Vietnam has had one of the ten fastest-growing economies in the world over the past decade, with average annual growth in per capita Gross Domestic Product (GDP) of 5.9% during 1992-2002. However, this economic growth has been geographically uneven, with particularly rapid growth in and around Ho Chi Minh City, and slow growth in some urban and many rural areas. In this study we focus on the three largest cities - Ho Chi Minh City, Hanoi, and Haiphong - and ask why growth rates have differed among them, with the purpose of determining what policies and underlying conditions that are conducive to rapid economic growth in Vietnam.
Our approach is to focus on competitiveness. Following the work of Michael Porter (1990) and Jonathan Haughton and Vadym Slobodyanyuk (2002), we identify the key components of competitiveness in the cities of Ho Chi Minh City, Hanoi and Haiphong. This in turn enables us to identify strengths and weaknesses, many of which may be influenced by the actions and decisions of local authorities, even in a country as administratively centralized as Vietnam. We are thus able to draw out a number of useful policy implications.
The evidence from the interviews showed that business people have had a clear idea of what the top priorities should be for the central and local government. They also identify a list of things that must be done urgently to foster the growth and competitiveness of their business. However, there were thorny problems remained. In the eyes of business leaders in all three cities, the most serious problems facing their growth are corruption and the low competence of government officials. They are also deeply concerned about the unhealthiness of the business environment, including counterfeit products and ineffectiveness of the regulatory system. They would like -- and to some extent, even expect -- central and local government to undertake a number of urgent actions in order substantially to improve the country’s business environment, by: upgrading the regulatory system; introducing stronger incentives for business investments; investing in basic and vocational education; and upgrading the transportation system.
October 2004
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