Automated manufacturing, clean energy, and startup springs are the new faces of Vietnam business.
The Economist recently finished its Vietnam 2016 Summit, and we have the full executive summary for you attached as a PDF below. But in case you do not time to read the entire report, we presented the five main takeaways in digestible form below.
1) Vietnam Adopts A New Growth Model
Vietnam is aiming to reduce its agricultural sector from 70% of its workforce to 40%. The main reason is that Vietnam is presently known more for quantity than quality of its agricultural exports. To meet the strict standards of the looming free-trade agreements (FTA), Vietnam must adopt new models that increase the production quality of its crops.
Likewise, manufacturing presently accounts for 80% of Vietnam’s overall exports, so its growth is already pushing on limits. To move up the global value chain, Vietnam plans to dive deeper into robotics that increase manufacturing productivity. Pham Binh Minh, Vietnam’s deputy prime minister of foreign affairs, stated: “We decided to transform our growth model to focus on the quality of growth to maximise factors like productivity, and [to] use knowledge and innovation to promote productivity. Those will be the building blocks of the new growth model.”
2) Vietnam Amps Up Higher Level Education
Vietnam has always scored well in the OECD’s Programme for International Student Assessment (PISA) rankings, which is a positive indication of its success in elementary and secondary education.
However, as the fourth industrial revolution dawns, it will also need to ramp up its vocational training capabilities so that its workers can adapt to the new growth model. “If the fourth industrial revolution takes place, it will affect 86% of the workforce, because they are semi-skilled, and that’s a challenge for Vietnam,” said Mr. Pham.
3) Vietnam Revs Up The Innovation & Technology Engine
The peak of the global value chain lies in providing services in the high-end of innovation and technology. After all, technology lies in the heart of the new growth model that is aimed aggressively at increasing productivity.
Vietnam’s government recognizes this, and has issued a five-year strategy to create an environment conducive to developing and launching new technologies. Some of the environment may already be there, as Vietnam seen incredible adoption rates among its middle class. In fact, it had the world’s fastest adoption rate for smartphones in the last three years. Demand for electricity is also expected to double between 2014 and 2020. Given that much of the country still runs on coal, we may see innovation sprout in renewable energy as well.
4) Vietnam Navigates Geopolitics
Issues of external origin beyond the Vietnamese government’s control will also play a large role in Vietnam’s trajectory. Some of the most ostensible issues are the South China Sea Conflict and its role in global trade agreements such as the Trans-Pacific Partnership (TPP). Its role in the battle against climate change will also be a big issue.
However, TPP worries aside, experts believe there is still much hope for Vietnam’s export-driven economy. The government has already negotiated Free Trade Agreements (FTAs) with 55 trading partners.
5) Vietnam’s Entrepreneurial Spirit Shines
97 of Vietnam’s largest companies are still state-owned, meaning there is still much work to be done in privatization. However, progress has picked up in the last nine months. A clear roadmap has been created for the government to reduce its shares in Habeco and Sabeco, two of the country’s largest brewing companies, and dairy producer Vinamilk, the long-hailed poster child of Vietnam’s stock index.
Furthermore, Vietnam has a strong entrepreneurial and business culture. “There are some key ingredients here in Vietnam that I have not seen elsewhere, like the entrepreneurial spirit,” said Gael McDonald, president and general director of RMIT University Vietnam. A startup nation is rising indeed.
Want to read the entire executive summary? Download the PDF here.