Leader Talk

WB Country Director: Productivity growth named momentum for economic development

By Thien Huong December 13, 2017 | 11:59 PM GMT+7

Vietnam Development Forum (VDF) held in Hanoi today focused on productivity growth, a key requirement for Vietnam's medium-term development prospects.

Ousmane Dione, the World Bank Country Director for Vietnam.

Giving opening speech at the forum, Ousmane Dione, the World Bank Country Director for Vietnam, praised Vietnam economy's important achievements in 2017.

"In particular, I would like to congratulate the government for achieving an improvement of 14 ranks in the WBG Doing Business 2018 ranking. Reform implementation must keep this positive momentum, as it is critical for continued macroeconomic stability and higher productivity growth," he emphasised.

VDF 2017 – A Quest for Productivity Growth

In the last five years, and following the global recession, Vietnam has achieved a commendable growth recovery. However, a continuing trend of weak productivity growth remains concern. 

Vietnam’s average labor productivity growth rate is about four percent. This compares to rates above seven percent for China and five percent for Korea when these countries were at similar levels of development as Vietnam is now. 

Current productivity growth rates are unlikely to deliver the sustained rapid growth that could see Vietnam follow the development trajectory of countries like Korea and Singapore.

"How can Vietnam address the productivity challenge? Regardless of how productivity is measured, this question really translates into a question of efficiency. How does Vietnam’s economy produce more for a given level of inputs?" he wondered.

The question might look simple, but there are no simple answers. Improvements in efficiency must take place both within individual sectors as well as across sectors, which require effective market institutions and government support. "I would like to highlight four areas for our discussion today," he said.

First, there is ample room for efficiency gains within individual economic sectors in the economy. This could include enhancing industrial energy efficiency, enhancing agricultural transformation and agribusiness development; more efficient transport, logistics and connectivity. But going beyond efficiency gains, moving up value chains is critical to improve productivity. 

Second, reforms to develop and enhance effective market institutions will need to be significantly steeped up to achieve higher productivity growth. This includes continued effort in improving business enabling environment – with focus on simplifying administrative procedures and reducing cost burden. 

Third, we can not emphasize more the importance of education, skill and innovation agendas in the country’s quest for productivity growth. Vietnam has done well in basic education. But a new set of knowledge and skills are needed to contribute to productivity growth, and importantly to a changing economy. 

Finally, the question is how Vietnam will mobilize and use its scarce public resources efficiently to finance its ambitious development agenda over the next five years. In addition, efforts must be stepped up significantly to create an enabling environment for private sector participation in quality infrastructure development – a critical contribution to Vietnam’s needed productivity growth.

"I look forward to a new and comprehensive Law on Public-Private Partnership that will address many current challenges to the PPP agenda in Vietnam. Last, but not least, ODA resources will need to be used more strategically and effectively to complement domestic public resources, and aim to leverage private investments," he said.    

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