Nguyen Dinh Cung, former Director of Central Institute for
Economic Research (CIEM). Photo by VnExpress. 

The Party Congress has set its sights high but the specifics are not sufficient to pressurize stakeholders into further innovation and breakthroughs, an economist says. 

Economic targets set out in the draft document of the 13th Party Congress, which lasted from January 25 to February 1, shows the country’s greater ambitions compared to past Party Congresses, Nguyen Dinh Cung, former Director of Central Institute for Economic Research (CIEM), said.

Under the document, Vietnam targets to overcome its low-middle income status in the next five years, hit high-middle income status by 2030 and to become a developed, high income, socialist-oriented country by 2045.

However, two issues remain, and the first is that specific targets set out in the draft Party Congress documents are not very different compared to previous years, he said.

"For instance, while transforming Vietnam’s economic growth model, from scale to depth, the economic metrics to show improvements in economic efficiency, equity and social welfare must be given," he said.

Instead, the documents include seemingly meaningless metrics such as percentage forest coverage, while goals more related to quality of life such as air pollution and the availability of clean water are absent.

"Objectives should provide a direction for change, and act as a driving force for specific action," he added.

Secondly, Vietnam's specific targets are not big enough to match its ambition to become a high income developed country. The draft documents foresee per capita GDP in the 2021-2025 period reaching $4,700-5,000 a year, and $7,500 by 2030.

But in order to become a developed, high-income country, from 2030, Vietnam must already be among the highest earners in the group of middle-income countries with a per capita GDP of at least $10,000-12,000, which should then hit $15,000-18,000 to enter the next bracket, Cung said.

According to a report submitted to the National Assembly by the government last October, per capita GDP for the third quarter of last year was estimated at $2,750.

"Vietnam’s GDP growth targets are too low, at 6.5-7 percent per year, but in order to achieve the big targets, it needs 7-8 percent per year, and must be able to sustain this high growth over a long time," he said.

Cung said Vietnam has enough economic resources to achieve these goals, and could achieve up to 10 percent GDP growth per year if efficiency is improved.

Moreover, goals need to be high enough to challenge leaders into innovation and lure out good and talented people, he added.

"For instance, social investment accounts for 34 percent of the state budget, but if we increased the efficiency of capital, using the Incremental Capital-Output Ratio (ICOR) model, from 6 to 4 to get a 1-point increase in the index, growth would immediately hit at least 8 percent a year."

ICOR explains the relationship between the level of investment made in the economy and the consequent increase in GDP. The higher the ICOR, the lower the productivity of capital or the marginal efficiency of capital.

Vietnam’s ICOR between 2016 and 2019 was 6.13, slightly better than 6.25 in 2011 – 2015. However, in 2020, the index was 14.28, due to impacts of the Covid-19 pandemic, according to the General Statistics Office.

"That does not even take into account other resources that could be improved, such as ineffective state enterprises, abandoned land, and the private sector. If these resources can be optimized, Vietnam can have 10 years of high speed growth."

As the solution lies in improving the efficiency of capital and resources, piecemeal solutions can be applied to those areas that need attention.

For instance, it has been a complaint for many years that public investment is lengthy and ineffective, so the government should plan things in such a way that instead of having a dozen projects that take a decade to complete. The focus is placed on completing two or three first, to create an immediate economic impact, Cung said.

He said investment targets must be chosen carefully, with priority given to areas that create more value and have more capacity for growth.

The private sector also needs to be further liberalized, and red tape removed to allow for more efficiency, which is a philosophy that should be incorporated by lawmakers.

"We don’t need scheduled legal compliance inspections on private enterprises. If a business violates the interests of others, they can take each other to court. We only need specialized inspections in areas such tax, environment, and antitrust, thereby increasing security for businesses and removing their worry about harassing inspections."

Lastly, Vietnam needs a civil court system that meets international standards, that is independent, and able to rule on matters of international law to help protect businesses, Cung added.

The 13th Party Congress was a nine-day premier political event in which the country selected the Party, State and National Assembly leadership for the next five years, besides finalizing socio-economic development policies for 2021-25 and orientations until 2030 with a vision towards 2045.