Opportunities, motivation for the economy in 2019

2018 is the second consecutive year that the country has completed and exceeded all socio-economic development targets set for the entire year. The domestic economy witnessed the most positive and comprehensive changes, which will continue to create motivation for further development in 2019 and the subsequent years.

Vietnam recorded an economic growth of 7.08% in 2018, the highest level over the past 10 years. (illustrative image)
Vietnam recorded an economic growth of 7.08% in 2018, the highest level over the past 10 years. (illustrative image)

Vietnam recorded economic growth of 7.08% in 2018, the highest level over the past 10 years, surpassing the most optimistic forecasts. Furthermore, the country also achieved its highest ever macroeconomic indicators, including the total export turnover (US$245 billion), trade surplus (US$7.2 billion), foreign exchange reserves (over US$60 billion), the number of international tourists (more than 15.5 million), number of newly registered firms and firms resuming operation (more than 160,000).

The total IPO (Initial Public Offering) value on the Vietnamese stock market also led Southeastern Asia and surpassed the Singaporean market. In addition, inflation was curbed at 3.54%, while non-performing loans and public debts continued to decrease.

Vietnam also approved the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and has become a member of the United Nations' Commission on International Trade Law for the first time. As many as 71 countries have recognised Vietnam as a market economy. In 2018, losses caused by natural disasters also decreased by 50% compared to the previous year.

In particular, Vietnam’s Getting Electricity indicator reached 87.94 points, the highest level so far, to rank 27th among 190 countries in the World Bank’s Doing Business report in 2018, up 37 places compared to the ranking in 2017. Vietnam’s electricity sector also ranked 2nd in the ASEAN region in terms of procedures and time required to connect to the national grid. The Electricity of Vietnam (EVN) was also selected in the list of top 100 sustainable enterprises in 2018 by the Vietnam Business Council for Sustainable Development and it was assessed as one of the leading state-owned enterprises in information transparency.

Vietnam was classified as an outperforming emerging economy together with 17 others among 71 major emerging economies worldwide, according to a McKinsey Global Institute report released at the World Economic Forum on ASEAN (WEF ASEAN) in Hanoi on September 12, 2018.

In addition, according to the World Bank’s latest Doing Business report, Vietnam, alongside Indonesia,is leading countries in ASEAN in carrying out reforms during the past year. Vietnam also made improvements in the areas of enforcing contracts, paying taxes and starting a business, among others.

Thanks to improvements to the investment environment, competitiveness, in addition to the effective coordination between management agencies, the application of high technology, and the compliance with technical procedures and quality control, Vietnam's export structure has become more solid and diverse. For example, in 2018, Vietnam reported 36 types of products with export turnover of over US$1 billion each. The proportion of high-value manufactured products such as telephones, computers, cameras, electronics and components accounts for roughly 35% of Vietnam’s export turnover compared to 5% in 2010.

Vietnam's rice export prices surpassed Thailand for the first time in 2018, with an average price of over US$500 per tonne, up 15% compared to 2017. Vietnam's US$10 billion pig breeding industry (ranked sixth in the world) is also reviving after only one year, helping hundreds of thousands of farming households to escape losses and debts.

Thanks to the improvements of the investment environment, the proportion and role of the private sector has also increased, becoming an increasingly important driver of the economy and accounting for the largest proportion of total social investment in 2018.

With a breakthrough in thinking and institutionalisation, Vietnam is facing the threshold of big changes and is likely to achieve high economic growth aligned with macro stability in 2019. However, Prime Minister Nguyen Xuan Phuc has reminded ministries and localities to "never rest on their laurels" and they should be alert and cautious tochallenges, including budget deficit and public debt, non-performing loans, trade deficit, risk of prolonged drought, saline intrusion, typhoons and floods; violations of the environment and food safety, traffic accidents, trade frauds, and others.

In particular, amid the wave of the Industry 4.0, Vietnam is encountering the trend of gradually losing the advantage of cheap labour costs and the decline of some traditional industries (mining), in addition to the increasing pressure of unemployment after age 35 (particularly in textiles, garments and footwear industries). According to the General Statistics Office, Vietnam's labour productivity is currently only equal to 4.4% of Singapore and 17.4% of Malaysia, while the average wage growth rate is exceeding the growth rate of labour productivity.

In 2018, ministries and sectors cut 6,776 out of 9,956 administrative procedures related to the specialised inspection of import-export goods and truncated 3,346 out of 6,191 conditions on business, which helped to save over 17.5 million working days and over VND6,279 billion (US$269.99 million) for businesses. However, the Prime Minister has urged for the acceleration of reducing administrative procedures to further facilitate enterprises.

More action should be done to seize opportunities and fuel economic development in 2019 including improving economic institution, enhancing the investment environment, promoting start-ups, boosting innovation capacity, increasing the application of information technology to production, expanding the export market, and maintaining political security and social order, among others. Meanwhile, the Government needs to make every effort to fight against corruption, build a contingent of qualified officials and attach importance to attracting talents to consolidate the trust of the people and businesses.

Vietnam should undertake more effort to renew itsinstitutions and promote innovation to take advantage of opportunities and overcome challenges in 2019 towards the goal of a growing economy and a prosperous and democratic country.