Renowned guru urges Vietnam to build new growth model

HANOI – Professor Michael Porter, a leading authority on competitive strategy and international competitiveness, on Tuesday urged Vietnam to build a new economic model centered on higher productivity and the leveraged role of the private sector as the current model will no longer work.

In announcing the National Competitiveness Report for Vietnam co-authored by him and other local and international economists, Porter said Vietnam has gained economic success in the past two decades. But the current economic model pillared by strong State investment, high inflow of foreign funds and cheap labor would not deliver value in the coming years, and changes are imperative now, he said at a seminar in Hanoi.

“Concerns over the sustainability of the current economic model are on the rise,” Porter said, pointing out the low added value in exports coupled with rising local demand and the depreciation of the Vietnamese dong has resulted in a high trade deficit.

Gross domestic product (GDP) growth has been decelerating versus the accelerating investment, thus aggravating Vietnam’s reliance on foreign funds for development.

The think-tanker remarked that the growth success could be maintained for just a couple of years ahead, and right from now, Vietnam has to address emerging challenges by correcting macro-economic imbalances and removing major bottlenecks.

Vietnam will have to seek measures to improve productivity as the core for raising competitiveness, he said.

In the competitiveness report, Porter and his colleagues said that most indicators pointed to low or average rankings in the national competitiveness, from political environment, rule of law and human resource development to macro-economic policies and the business environment.

They highlighted the need to boost productivity alongside development of the private sector, while the Government should seek to build advantages for the economy. They also suggested Vietnam establish the national council for competitiveness management.

For the State economic sector, the report authors suggested the Government build and apply modern governance to advocate market-driven competition while seeking to accelerate the equitization of State-owned enterprises.

The National Competitiveness Report, with Michael Porter as the lead researcher, was conducted by the Central Institute for Economic Management and Asian Institute for Competitiveness.

At the launching of the report on Tuesday, Deputy Prime Minister Hoang Trung Hai appreciated the research, saying “it is released timely when Vietnam is building its economic strategy for the next ten years.” Hai said the Government would seriously consider the researchers’ suggestion on the establishment of the national council for competitiveness management.

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