What are the main challenges facing Vietnam's economy on the path to sustainable development?

DNHN - Vietnam is facing significant challenges in economic development due to its reliance on resources and cheap labor.

According to Associate Professor Dr. Bùi Quang Tuấn, former Director of the Vietnam Institute of Economics, the country has not yet escaped the extensive growth model, which mainly depends on the exploitation of resources, land, and cheap labor. This is a warning bell about the imbalance in growth drivers and the potential consequences for sustainable development.

Labor productivity has improved but remains relatively low
Labor productivity has improved but remains relatively low.

Dr. Tuấn emphasized that financial and human resources are making significant contributions to GDP, while the contributions of total factor productivity (TFP) and labor have gradually declined. This indicates that capital investment is still the main driver of growth, rather than improvements in productivity and labor quality.

The current growth model carries many risks. Overexploitation of resources can lead to depletion, environmental damage, and weaken the foundation for sustainable development. Dependence on cheap labor makes Vietnam vulnerable to being stuck in low-value-added manufacturing, which hinders efforts to improve income and living standards for the population. A lack of productivity improvement and innovation will result in unsustainable growth that is difficult to maintain over the long term.

To address these limitations, Vietnam needs to transition to a growth model based on productivity and innovation. This requires investment in education and training to improve the quality of human resources, develop skills, and foster creative capacity. It is necessary to encourage innovation by creating a favorable environment for research and development and the application of new technologies. Developing a green economy, transitioning to low-carbon industries, using resources efficiently, and protecting the environment are also important directions. Finally, institutional reforms to improve the business environment, promote healthy competition, and enhance transparency are indispensable.

To reduce reliance on resources and cheap labor, Vietnam needs to implement a series of policy solutions focused on improving productivity, fostering innovation, and promoting sustainable development. First, it is necessary to invest in education and training by enhancing the quality of education, especially in the fields of science, technology, engineering, and mathematics (STEM), while also encouraging vocational training programs to develop skills for the workforce to meet the demands of modern industries. Next, it is important to encourage innovation by creating a conducive environment for research and development (R&D) through financial support and infrastructure for research centers and startups, as well as promoting collaboration between universities, research institutes, and businesses to transfer technology and knowledge.

In addition, developing a green economy is a key factor, with a focus on transitioning to low-carbon industries, using resources efficiently, and protecting the environment, along with promoting the use of renewable energy and environmentally friendly technologies. Institutional reforms and business environment improvements should also be prioritized by reforming legal regulations to create a transparent and competitive business environment, while minimizing administrative procedures and unnecessary costs for businesses. Supporting industries and high-value chains should be promoted by developing supporting industries to enhance localization capabilities and add value in production, along with encouraging businesses to participate in global value chains, particularly in high-tech sectors.

High-quality investment attraction policies need to be implemented to attract foreign investors in high-tech and environmentally friendly fields while ensuring that investment projects bring long-term benefits to the economy and do not harm the environment. By implementing these solutions, Vietnam can build a more sustainable economy, reduce reliance on resources and cheap labor, and enhance its position in the global value chain.

The documents of the 13th Party Congress emphasize: Continuing to accelerate the innovation of the economic growth model, strongly shifting the economy to a growth model based on productivity increases, scientific and technological advancements, innovation, high-quality human resources, and the efficient use of resources to enhance the quality, efficiency, and competitiveness of the economy. The 2021-2030 Socio-Economic Development Strategy sets specific targets: an average GDP growth rate of about 7% per year; GDP per capita at current prices reaching about 7,500 USD by 2030; the proportion of processing and manufacturing industries reaching about 30% of GDP; the digital economy accounting for about 30% of GDP; TFP contribution to growth reaching 50%; and the average social labor productivity growth rate exceeding 6.5% per year.

Tran Tung

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