WB support for Vietnam to develop economy and society

The World Bank (WB) has been helping Vietnam build a strategy to develop the economy and the society in the next 10 years. So what is WB really supporting in Vietnam and what is the core of this strategy? SGGP Investment & Finance had a discussion with OUSMANE DIONE, Country Director of WB in Vietnam, to further understand this issue.

Vietnam must pay attention to environmental issues.

Vietnam must pay attention to environmental issues.

JOURNALIST: - What is the content of this strategy?

Mr. OUSMANE DIONE: - The first thing is transformation. It is very important to transform the State Owned Enterprises (SOEs) to increase competitiveness. However, there is one thing that I want to clarify is that most people think that transformation of SOEs must be linked with privatization. It is not that way. The key thing is how we can make SOEs use modern management methods in operations to achieve sustainable growth.

There are many successful SOEs in this world without privatization. However, to get this achievement, these enterprises have to operate the way that private enterprises do. This is the key difference. They know how to use the company resources reasonably, apply new methods and technologies in financial and operating management. These SOEs even do transformation, creation and innovation.

Hence, the strategy to develop the economy in coming times is very important, especially as now Vietnam is out of list of low income countries. Vietnam now is a country with average income, it means that old challenges are long over, but Vietnam is facing many new barriers.

Vietnam has to review the economic platform to see what it should keep, what it needs more, and what it has to improve. One of the key issues that Vietnam needs to focus on when doing the transformation is the environment. If the changes impact the environment, the results will be unpredictable and costly.

- Could you please give more details?

- For example, according to our study, the environment pollution may impact GDP growth of Vietnam from 2.5% to 3%. The first issue that a person who moves to a big city with his family to work will care about is the environment and how it will impact his living standard.

Some big cities of Vietnam like Ha Noi and Ho Chi Minh City are losing their attractiveness because of environment pollution. To resolve this problem, Vietnam needs to move to use recycle energy like solar power, wind power or natural gas.

- The other hot issue is the ongoing US-China trade war. Most experts think that Vietnam is the beneficiary of this trade war. What is your point of view?

- In my opinion, in the short term, the impact of the trade war on Vietnam’s economy is positive as several enterprises from China are moving to Vietnam. The trade war has also helped increase exports of some products in Vietnam. However, it is for the short term only.

Vietnam’s economy is widely opened by signing many free trade agreements (FTA) like CPTPP, EVFTA. These FTAs are drivers and motivation for Vietnam to further develop international trade.

According to Ousmane Dione, Vietnam’s economy is ready to transform quickly and significantly to speed up the growth and complete assigned targets.
However, the issue that Vietnam needs to take care about is the rising of protectionism and the escalation of the US-China trade war. Vietnam should update and analyze to know what sectors will be most sensitive, and what Vietnam should do to support these sectors. Vietnam should be well prepared when one market is closed and it must be ready to find another market to replace.

The current situation is not so serious but it does not mean Vietnam need not do anything. The future will be different. I hope that Vietnam will always keep eyes open and be more flexible in responses to continuous changes in the current complicated world economy.

- Vietnam and EU have signed the FTA with many opportunities opening for Vietnam. However, the question is what Vietnam should do to utilize all these opportunities. Do you have any advice?

- Signing FTA with EU is a big event for Vietnam. This is very important as now is the time when most people are talking about protectionism, internal focus rather than external expansion. The FTA signing shows that Vietnam is more open and appreciates the benefits of international trade.

The opportunities here in Vietnam will be an increase of various business partners, more markets to export, and wider differentiation for Vietnam in attracting foreign investments. However, the EVFTA also brings Vietnam many challenges like origin of products. This is a good chance for Vietnam to learn about international trade practices to further adapt to coming changes.

Currently, Vietnam has a plentiful labor resource which is at the golden age for working. After this period, the population will be aging, even aging quickly. The new generation has much knowledge and will benefit from the opening. This is a positive thing of EVFTA and is the motivation for Vietnam to grow further.

- However, in ASEAN, Singapore has also signed the FTA with EU?

- Vietnam is the second country, after Singapore, to sign FTA with EU. Competing with Singapore is Vietnam’s pride. At a certain level, it reveals the competitiveness of Asia- Pacific region as well as Vietnam in exports and imports.

However, this also brings Vietnam many competitive challenges in coming times. It will be a big problem for big corporations as they have already applied international standards and practices, hence, they are able to compete. The key issue of Vietnam is how will it screen and choose the core sectors and core enterprises to further develop and create added value.

For small companies the size and the ability is not developed, and Vietnam should go along with them, help them apply technology, encourage them in creation and innovation, or let them integrate with FDI companies to learn and improve further.

- Thank you very much.

Ha Linh

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