1-The biggest macroeconomic challenge facing Vietnam today is sustaining growth. Most doi moi-era growth has resulted either from efficiency gains associated with the introduction of a market economy (opening domestic markets and trade, relaxing restrictions on labour movement and land transactions) or from expanded endowments of low-skill labour and capital. GDP continues to grow at a very respectable rate, albeit lower than that projected in national planning documents.
2-But the warning signs for future growth are clear:
+ a low (29 per cent) contribution of total factor productivity growth to total growth;
+ underwhelming growth rates of human capital;
+ persistent budget deficits and increasing public sector debt;
+ and a seeming loss of will to press ahead with the reform agenda.
3-Vietnam’s state-owned enterprises (SOEs) contribute to each of these problems and, as such, continue to prevent the country from realising its full growth potential.
+ With privileged access to credit from the
, SOEs continue to absorb 49 per cent of investment despite creating only a tiny share of new jobs and contributing almost nothing to export earnings.
+ As a group, they are hugely inefficient: their average capital productivity, to take just one metric, is roughly half that of non-state industries;