Transition in Vietnam

Vietnam is making a success in transition from very poor country to the middle income country and from centrally planned economy to a market economy. In the last 20 years, they make a wonderful progress. On the other side, the transition which should make Vietnam industrialized and modern country by 2020, has just begun. Their priorities are: stabilize the economy, create a skilled labor force and build better infrastructure.

This is going to be very hard for Vietnam! In recent years they experienced loss of international reserves (which had a negative effect on investors’ confidence) and macroeconomic turbulence (depreciating currency, double-digit inflation and capital flight). This rapid growth revealed many structural problems. The quality and sustainability of growth are a big concern. Other concerns are related to: environmental degradation, low value in exports and declining contribution of productivity to growth. Sadly, there are more problems! They haven’t kept pace with logistical cost and demand. Real estate prices are very high and many citizens don’t have the required skills! This last problem is spreading through the country, and it will be very hard to stop it!

The root of those problems lie in the incomplete transition to a market economy! When they solve problems of weak institutions, inadequate information and distorted incentives, the situation in the country will be better. There are several plans, which should solve the problems, and help Vietnam in this transition. This country has huge potential and even better work force! If it solves the lack of skills problem, this could lead to increased productivity and more investments from foreign countries.