Investing in higher education - key to stable economic growth

WVR - International experience shows that an increase in labour productivity can only be achieved by investing in the education system, which is an important part of the reform process.
Đầu tư cho giáo dục s. (Nguồ phổ thông - Chìa khóa thúc đẩy tăng trưởng kinh tế bền vững
Investing in higher education - The key to stable economic growth. (Photo:

In the August 2022 report “Education to Grow”, the World Bank (WB) concluded that investment in higher education is the “key” to higher productivity in Vietnam and will thereby contribute to implementing the goal of becoming a high-middle-income country by 2035 and a high-income country by 2045.

Optimism for Vietnam's economic growth

Vietnam is currently one of the few economies that is forecasted to grow quickly and control inflation well despite the volatility in 2022. In a recent report, Vietnam is the only economy in the region whose growth forecast is adjusted by the World Bank to 7.5% in 2022 and 6.7% in 2023; Inflation is expected to remain around 4% in 2022 and 2023.

Many industries are predicted to recover strongly in the second half of this year, especially when Vietnam has reopened to tourism after 2 years of closure due to the COVID-19 pandemic. This is the reason some international financial institutions have rated Vietnam's economic growth prospects in 2022 more optimistically, such as credit rating agency Moody's, which has raised its growth forecast for Vietnam to 8.5% - the highest among Asia-Pacific economies.

The service sector will continue to recover strongly as customers increase spending in order to satisfy demands and the number of foreign visitors increases in the Autumn 2022 / Winter 2023 tourist season.

Growth in exports of processed and manufactured industrial products is expected to continue, although it may decelerate somewhat as leading economies and large markets such as the US, the European Union (EU) and China... are experiencing another period of slow growth.

In the current world economic situation, many major economies are experiencing a period of growth slow-down, inflation reaching record levels; many other regions and small economies are experiencing unprecedented challenges; The above forecasts and optimism in Vietnam's economy are quite "rare".

However, amid the difficult situation, for the foreign economic sector, the main risk is that economic deceleration outweighs the expectations of Vietnam's top important trading partners.

The continuation of social distancing in China may prolong the disruption of the value chain and affect the export of processed and manufactured industrial products of Vietnam.

Increased geopolitical tensions have increased the level of uncertainty and could cause changes in trade and investment trends, affecting highly open economies like Vietnam…

Meanwhile, within the economy, the challenges are more long-term, including difficulties that continue to exist in some industries and labour shortages. At the same time, like many economies, rising inflation could weigh on the recovery of household consumption, which was strong in the first half of 2022.

World Bank Vietnam Director Carolyn Turk said that, in the face of existing challenges at home and abroad, in order to maintain economic growth at the desired rate, Vietnam needs to increase productivity to 2-3% per year.

International experience shows that an increase in labour productivity can only be achieved by investing in the education system, which is an important part of the necessary investments and reforms. A competitive, productive workforce is what Vietnam needs in the long term. Analysis from the World Bank shows that renovating the higher education system in Vietnam can help achieve development goals.

However, in reality, according to the World Bank's assessment, Vietnam's higher education system is currently not operating as effectively as expected.

Accessibility to higher education, including colleges and vocational schools, among Vietnamese students, as measured by the overall enrollment rate, is below 30%, one of the lowest among East Asian countries and much lower than higher income countries such as Korea (over 98%), China (over 53%) and Malaysia (43%).

An industry with higher added value, innovation, creativity and a skilled workforce is needed to ensure the economy can grow further. (Photo: Daidoanket)

From the farm to the factory

There are several reasons for the modest performance of the higher education system in Vietnam. Factors including growing opportunity costs and financial costs, and the perception that profits decrease if one pursues higher education, are some reasons for the declining demand.

In addition, the system has other shortcomings, such as the gap between skill output, employees not being able to provide the skills that employers need, limited investment from the budget, and weak and fragmented institutional structure of higher education governance.

From there, the World Bank identifies four actions that Vietnamese authorities need to prioritise in order for the higher education system to achieve the necessary outcomes and ensure this sector contributes to the future growth trajectory of the country. The 4 priorities include: Improving accessibility and equity; Improve quality and suitability; Ensuring better financial resources for this sector and Better public governance in the higher education sector.

In fact, information from the Ministry of Finance shows that for many years, the Party, State and Government of Vietnam have always identified education and training as a national policy, investment in education and training is an investment in development. Therefore, in the overall investment of state financial resources (including the state budget) for national development, priority has been given to education and training, one of the fields with the largest investment.

In addition, the State has issued many policies to increase investment in education and training, gradually meeting the country’s requirements for education development. The National Assembly has promulgated the Law No. 39/2019/QH14 to regulate public investment, including public investment in the field of education and training.

According to the Ministry of Finance, the National Assembly, the Prime Minister has issued many specific policies prioritising the use of the state budget for education and training such as using revenue from lottery activities for development investment objectives, in which priority is given to investment in education, training and vocational training, public health, and additional investment in the procurement of teaching equipment to innovate the teaching programme and textbooks; the programme of concretisation of schools, classes, and teacher public rooms in the period of 2014-2015, with roadmap to 2020.

Along with that are credit policies for students; policies on granting scholarships, tuition fee exemption and reduction, support for study expenses, meal support, accommodation rent, rice support... for pupils and students; in which priority is given to students who are from ethnic minorities...

However, according to the analysis of labour economist Valentina Barcucci from the International Labour Organisation (ILO) Vietnam, the manufacturing industry with low added value which accounts for a large proportion of the current FDI sector has been the starter for Vietnam's economic growth. An industry with higher added value, innovation, creativity and a skilled workforce is needed to ensure the economy can grow further.

Specifically, this is a new shift - a key factor contributing to Vietnam's productivity growth over the past two decades has been the shift from farm to factory. Perhaps Vietnam is close to reaching the marginal point for this shift to continue to contribute to increased productivity.

That is the problem for higher education, which Vietnam needs a reasonable solution for.

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