technological upgrading and improvement in human capital. The policy dialogue discussed several key policy areas where removing barriers to productivity improvement is critical.

Session 1 focused on place-based and state sector policies, touching on several issues such as the extent to which the establishment of industrial zones has generally impacted local job creation and economic growth, and the potential reforms in capital market, privatisation, and a broader policy package to level the playing field between private and state firms. Session 2, on trade and investment, raised issues such as how firms’ participation in global value chain contributes to labour productivity, and how foreign direct investment (FDI) has affected the structure of demand for labour and skills. The discussion touched on the government’s efforts to facilitate the involvement of small- and medium-sized enterprises in global value chains and promoting a more sustainable supply chain.

Acknowledging Viet Nam’s aspiration to achieve an upper-middle-income status within the next decade, participants in session 3, on skills and education, argued that to avoid being too heavily reliant on FDI and foreign firms, Viet Nam will need to match skills with labour market demand. The session called for an upgrade in Viet Nam’s upper-middle-skilled labour force by raising upper-secondary education enrolment and improving post-school training. Session 4 discussed the policy actions in sustainable and organic farming practices needed to improve agricultural productivity. It touched on the ongoing issue of land-use regulations and the need to collect a reliable data set to better evaluate the impact of the agricultural policies.

Dr Nguyen Anh Duong, Director of CIEM’s Department for General Economic Issues and Integration Studies, concluded the event by suggesting continued collaboration between ERIA project members and Vietnamese policymakers to ensure that insights from studies can be successfully translated into practical and concrete policy actions that remove barriers to productivity growth in Viet Nam.

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