Economic falters after spectacular start

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The message was highlighted in the Ministry of Planning and Investment’s report released last week to update its economic performance after five years of World Trade Organization (WTO) membership.

According to the report, the average annual gross domestic product (GDP) growth rate in between 2007-2011, after Vietnam joined the WTO in 2007, sat at 6.5 per cent, lower than the initial target of 7.5-8 per cent, and also lower than the 2002-2006 period’s 7.8 per cent and the 7 per cent level recorded in the 1996-2000 period when the Eastern Asian crisis happened.

“Since mid-2008 the economy growth has slowed down, with an annual average rate of 6.1 per cent in 2008-2011. The rate dropped to 5.89 per cent in 2011 and merely 5.03 per cent last year,” said the report.

Vo Tri Thanh, vice head of the Central Institute for Economic Management, which made the report, noted that: “Vietnam’s economy has declined not only in terms of growth figures, but more seriously, in terms of growth quality.”

Technically, he said the total productivity factor (TPF), one of the tools to measure the economic quality, in the 2007-2011 annually held only 0.4 per cent of the GDP growth, far lower than the annual 2.6 per cent level in 2002-2006.

In 2009 and 2010, the TPF was minus 0.1 and 2 per cent, respectively.

“In the 2007-2011, the GDP’s growth depended largely on capital, which grew at an annual average rate of 4.5 per cent, against 3.5 per cent in the pre-WTO five-year period. Meanwhile, the GDP growth rate in the 2007-2011 period remained lower than in the 2002-2006 period,” Thanh said.

Raymond Mallon, an Australian senior economist supporting the CIEM in producing this report, said Vietnam’s declining economic quality was also due to the country’s low labour productivity, which was $5,900 last year, equal to 13.2 per cent of Japan, 23.3 per cent of Malaysia, 12 per cent of Singapore, 13.3 per cent of South Korea, 46.5 per cent of China, 37 per cent of Thailand and 69.9 per cent of the Philippines.

The World Bank and the Government Inspectorate in 2012 conducted a survey over 2,600 citizens, asking them to identify three most serious issues for Vietnam at present. Some 44 per cent of total responses selected cost of living while 21 per cent chose income and 15 per cent chose jobs.

"There are good reasons to believe that Vietnamese citizens are increasingly worried about the quality of growth and not just its quantity," said Mishra, the lead economist from the World Bank.

The General Statistics Office said Vietnam's macro-achievements, featured by inflation and growth indexes, had worsened in the 2007-2012 period as compared to the 2001-2006 period.

Specifically, the average inflation and growth rates were 12.6 and 6.2 per cent, respectively, in the 2007-2012 period. Previously, the respective rates were 4.9 and 7.6 per cent in the 2001-2006.

The United Nations Development Programme in Vietnam calculated that only 15.2 per cent of Vietnam's total public investment was currently spent on social services and 7.7 per cent on governance, compared to 77.1 per cent for economic growth-related purposes.