Strong, constant reform and intergration

President of the Central Institute for Economic Management (CIEM) Dr. Tran Thi Hong Minh.

In the past 10 months of 2022, Vietnam’s economy witnessed incredible growth. How do you assess the country’s economic picture against the backdrop of a volatile global economy?

Vietnam enters 2022 with advantages and disadvantages intertwined. Despite high expectations for a fast recovery with the implementation of the Socio-Economic Development and Recovery Program, Vietnam also faces many difficulties such as high commodity prices or energy and food crises, just like the rest of the world.

Against that backdrop, Vietnam’s economy has overcome difficulties and demonstrated a positive and strong recovery momentum in the first 10 months of 2022. It’s GDP in the first nine months of 2022 increased by 8.83% compared to the same period last year, the highest 9-month-increase recorded in the last 10 years.

Furthermore, exports grew by 16%, trade surplus reached 9.6 billion USD, average CPI only increased by 2.73% over the same period last year.

In the third quarter of this year, Vietnam’s GDP growth rate was significantly higher than other Asian economies, even if the region recorded a relatively dynamic recovery after the Covid-19 pandemic.

More importantly, Vietnam is constantly in the top of Nikkei Asia’s Covid-19 recovery index. This is also an important basis for international organizations and foreign investors to continue to put their faith in the positive recovery prospect of Vietnam's economy in the last months of 2022 and the whole year of 2023.

International organizations such as Moody's, World Bank, International Monetary Fund and Asian Development Bank forecast Vietnam's GDP growth in 2022 at 8.5%, 7.2%, 7%, and 6.5%, respectively. How do you predict GDP growth this year and what factors can help Vietnam achieve this result?

International organizations have the same opinion on the prospect of Vietnamese economy’s solid recovery. According to the World Bank, Vietnam's economic activities have recovered, the economic freedom index is rated positively. The S&P Global Ratings upgraded its long-term sovereign credit rating on Việt Nam to BB+ from BB with a “stable” outlook. This is a remarkable result for Vietnam, especially since international organizations have downgraded the growth prospects of dozens of other countries around the world.

In my opinion, an important part of this achievement is thanks to the Government's implementation of many drastic and synchronous measures to stabilize the macro-economy, control inflation, promote economic and ensure major balances.

However, besides the achievements, Vietnam's economy still has to deal with some difficulties and potential risks. Specifically, pressures of increased inflamation, policies are still not synchronized to meet the requirements of expanding space for new economic activities, effectiveness of coordination among government agencies in the process of economic institutional reform has not up to expectations...

I think, if we make good use of opportunities and effectively handle intertwined challenges, Vietnam can be confident in the recovery of economic growth in 2022 and create a positive foundation for 2023.

According to the Foreign Investment Agency (Ministry of Planning and Investment), in the first 10 months of 2022, the total newly registered capital, adjusted and contributed capital to buy shares, capital contributions from foreign investors reached over 22.46 billion USD. In your opinion, what are the reasons why foreign enterprises choose Vietnam as a "base" for production and business activities?

Besides the achievements in the fight against the COVID-19 pandemic, Vietnam still maintains the long-term foundational elements, such as: the investment and business environment changes rapidly and positively, opportunities from a series of new FTAs such like the CPTPP, EVFTA, EVIPA, etc., and a stable macroeconomic and social fundamentals.

In particular, Vietnam's policy management capacity has been demonstrated through uncertain times such as the US-China trade war and the COVID-19 pandemic. That has contributed to strengthening the image of a Vietnam that is constantly reforming and integrating strongly, creating considerable confidence with foreign investors.

In recent years, Vietnam has shown positive and proactive thinking and determination to foreign investors. The country has also set out orientations to approach investors who are suitable, to have aspirations and capacity to effectively contribute to Vietnam's development process.

Getting through these tough times, we can fully understand the correctness of this policy because foreign investors have actively coordinated with the Vietnamese Government, ministries and branches in work of "vaccine diplomacy", thereby helping to accelerate the vaccination campaign and create the momentum for economic recovery.

In this process, Vietnam also showed its willingness to listen and cooperate. That is what investors especially appreciate.

Samsung Electronics Vietnam factory in Bac Ninh. (Source: VNA)

Beware of risks

Despite achieving positive results, many forecasts say that the fact that countries are competing with each other in attracting FDI also make Vietnam face difficulties in attracting foreign capital flows. What do you think about these forecasts? What difficulties does Vietnam currently face?

The trend of investment shifting has existed in previous years, for example China+1, Thailand+1 strategies. In the context of the US-China trade war and the COVID-19 pandemic, this trend has been accelerated even faster.

Accordingly, the global supply chain is shifting strongly, along with great opportunities to attract foreign investment for other countries in the region, including Vietnam.

The relatively effective response to the COVID-19 pandemic has increased foreign investors' confidence in Vietnam’s business environment. However, Vietnam must not be content with its achievements. It should be noted that Vietnam still faces difficulties and challenges both in terms of institutional capacity, capacity of enterprises and employees, as well as the quality of the infrastructure system.

Competition to attract FDI is inevitable, but if Vietnam relies solely on the approach of giving financial incentives to attract FDI, Vietnam may run the risk of "race to the bottom" with other economies.

So, what solutions and policies does Vietnam need to continue to attract FDI, especially high-quality capital?

Vietnam needs nothing more than to do better than what it is doing.

On the one hand, we need to continue to consolidate macroeconomic stability, remove difficulties for employees to create an important foundation both in terms of economy and society to support the operation of foreign-invested enterprises.

On the other hand, Vietnam must also focus more on building and perfecting an ecosystem for high-quality FDI inflows. Accordingly, it is necessary to continue to remove legal barriers to investment and business activities. Looking directly at these barriers will be an important premise for Vietnam and foreign investors for a more effective cooperation.

Finally, Vietnam needs to promote stronger recovery and development, associated with disbursement of public investment, development of infrastructure system, and skills training for workers.

We already have great policies and experiences, while investors also expressed interest in Vietnam. The remaining key is the determination to act more methodically and urgently.

Thank you very much!