Repositioning Vietnam in the context of global change

Attending the online workshop were Assoc. Prof. Dr. Pham Bao Son - Vice Director of VNU Hanoi, Prof. Dr. Andreas Stoffers - Country Director of the Friedrich Naumann Foundation for Freedom (FNF) in Vietnam, Assoc. Prof. Dr. Nguyen Truc Le - Rector of the University of Economics, VNU Hanoi, along with economic experts, policy researchers, scholars and scientists from Vietnam and abroad.

Speaking at the conference, Associate Professor Pham Bao Son emphasized that since 2018, the Vietnam Institute for Economic and Policy Research (VEPR) - School of Economics, Vietnam National University, Hanoi, has been selected as one of the key research centers of Vietnam National University, Hanoi. Vietnam National University, Hanoi acknowledges the academic contributions and policy consultations that the Center has consistently made over the years. The Center has demonstrated its potential and capabilities through the quality of its activities and in-depth scientific research products, and its annual economic report is one of its exemplary products, recognized and highly valued for both its expertise and practical value.

Highly appreciating the role of the Conference, Associate Professor Pham Bao Son stated that the Conference was held in the context of a global recession due to the impact of the COVID-19 pandemic. It can be said that, along with the decline in productivity, economic growth, trade, and global investment in recent years, the COVID-19 shock has cast a gray shadow over the global economic landscape in 2020.

Furthermore, while globalization continues to progress, there are conflicting trends; the Fourth Industrial Revolution presents many new opportunities and challenges; and traditional and non-traditional security issues are increasing in both level and scale.

"The Vietnam Economic Annual Report 2021 delves into an analysis of the Vietnamese economy amidst global economic fluctuations, repositioning Vietnam in the global economy based on an assessment of its comparative advantages and participation in global value chains, as well as the competitiveness of the Vietnamese economy."Associate Professor Pham Bao Son stated.

According to the report, in 2020, global economic growth slowed and became more unpredictable with a sharp decline in global trade and investment; employment and income also fell sharply; commodity markets experienced major shocks and vulnerabilities emerged in financial markets. The pandemic disrupted production and created a trend of reshaping global value chains (GVCs).

This has prompted a series of governments and organizations to introduce strong bailout and stimulus packages to help stabilize the economy. Central banking systems around the world have also stepped in to support governments in the recovery process. However, concerns about a fourth wave of debt have become increasingly apparent.

“The COVID-19 pandemic triggered a severe global recession whose impact is second only to the World Wars and the Great Depression of 1930. Many countries entered the crisis with precarious fiscal positions and limited capacity to implement strong policy responses related to healthcare or livelihood support. Measures such as social distancing, vaccination, and medical treatment helped slow the spread of the virus and save many lives; while also supporting economic growth.”Associate Professor Dr. Nguyen Truc Le stated.

Against this backdrop, the Vietnamese economy concluded a turbulent 2020 with impressive growth results. Vietnam achieved an annual GDP growth rate of 2.91%, making it one of the few economies in the world to experience positive growth. This is a remarkable achievement, especially considering the COVID-19 pandemic was not yet fully under control and the production and consumption sectors were significantly impacted.

Production of goods and provision of services slowed down in all three sectors, with the service sector being the hardest hit, growing at only about one-third of the average of previous years. The number of businesses dissolving or temporarily suspending operations increased rapidly. Labor and employment declined sharply in the non-state enterprise sector. Business and consumer confidence both decreased,…

Professor Andreas Stoffers stated that the 2020 crisis severely impacted the global economy and continued to worsen due to the COVID-19 pandemic. Amidst this global recession, Vietnam was one of the few countries in the world to overcome the crisis and achieve impressive economic growth. Vietnam's economic picture has proven to be appropriate and highly regarded worldwide.

Up until the first half of 2021, Vietnam's economic figures and indicators showed many positive signs compared to other countries in the world.

"In many developing countries, interest rates are lower than inflation, causing people's savings to gradually dwindle. But with sound, appropriate, and flexible economic policies, Vietnam has avoided this."Professor Andreas Stoffers stated...

Professor Andreas Stoffers also warned of unpredictable impacts on the Vietnamese economy as this latest wave of the COVID-19 pandemic is more complex, coupled with a generally bleak global economic and pandemic situation that presents unpredictable uncertainties.

“With the admirable resilience and solidarity of the Vietnamese people in the fight against the COVID-19 pandemic, along with astute and correct economic policies such as: commitments to trade liberalization, digitalization of the economy, opening up to FDI flows, and prudent fiscal and monetary policies, I am very optimistic and believe that Vietnam will overcome this difficult period as it did in 2020 and position itself in a higher position.”Professor Andreas Stoffers said.

According to the report, compared to a year ago when Covid-19 first broke out worldwide, the economic future is less uncertain thanks to experience in responding to the pandemic and the rollout of vaccines in many major countries. However, the global economic outlook still depends on the ability to control the pandemic on a global scale, which is unlikely to happen within the next year.

Vietnam continues to integrate deeply into the international community and is increasingly sensitive to external fluctuations. In particular, 2021 can be considered a pivotal year in a new phase of development for the Vietnamese economy.

The driving force behind Vietnam's economic growth is projected to continue to come from exports and public investment. With foreign direct investment (FDI) continuing to flow into Vietnam (albeit slowing down due to the pandemic), exports from this sector will remain the most important driver of economic growth for many years to come. However, the pace of export growth will depend heavily on the recovery of the global economy and the export of traditional goods that were severely affected last year.

Re-emergence of the pandemic could disrupt many production and consumption activities. Given the results achieved in the first six months of the year and the complex developments of the current pandemic situation, economic recovery depends heavily on: the speed and scale of vaccination; the effectiveness/side effects of disease prevention measures; and domestic support and growth promotion packages. The report forecasts economic growth in 2021 down by 1-1.5 percentage points compared to previous forecasts, while assuming the macroeconomic environment remains stable.

"In this context, Vietnam needs to implement a balanced policy to ensure both the safety and health of its people and the 'health' of its economy."Professor Andreas Stoffers emphasized this point.

The Vietnam Economic Annual Report 2021 offers the following policy recommendations:

In the short term,It is necessary to make concerted efforts to implement measures to control the COVID-19 pandemic, develop domestic vaccines, and leverage strategic relationships to conduct vaccine diplomacy. Priority should be given to ensuring the supply and organizing rapid and effective COVID-19 vaccination for both manufacturing and business enterprises, as well as household businesses heavily impacted by restrictions and social distancing measures across major cities and key economic centers.

Policies to support businesses and people during the pandemic need to be focused, economical, and targeted; public investment should only concentrate on and accelerate key national projects that have already been planned; monetary policy needs to pay special attention to controlling money supply growth and directing credit flows towards the production sector.

In the medium and long term,Vietnam needs to enhance its competitiveness and improve its business environment. In particular, it needs to continue improving the local business environment through the pillars of the Provincial Competitiveness Index (PCI). Vietnam needs to leverage trade and investment to enhance its position internationally in the future. To achieve this, it is necessary to recognize the crucial role of FTAs ​​in improving Vietnam's comparative advantage and added value in the global supply chain (GVC), while simultaneously creating an environment for FTAs ​​to be effective.

The accelerating trends of greening and digitalization are opening up many new opportunities and approaches for most industries. For the electronics and food industries, new opportunities and approaches can be explored, such as developing clean and organic product segments; and new commercial methods for these products (using e-commerce platforms, etc.).

To improve Vietnam's position in the food industry's GVC, focus should be placed on three main pillars: processing (performing specific tasks better), products (creating higher-quality, more complex, or higher-priced products), and functions (acquiring new skills in the value chain that the company has not previously engaged in).