Efficiency is critical to reach double-digit growth

How do you assess the socioeconomic development of the country this year, and the issues possibly ahead?

Vietnam’s GDP has grown significantly this year. By removing some obstacles, the government is aiming for double-digit growth in the long term. The core solution to this is improving business performance.

Luong Van Khoi, vice president of the Central Institute for Economic Management (CIEM)

In 2024, GDP growth may grow by about 7.04 per cent, matching pre-pandemic levels, and the International Monetary Fund forecast in October that Vietnam’s GDP will top the region. The economy grew evenly across agriculture, forestry, and fisheries; industry and construction; and services. All important targets have been achieved or exceeded the plan.

In terms of existing problems, CIEM highlighted the domestic economic sector has not contributed a large proportion to growth. The leading localities of Ho Chi Minh City, Hanoi, Binh Duong, Dong Nai, and Ba Ria-Vung Tau are gradually reducing their contribution to total GDP because they have utilised their potential, whilst other localities are on the rise.

Business efficiency is critical, and although this has nearly doubled compared to 10 years ago, overall efficiency has not met expectations. For example, the leather, footwear, electronics, and garment industries are key export sectors, but efficiency only reaches about 50 per cent in terms of technical efficiency and efficiency of scale.

The reasons come from internal factors such as human resource quality and management, and external factors such as the business investment environment, shocks in the global market, and Vietnam’s response. If the potential can be unlocked, Vietnam can achieve double-digit growth.

In the internal economy of Vietnam, what will be the drivers for growth next year?

For the Vietnamese economy, drivers for economic growth will depend on inflation remaining under control, economic sectors growing steadily, living standards improving, international tourists numbers rising, and exports and foreign investment remaining bright.

In addition, infrastructure has significantly improved, especially highways to increase inter-regional connectivity, and the 500kV high-voltage line 3 has been put into operation to ensure stable energy, especially in the dry season.

The sharp increase in state budget revenue in 2024 should form the basis for increased public investment spending and implementing development support policies in 2025.

In addition, new policies will create a better institutional framework for economic development, especially new laws issued in 2023 and 2024, such as the Law on Land, Law on Housing, Law on Real Estate Business, and Law on Bidding, which have already taken effect. Institutional development for 2025 will be more favourable thanks to the improvement of institutions that are easier to identify and observe.

In particular, the business sector has recovered and has seen good growth and development. At the same time, digital transformation, innovation, and the application of Industry 4.0 technology among enterprises and the political system will continue in the coming year.

In this, AI has had a great impact. In terms of production and business, AI can predict market trends, improve the customer experience, enhance performance, and optimise supply chains. AI is expected to contribute up to $15.7 trillion to global GDP by 2030.

Countries must catch up with these trends and anticipate the increasing role of AI in consumer decisions. Therefore, using AI is one of the urgent requirements that we must implement. Once it is applied to improve business performance, there is no doubt about double-digit growth rates.

Can you provide some recommendations to accelerate Vietnam’s GDP growth?

Vietnam should continue improving its institutions and policies. All capital sources for development coming from overseas funding, remittances, and saving should be unlocked and utilised properly.

Infrastructure should be developed through public investment in transport infrastructure. In the medium and long term, we should focus on developing irrigation infrastructure and natural disaster prevention because droughts, floods, and landslides are occurring more frequently, and on a larger scale. Moreover, it is necessary to carry out procedures and arrange capital for the construction of the North-South high-speed railway, as well as nuclear power.

Policies to support development should be added to boost production, and business, and call for investment in high-tech, green production, and the circular economy. The government should continue to implement support policies as in previous years, including credit from commercial banks, tax exemption and reduction policies, and tax extension policies, but should narrow down the beneficiaries.

To support businesses looking for new export markets, we should pay more attention amid the rapidly increasing trade defence investigations against Vietnam’s export goods, and support businesses to utilise commitments in free trade deals. We should promote state-level trade promotion and export promotion activities to increasingly expand the list of Vietnamese goods exported, especially with our current major trading partners.

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