Many challenges remain in escaping the middle-income trap.

According to Minister of Planning and Investment Nguyen Chi Dung, Vietnam is facing numerous difficulties and challenges in achieving its goal of escaping the middle-income trap. These include inherent weaknesses in the economy that are slow to be addressed, and low levels of production capacity and economic self-reliance.

According to Minister of Planning and Investment Nguyen Chi Dung, the World Bank's 2024 World Development Report suggests that since 1990, 34 economies have escaped the middle-income trap. These include economies in the Asian region.

In Vietnam, the country's development trajectory after nearly 40 years of reform has completely changed, with many untapped potentials and ample room for growth. This creates favorable conditions for us to escape the middle-income trap.

That is political stability; a fairly solid foundation for economic growth. Vietnam is internationally recognized as one of the few countries that have achieved high growth coupled with social equity. Vietnam's position on the international stage is constantly increasing.

Vietnam's economic growth rate has been below its potential in recent times and is showing signs of slowing down.

However, Mr. Dung emphasized that Vietnam also faces many difficulties and challenges that need to be overcome to achieve the goal of escaping the middle-income trap. These include inherent weaknesses in the economy that are slow to be addressed; and the low level of production capacity and self-reliance of the economy.

Recent growth rates have remained below potential and are showing signs of slowing down. Economic restructuring, coupled with innovation in the growth model, has been slow; productivity, quality, efficiency, and competitiveness of the economy are still low.

"Some key industries are heavily dependent on foreign direct investment. The foundation for industrialization and modernization is not yet solid, and the technological self-reliance of many industries has not improved. New economic models are slow to be implemented and replicated," Mr. Dung said.

Due to its high degree of openness, the domestic economy is more quickly and strongly affected by the global economic situation. Meanwhile, the global competitiveness of the economy is improving slowly, especially in terms of institutions, infrastructure, and human resources.

Science, technology, and innovation have not yet become the crucial driving force for transforming the growth model. Social issues such as rapid population aging, wealth inequality, and development disparities between regions also put significant pressure on socio-economic development.

Sharing the government's direction and guidance to help Vietnam escape the middle-income trap, Mr. Dung emphasized that many documents of the Party and State have identified the middle-income trap as one of the major and top challenges.

This includes three key breakthroughs identified in the 10-year Socio-Economic Development Strategy 2021-2030. These are: perfecting and improving the quality of the socialist-oriented market economy institutions; developing human resources, education and training, science, technology, innovation and digital transformation; and developing infrastructure.

"Institutional breakthroughs are the first and most important breakthroughs, laying the foundation and prerequisites for other breakthroughs to succeed. To realize this breakthrough, we need to continue innovating our thinking on institution building."

"How can institutions keep up with and meet the demands of the times in a proactive, scientific, practical, and long-term, holistic manner? Institutional building should not be just top-down or bottom-up, but rather interwoven, multi-faceted, ensuring high practicality and sufficient strength," Mr. Dung said.

At the same time, the investment and business environment needs attention in the new context. It's not just about good tax incentives for businesses or a one-stop shop for administrative procedures; it requires significant advancements in human resources, science and technology, and an innovation ecosystem.

As the agency advising the Government on socio-economic development strategies, the Ministry of Planning and Investment has proposed a new development mindset – seizing and realizing opportunities to overcome challenges. The Ministry also advises on breakthrough solutions, focusing on mobilizing and effectively utilizing resources for development, using development to maintain stability in order to achieve strategic goals.

For example, Vietnam could raise its public debt ceiling to create room for mobilizing resources in the current context, where the public debt-to-GDP ratio is still very low compared to other countries in the region and around the world.

“The Ministry of Planning and Investment is determined to further promote innovation, digital transformation, green transformation, and the development of a circular economy. At the same time, we consider these to be decisive factors in improving the productivity, quality, efficiency, and competitiveness of the economy,” Mr. Dung said.

Hoai Anh

Source: https://doanhnghiepvn.vn/kinh-te/phan-tich/nhieu-thach-thuc-de-thoat-bay-thu-nhap-trung-binh/20240831012903824