Attendants at the workshop on "Vietnam economy’s innovation and productivity: Evidence from empirical analysis" (Photo VNA)

Hanoi (VNA) -
Productivity and innovation are considered leading factors for Vietnam’s international integration, said Dang Huy Dong, Deputy Minister of Planning and Investment.

Dong told a workshop titled "Vietnam economy’s innovation and productivity: Evidence from empirical analysis" held in Hanoi last week that the two factors are required for the Fourth Industrial Revolution as well as joining global supply chains that take advantage of digitalisation in production.

Dang Duc Anh, head of the Analysis and Forecast Board under the ministry’s National Centre for Socio-economic Information and Forecast, said Vietnam had exploited traditional resources such as capital, natural resources and cheap labour for its economic development, exhausting such resources. The quality of growth therefore was not high and lacked sustainability.

“If the country continues this development trend, it would result in environmental pollution and a loss of competitiveness in comparison with the region and the world in the long-term,” Anh said.

However, Vietnam’s productivity has long suffered a gap with the region. In another way, the quality of its human resources has not provided momentum for productivity growth. The rate of young labourers who were not given training and education is too high, becoming a barrier for the country’s productivity to increase.

Experts agreed that Vietnam has a shortage of skilled labourers. As many as 11 out of 20 economic sectors which had positive growth rates in the 2006-16 period were not due to increasing productivity. Of which, four of 20 economic sectors saw declines in productivity in the period and another 7 had added value based on productivity less than the ideal level of 60 percent.

They suggested that the Government should speed up renovation and restructuring of State-owned enterprises effectively and drastically. It was expected that economic output could rise by 10 percent through increasing productivity.

Experts calculated that if SoEs’ productivity rises by 2 percent, it would lead to a GDP increase of 1.14 percent, industrial production of 2.26 percent and export output of 1.15 percent.

The rapid growth requires active participation of the private sector with small-and-medium sized enterprises (SMEs). Research also revealed that if SMEs promote the application of new technologies, productivity would increase by 25 percent.

Anh also said the country’s growth rate had been relatively impressive and sustainable with positive export results. However, export and GDP growth depended on the FDI sector while local firms and their investment effectiveness had not significantly improved.

In addition, one of the main reasons for low productivity was education and training quality as well as human resources that did not meet requirements. Vietnam risked moving backwards in terms of human resources and losing the advantage of its cheap labour.

He proposed that the Government and relevant agencies should focus on institutional and business environment improvement to serve businesses in combination with speeding up the privatisation of SoEs.

Especially, the Government should enhance start-up spirit and support the training of entrepreneurs to help them increase added value through new technologies.

Dr. John FitzGerald from the Economics Faculty of Trinity Dublin University said Vietnam should concentrate on three factors including capital, science and technology and human resources for sustainable development and catching up with developed countries. Vietnam could improve its productivity through developing science and technologies while resolving issues of economic structure, labour, working environment and administrative reform to increase productivity.-VNA