Brian Jeffrey
The Vietnamese Minister of Planning and Investment, Nguyen Chi Dung, has announced a significant goal: Vietnam aims to achieve an average annual economic growth rate exceeding 10% for the next 20 years, with the vision of becoming a high-income country by 2045.
This target for sustained double-digit growth is certainly ambitious. However, clear strategies or plans to realize this aspiration remain unspecified.
Currently, the Ministry of Planning and Investment (MPI) has yet to provide a comprehensive plan, especially with the impending merger of MPI and the Ministry of Finance.
No country has successfully maintained double-digit growth over a continuous 20-year period globally.
Historical examples of rapid economic expansion show shorter spans of high growth.
For instance, South Korea achieved an average GDP growth of 9.58% from 1960 to 1990, surpassing 10% for 14 years and hitting a peak of 14.8% in 1973.
China recorded an average growth of 10.02% during its 30 years of reform from 1977 to 2007, exceeding 10% for 15 years and recording a high of 15.14% in 1984.
Vietnam’s growth trends indicate a decline, with an average growth of 7.56% from 1991 to 2000, dropping to 7.26% from 2001 to 2010, and further down to 5.95% from 2011 to 2020, as reported by the General Statistics Office (GSO).
The current growth target set by the 13th National Congress for 2021–2025 is only 6.5–7% annually, falling short of the ambitious double-digit goal.
Since the economic reforms known as Đổi Mới, Vietnam has struggled to achieve 10% annual growth consistently.
Aiming for over 10% growth for two decades highlights Vietnam’s urgency in closing the development gap with other nations, despite the significant challenges faced both domestically and globally.
Traditionally, Vietnam’s economic growth has relied on a combination of exports, investments, and consumption.
1. Consumption: In the first 11 months of 2024, inflation-adjusted consumption growth was only 5.8%, approximately half the pre-pandemic rate.
2. Investment: Public sector investment faced delays, with only 73.5% of the allocated budget utilized in the first 11 months of 2024, while private investment rose modestly by 7.1% over the first nine months.
3. Exports: In 2024, exports grew significantly, with a 24.2% increase in shipments to the U.S. and a 16.4% rise to the EU. However, much of this was compensating for substantial declines from the previous year.
As the third-largest exporter to the U.S., Vietnam faces questions about the sustainability of this growth in a competitive landscape.
The combined challenges indicate potential difficulties for the “three-horse chariot” needed to maintain a 10% growth rate over an extended period.
Minister Nguyen Chi Dung stressed the importance of private enterprises in fostering long-term economic development.
Currently, private businesses contribute over 50% to GDP, significantly outperforming the state (20.54%) and foreign sectors (20.45%).
They are responsible for 82.1% of employment, contrasting with 7.9% in the state sector and 10% in foreign-invested companies.
However, the growth of private enterprises has been limited, with Vietnam having 930,000 officially registered businesses for a population of over 100 million.
The combined assets of the country’s leading private firms amount to around USD 70 billion, equivalent to those of a single large Indian corporation such as Infosys, highlighting a lack of development in the private sector.
To unlock the potential of the private sector, policy and governance reforms are crucial.
General Secretary To Lam and Prime Minister Pham Minh Chinh have called for a change in governance philosophy:
“If it cannot be managed, do not ban it. Citizens and businesses should have the freedom to engage in any activity not explicitly prohibited by law.”
Key reforms should include dismantling legal barriers, preventing the criminalization of economic disagreements, and decreasing the number of administrative inspections during economic hardships.
Moreover, the government must redefine its relationship with the market to enhance business opportunities and stimulate innovation.
Comprehensive reforms focused on empowering private enterprises will be vital for Vietnam’s ambition of sustained high growth rates.
While the goal of exceeding 10% annual growth for 20 years is indeed ambitious, fostering private enterprise, encouraging innovation, and addressing structural challenges will be pivotal in achieving the high-income target by 2045.
