Vietnam’s transition from a centrally planned economy to a market economy and from an extremely poor country to a lower-middle-income country in less than 20 years—is now a case study in many development textbooks. But Vietnam’s other transition—to becoming an industrialized and modern economy by 2020—has barely begun. The latest Socio-Economic Development Strategy (2011-2020) goes on to identify the country’s key priorities to meet this ambitious target: stabilize the economy, build world-class infrastructure, create a skilled labor force, and strengthen market-based institutions.
Meeting these aspirations will not be easy. The country has experienced bouts of macroeconomic turbulence in recent years—double-digit inflation, depreciating currency, capital flight, and loss of international reserves—eroding investor confidence. Rapid growth has revealed new structural problems. The quality and sustainability of growth remain a source of concern, given the resource-intensive pattern of growth, high levels of environmental degradation, lack of diversification and value addition in exports, and the declining contribution of productivity to growth. Vietnam’s competitiveness is under threat because power generation has not kept pace with demand, logistical costs and real estate prices have climbed, and skill shortages are becoming more widespread.
Though challenging, these aspirations can be achieved. The VDR 2012 argues that the root causes of the current problems lie in the country's incomplete transition to a market economy. Specifically, the report focuses on weak institutions, distorted incentives and inadequate information—labeled as the three “I’s” of the market economy—as the explanation for Vietnam's current tribulations. The report provides a number of ideas and suggestions to address these problems which can help to create a foundation to sustain rapid growth for Vietnam in the next 10 years. Read more »