Prime Minister Nguyen Xuan Phuc at the forum. Source: VGP.
Phuc shared his view at the annual Vietnam Reform and Development Forum (VRDF) 2019 held on September 19.
After 30 years of reform, Vietnam has maintained high economic growth rate, and joined a number of countries overcoming extreme poverty.
“The middle class now makes up 15% of the population and is growing fast in number,” Phuc said.
According to Phuc, such achievement was thanks to the presence of foreign invested companies, as well as Vietnam’s participation in free trade agreements (FTAs), in turn shifting global supply chains from multinationals to Vietnam, including that of Samsung, LG, Fujitsu, Aeon, Nestle, Nike, Intel, among others.
“However, only 21% of Vietnamese enterprises join foreign supply chains, much lower than the rate of 30% of Thailand or 46% of Malaysia, not to mention the poor localization rate of 33%,” Phuc stated.
Addressing shortcomings of the economy, Phuc said there have been signs of slowdown in GDP growth, posing risks of Vietnam falling into the middle-income trap.
In 2018, Vietnam stood third in ASEAN in terms of the population, but sixth in scale of economy.
Phuc revealed Vietnam is drafting development strategy in the 2021 – 2030 period in the context of growing global uncertainties, along with concern over geopolitical tension, trade war, protectionism, climate change and global economic recession.
“Such shortcomings of Vietnamese economy has motivated us not only to dream but act and overcome challenges ahead. During this process, Vietnam seeks greater cooperation and support from international community,” Phuc said.
More investment to startups
Director of Vietnam Silicon Valley Thach Le Anh added with the current economic growth, by 2048, or in 30 years, Vietnam’s GDP per capita would catch up with that of South Korea in 1997.
This means Vietnam would need a total of 58 years to achieve what South Korea did in 28 years, Anh stated.
Without efficient policies to promote startups, the gap in development between Vietnam and developed countries may widen, Anh urged.
Anh referred to Indonesia being the 16th largest economy in terms of GDP. In 2012, Indonesia leapfrogged India to become the second fastest growing economy in the G20 group, only behind China.
More importantly, that neighboring country is home to an advanced startup ecosystem that gave birth to the largest number of unicorns in Southeast Asia, such as Traveloka, Go-jek, Tokopedia, and Bukalapak.
Meanwhile, Vietnam recorded 50 investment deals into startups worth US$205 million in 2016, of which a major proportion came from foreign investors. One year later, with 92 investment deals, total capital poured into startups rose to US$291 million, 84% of which came from foreign venture capital and investors.
The investment capital in 2018 tripled that of in 2017 with US$889 million for the same number of deals of 92.
Anh said Vietnam is missing opportunities to invest in technologies as most startups in Vietnam are being financed by foreign investors.
With a population of nearly 100 million and rapid GDP growth rate, Vietnam is on track to become a major market in the region and of the world. Anh raised the question whether Vietnam could come up with efficient measures to retain tax revenue, as well as big assets which are startups worth billions of US dollars.
Anh recommended the government to issue a venture capital law, in which the government must directly join the investment process to stimulate greater quality in startups and also the amount of investments.
Anh pointed to the fact that most countries with highly developed startup ecosystem such as the US, Israel, South Korea, Singapore, all have the government’s involvement, not only in the role of policy developer, but also an investor.