VIETNAM ECONOMIC POLICY FRAMEWORK Development break-throughs based on the Industrial Improving the effectiveness and efficiency of state economic Revolution 4.0 to increase productivity, quality, efficiency management and state capability in enabling development. and competitiveness of the economy. Achieve rapid and sustainable development; soon turn Vietnam into a modern December 2018 industrialized nation. VIETNAM MINISTRY OF PLANNING AND INVESTMENT 2 In order to leverage the achievements of comprehensive economic Renovation during the last over 30 years, based on the foundations of a socialist-oriented, modern and internationally integrated market economy institutions, and opportunities brought about by the Industrial Revolution 4.0, a focus must be placed on implementing economic policies with strong aspiration of reaching higher. The Vietnam Economic Policy conveys a clear message to the business community, international organizations, managers and the entire Vietnamese people about the determination to build a developmental, action-taking and integrity state to continue pushing up the course of reform, improving the business and investment environment, and mobilizing resources for development with an aim to jointly building Viet Nam into a prosperous, harmonious and sustainable nation. Nguyễn Xuân Phúc Prime Minister The Socialist Republic of Vietnam 3 VIETNAM MINISTRY OF PLANNING AND INVESTMENT “PUTTING THE PEOPLE AT THE CENTER OF DEVELOPMENT. GOVERNMENT POLICY SHOULD PROMOTE PEOPLE’S HAPPINESS.” Minister of Vietnam Ministry of Planning and Investment Nguyễn Chí Dũng 4 PART I: THE VISION OF VIETNAM 1 WHERE IS VIETNAM NOW? Vietnam’s GDP size and growth rate Domestic Context Billion USD % 30 years of reform have completely changed 250 12 GDP GROWTH Vietnam’s economic landscape – high 200 10 • 2001-2010: 7.3% economic growth has improved the living 150 8 • 2011-2017: 6 % standards; Vietnam has become a middle- 100 6 4 income country in 2010. 50 2 IN 2017 But considerable amount of work remains 0 0 1990 • Population: 93.7 million 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 to be carried out for Vietnam to become • GDP: USD 223 billion a modern, industrial country; sustaining GDP Size GDP Growth Rate innovative reform mindset is required • Per capita GDP: 2,389 USD (ranked 134/187 to solidify and further advance the past countries and territories) Vietnam’s average productivity growth rate (%) achievements. • Commodity export: USD 214 billion 8 • Commodity import: USD 211 billion 6 • Trained labor force: 21.5% International Context 4 • Unemployment: 2.24% The Industrial Revolution 4.0 has introduced 2 • Human Development Index (HDI): 0.694 rapid changes in the organization and 0 (ranked 116/189 countries and territories) 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 arrangement of productive activities and life • Global Competitiveness Index (GCI): 4.36 everywhere. (ranked 55/137 countries and territories) Poverty rate in Vietnam (%), 1998-2016 A deepening globalization and market • Doing business index (DB): 67.93 (ranked 40 integration process is taking place; the world 68/190 countries and territories) trade order is changing profoundly. 30 • Global Innovation Index (GII): 38.34 (ranked 20 The geo-political developments have become 47/127 countries and territories) 10 more complex and having significant impact on development policies of many countries. 0 1998 2002 2004 2006 2008 2010 2011 2012 2013 2014 2015 2016 2 5 LONG TERM DEVELOPMENT GOALS Average per capita GDP growth during 2016-2035: 6.8% (corresponding By 2035 to an annual GDP growth rate of 7.5%) Upper middle income country, Size (USD billion) and structure of the economy GDP per capita USD 10,000 USD 440 billion USD 290 billion USD 193 billion Economic Social equity Increased 15% prosperity and and inclusion state environmental capacity and sustainability accountability USD 1050 billion USD 670 billion Focus of reform Agriculture 1 2 3 4 5 6 Industry Services Economic Development Improved Environment Promotion Modern modernization of the national economic sustainability of social institutions and private innovation efficiency of and enhanced equity and and effective sector capacity urbanization climate inclusiveness state development and spatial change Per capita GDP (USD) planning resilience 10,000 10,000 8,000 6,500 6,000 4,500 Industrial Revolution 4.0; 4,000 3,000 Modern, integrated, fully-developed 2,000 2,109 market institutions 2015 2020 2025 2030 2035 6 PILLAR 1: Economic Prosperity, PILLAR 2: Social Equity and PILLAR 2: State Capacity and Environmental Sustainability Inclusiveness Accountability Economic modernization and private 1. Ensuring equal opportunities for all, 1. Building the rule-of-law state sector development especially for the disadvantaged groups 2. Modernizing the state administration 1. Strong development of the private sector 2. Evolving the role of the state in public based on the e-government and 2. Reforming state-owned enterprises service provision meritocratic system 3. Leveraging industrial revolution 4.0 and 3. Adaptating social policies to the changing 3. Implementing market-based economic integration for growth population structure policies 4. Promoting the new middle class to reach 4. Enforcing accountability, transparency, Innovation capacity development the common prosperity and public disclosure 4. Putting the enterprise at the center 5. Enabling an innovation-conducive environment Major social changes by 2035 6. Making resources available to mobilize leading experts • The poverty rate will be reduced to 1% • More than half of Vietnam’s population Increased urbanization and spatial will join the global middle income planning efficiency 7. Improving economies of scale and efficiency of urbanization Structure of Vietnam Middle Class 8. Expanding and linking satellite cities to metropolitan urban centers 9. Developing growth centers 10. Ensuring equal access to public services Environment sustainability 11. Restoring and sustaining natural Global Middle Class: >15.00 USD PPP/day resources (land, water, forest, others) Emerging Consumers: 5.50 - 15.00 USD PPP/day 12. Enhancing adaptation to climate change People close to Poverty Lines: 3.10 - 5.50 USD PPP/day Poor: <3.10 USD PPP/day 7 PART II: MID-TERM ECONOMIC POLICIES GROWTH DRIVERS Key economic indicators No. Indicator Unit 2020 2030 1 GDP growth % 6.5 - 7.0 6.5 - 7.5 Lean, effective 2 GDP/capita USD 3,000- 6,000- and efficient Private 3,500 6,500 administration sector 3 Economic development structure Agriculture % 15 <10 Rapid and Industry % 40 40 - 41 sustainable economic Services % 45 49 - 50 growth, improved 4 Manufacutring/ % 20 competitiveness based GDP on the Industrial Revolution4.0 and 5 Annual % 5.8 6.0 - 6.5 market institutions productivity growth 6 Agriculture labor % 40 20 - 25 Modern, / Total labor force synchronized infrastructure 7 Urbanization rate % 38 - 40 40 - 45 Human capital 8 Competitiveness ASEAN 4 development, average innovation 1 8 PRIVATE SECTOR DEVELOPMENT Promotion of Domestic Private Sector SOE Reform FDI Attraction Development 1. Promotion of market-based fair competition 1. Creation of favorable conditions for 1. Removing restrictions to business in all 2. Introduction of good international FDI aiming at economic restructuring, sectors governance in SOEs economic growth, and modernization 2. Protection of property rights, including the 3. Speeding up equitization and effective 2. Focus on high-tech companies taking into use rights of land and intellectual property divestment account the environmental protection aspects 3. Equitable access to resources (capital, land, 4. Effective management of state equity in minerals, labor, etc.) enterprises 3. Encourage the linkage and transfer of technology to domestic enterprises 4. Level playing field 5. Promotion of innovation, technological modernization, and human resource SOE Reform 2016-2020: development • Equitization of 137 SOEs 6. Liberalization of factor markets, especially land, labor and technology markets • The state shall hold 100% share Corporate 7. Promotion of linkages with the FDI sector in only 103 enterprises governance Startup, • Divestment of at least innovation VND 250 trillion Private enterprises • 2020: 1 mil enterprises • 2030: 2 mil enterprises 5 Access to ressources and Private sector contribution to GDP ironment Administra opportunities nv ti le supports • 2020: 50% ve na Institutio refo • 2030: 60%-65% rm Di a s Human resource lo e g, c ris development 3 Enterp Product onsultatio brand development Companions with Enterprises n 2 9 HUMAN RESOURCE DEVELOPMENT AND INNOVATION 1. Reform of the national innovation system, put enterprises at the center Support the national startup and Develop 3 national 2. Promote innovation and business startup innovation ecology until 2025 universities (Hanoi, Da • Support 2,000 startup proposals and Nang, Ho Chi Minh City) to 3. Protect the intellectual property rights, develop the technology market 600 startup firms become the training hubs • Support 100 venture startups to catchup with the IR 4.0 4. Apply the achievements of the Industrial Revolution 4.0, promote smart • Establish the national innovation and production (with a focus on agriculture, start up center tourism, IT); develop smart cities, green 54% population using cities internet, ranked 5th in 5. Implement strategic breakthroughs the EAP region regarding in human resource development, internet connectivity comprehensive reform of the education system, starting with the higher education and vocational training system 6. Prioritize the full employment of the trained labor force 7. Promote green growth, clean energy 55% population use smart phones Energy usage/GDP to reduce 1-1.5% per year in 2011-2020 In 2020 the high-tech and green technology shall contribute 42-45% in GDP 3 10 MODERN AND INTEGRATED INFRASTRUCTURE Break-through in Infrastructure Improved Public Investment Efficiency Development Public investment restructuring plan 1. Introducing international investment 2017-2020, directions until 2025 1. Prioritize key infrastructure projects such as: management practices--project appraisal, North South Highway, High-speed Railway, evaluation, selection • Annual public investment Long Thanh Airport, large ports (Hai Phong, 2. Public investment reform linked with disbursement rate: > 90% Van Phong, Cai Mep - Thi Vai), transport the medium term state budget and debt • Continued public investment system in major cities, key regional reservoirs restructuring management reform 2. Transport connectivity between major 3. Giving funding priority to completion • Public investment average economic hubs, transport nodes, etc. of national targeted programs and allocation: 10-11% GDP 3. Sufficient power supply for production and major projects linked with the economic • Further diversification of investment residential consumption; by 2030 renewable restructuring sources and modalities energy shall account for 10% 4. Encouraging the involvement of other 4. Ensure sufficient water supply for production players in the public service provision and residential consumption; adaptation to climate change, and sea level rise 5. Modern and synchronized urban transport infrastructure; reduction of traffic conges- tion and flooding in major cities 6. Improvement of the national IT infrastructure 4 11 A STREAMLINED, EFFECTIVE, AND EFFICIENT STATE ADMINISTRATION 1. New roles of the State to better support a 2. Full implementation of the ownership of the modern market economy, and economic public and the social organizations integration: 3. Improving transparency and accountability • Clear decentralization of power and 4. A modernised and efficient state administration responsibilities between the central and local levels 5. Promote social mobilization in the public service delivery • Improved coordination and enforcement of policies implementation 6. Adopt special mechanisms for Ha Noi and HCMC • Improved capacity of the state employees and civil servants; introduce a meritocratic 7. Establish special administrative – economic recruitment and compensation system zones) with modern institutional arrangements 12 “ NEW MINDSET, NEW VISION, NEW OPPORTUNITIES “ Big Investment Opportunities High Market Potential 1. Infrastructure projects • 94 million population, fast growing middle 2. Human resource training and high quality class service delivery projects • Regional and global connectivity (16 FTAs 3. Priorities linked with IR 4.0 and multilateral agreements) 4. Hanoi and Ho Chi Minh City; special administrative – economic zones) with modern institutional arrangements Ảnh: gdt.gov.vn 13 Shared Aspiration Economic Prosperity Harmonized Society Sustainable Future The Vietnam Economic Policy Framework is an initiative of the Minister of Planning and Investment to support the implementation of the report Vietnam 2035. It was developed in collaboration with the Australia-Word Bank Group Partnership, Phase 2 (ABP2). MINISTRY OF PLANNING AND INVESTMENT