Dr. Rainer Zitelmann: The service is the bright spot of Vietnam's economy in 2023
WVR - If the market economy reforms are continued, Vietnam can become one of the leading countries in Asia - Dr. Rainer Zitelmann, a famous businessman, real estate expert and author, shared his opinion with the World and Vietnam Report.
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| Dr. Rainer Zitelmann at the launch of the book in Hanoi in September 2022.(Photo: Vietnamnet) |
Last year, Vietnam received attention from the international community. In your opinion, what are the bright spots of the economy in 2023?
First, the visit by US President Joe Biden and the upgrading of relations between the US and Vietnam. Second, the service sector economy has been helped by a strong rebound in international tourism.
The total number of international tourists in 2023 is estimated at 12.5 million. Meanwhile, the number of domestic tourists is forecasted to reach 108 million, exceeding the yearly target by 5.8%. The total revenue from tourism is estimated at 672 trillion VND, exceeding the plan by 3.38%.
Vietnam was honoured in 45 categories of the 2023 World Travel Awards, one of the leading tourism awards in Asia, including the Asia’s Leading Destination award for the fifth time and Asia’s Leading Nature Destination award for the second time in a row. I have been to Vietnam several times myself, both to present my books and as a tourist. Service at hotels in Vietnam is excellent, no less than the US and Europe.
What are the difficulties with the Vietnamese economy in the past year?
As mentioned, income from tourism rose sharply, probably by around 50%. However, this could not compensate for the weak development of industry (only one percent growth). A challenging external environment and weaker domestic demand is leading to a slowdown in economic growth in Vietnam.
There were problems in the real estate sector. New bond market regulations made it difficult to access capital and real estate companies were forced to suspend work on a number of projects. This led to a drop in consumer confidence. The bond regulations were later suspended; however, the damage was already done. The lesson from this should be not to react too quickly to economic problems with new regulations, as these often make the problems even worse.
Another serious problem was the power supply. A hot summer and unprecedented drought were straining energy supplies in northern Vietnam, prompting rolling blackouts and sudden power outages that have led to losses among local firms and foreign manufacturers.
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| The service sector has been helped by a strong rebound in international tourism. (Photo: TTXVN) |
What do you predict about economic growth in 2024?
2024, the government growth target is 6 to 6.5%, which is similar to the Asian Development Bank’s July 2023 projection. While some projections are lower - Fitch has 5.5% due to expected export weakness - the continued movement of some export production out of China should help Vietnam’s exports rebound.
As Vietnam is heavily dependent on exports, a lot depends on how the global economy develops next year.
How do you evaluate Vietnam's goal of becoming a developed country by 2045?
Vietnam has had a great economic development. As recently as 1990, it was one of the poorest countries in the world, but the proportion of people living in poverty has fallen from 60% (1990) to only 4% today.
The reason for this great development was the market economy reforms. No country of comparable size has gained so many points in the Heritage Foundation's Index of Economic Freedom since 1995 (only Poland has made similar progress). Despite these successes, much remains to be done.
The Index of Economic Freedom says for Vietnam: “Despite ongoing reform efforts, the regulatory framework is inefficient. Even with no minimum capital requirement, starting a business is costly. The labour market remains rigid and controlled, and informal labor activity is considerable. Monetary stability is relatively well maintained, but inflationary pressures continue.”
The future of Vietnam is bright if further market economy reforms follow. Deregulation is necessary to fight corruption. The proportion of state-owned enterprises is still too high. Vietnam’s formal domestic private sector is to week. The greatest danger for Vietnam would be that a regression towards more state and less market takes place. Conversely, if the market economy reforms are continued, Vietnam can become one of the leading countries in Asia.
Thank you so much!
| Rainer Zitelmann is a German historian and sociologist who has published 28 books. His books have been published in over 30 languages, including Vietnam. His latest book "The Rise of the Dragon and The White Eagle" (English Title: How Nations escape poverty) deals with the economic success of Poland and Vietnam. |
