Visa policy developments help promote GDP growth

These steps will help to promote a more welcoming and inclusive environment for foreign workers and visitors, ultimately providing an important boost to the country's GDP growth, Gabor Fluit told VGP in a recent interview.  

Regarding economic performance in the first quarter, Gabor Fluit said Viet Nam's GDP growth was modest in the first quarter of 2023, reaching only 3.32 percent. These results are not surprising, as Viet Nam's overall exports fell 11.9 percent from a year earlier due to weaker global demand.

Viet Nam's ability to navigate global economic uncertainties and the ability of its manufacturing sector to rebound will determine whether or not it meets its 6.5 percent GDP growth target. Aside from increasing domestic consumption, Viet Nam should also attract more foreign investment, especially in infrastructure and the digitization of the economy, he said.

In EuroCham's Business Climate Index, European business stakeholders found that regulatory simplification, investment incentives, sustainable development, environmental protection, and workforce development programs have all been crucial to Viet Nam's growth. Our recommendation is to continue improving these areas to accelerate development further.

Despite the challenges that foreign workers have faced in obtaining work permits and the dissatisfaction expressed by tourists in navigating Vietnamese travel visa requirements, EuroCham is optimistic about the positive developments currently taking place to address these issues. 

Gabor Fluit said "We are thrilled to hear of the progress being made in the legislative process to improve the ease and accessibility of working and traveling to Viet Nam. We firmly believe that these steps will help to promote a more welcoming and inclusive environment for foreign workers and visitors, ultimately providing an important boost to the country's GDP growth".

On FDI attraction, despite challenges in recent years, Viet Nam remains a prime destination for foreign direct investment. Several factors contribute to this, such as its large and youthful workforce, its strategic location, and its cost-effective business environment.

The EuroCham Business Climate Index from the first quarter of 2023 supports this, showing that 36 percent of European business stakeholders rate Viet Nam as among their top five investment destinations worldwide.

Manufacturing remains top FDI recipient

Many sectors have benefited from FDI, in which manufacturing remains the top recipient so far in 2023, followed by real estate, then wholesale and retail. 

Sectors like healthcare and education also show strong potential. In addition, as FDI inflows continue to increase, we are witnessing a shift in investment patterns towards high-tech manufacturing, renewable energy, and information technology.

Nonetheless, the FDI landscape in Viet Nam is not without its challenges. Issues like lengthy administrative processes, unclear regulations, and insufficient infrastructure are among the factors that hinder Viet Nam's FDI attractiveness. Taking action to address these challenges will help Viet Nam unlock its full FDI potential.

The Vietnamese export sector is a key source of economic growth and development. Despite the challenges and uncertainties that lie ahead, Viet Nam can improve its export orientation and continue to excel in this sector in a number of ways, according to Gabor Fluit.

By exploring new markets and industries, Viet Nam should diversify its export portfolio. Even though the country's exports to sectors like electronics, textiles, and agriculture have already been strong, it should also pursue growth areas like renewable energy, digital services, and e-commerce. 

Additionally, under the EU-Viet Nam Free Trade Agreement, Viet Nam should seize the opportunity to expand its presence in European markets, as well as in all markets Viet Nam has free trade agreements with. As a reliable partner to Viet Nam for over 25 years, EuroCham is ready and able to continue to support this in every possible way.

Next, investing in research and development, enhancing technological capabilities, and improving product design, standards, and certifications can improve export competitiveness. This will not only enhance attractiveness in international markets but also create new employment opportunities.

Gabor Fluit suggested Viet Nam should also prioritize trade facilitation and connectivity to reduce logistics costs, improve efficiency, and enhance competitiveness. This can be achieved by reducing trade barriers and streamlining customs procedures. The EVFTA provides a framework for achieving this. Furthermore, investing in transport infrastructure, such as ports, airports, and railways, can improve connectivity with key markets and regions.

ODA vital for infrastructure development

Infrastructure development is a critical factor for Viet Nam's economic growth and development. Attracting official development assistance and concessional loans can provide vital financing support for infrastructure development projects. 

To attract such funding, the Vietnamese government should continue to engage with international development partners and financial institutions to identify potential funding sources and develop partnerships. These relationships can help build credibility and increase Viet Nam's capacity to attract more funding.

By providing tax breaks or simplifying regulations, the Vietnamese government can also encourage private sector investment in infrastructure.

To further enhance its efforts, Viet Nam can also establish a dedicated infrastructure financing agency to coordinate funding and investment activities. By streamlining regulatory processes, this agency can expedite approval and implementation of projects, accelerating their progress.

Viet Nam should also continue to prioritize investment in sustainable and climate-resilient infrastructure by focusing on high-impact infrastructure projects that can generate significant economic and social benefits. 

However, one essential step that is still missing from the picture is the Power Development Plan (PDP) VIII. Once this vital component is finalized and approved, there will be comprehensive development of renewable energy by foreign investors. Therefore, PDP8 must be established as a roadmap, providing a clear path forward for the implementation of energy projects.

Implications of growth in retail sales of goods and services

Certainly, retail sales of consumer goods and services in the first quarter of 2023 suggest the economy is gradually recovering and regaining pre-COVID-19 confidence. With businesses and consumers alike regaining optimism, we can expect growth to continue, said Gabor Fluit.

This jump in domestic consumption can be attributed to several factors, such as growing incomes, a rising middle class, and effective inflation control measures. As a result, employment opportunities have been created and the economy has grown, thereby raising living standards and reducing poverty.

Competition in Viet Nam's retail and service sectors is expected to increase with more and more investment from major domestic and foreign players. This development will provide consumers with more options and opportunities. In order to remain competitive, companies must maintain adaptability, particularly by offering high-quality products and services. Moreover, businesses must build strong customer relationships and provide excellent customer service while making their products and services more accessible.

Importance of growing middle class

Gabor Fluit expressed his belief that the reform or Doi Moi process initiated in 1986 has been highly successful, resulting in rapid economic growth, improved living standards, and a reduction in poverty. 

It has also opened the country up to foreign investment, enabling Viet Nam to become one of the most competitive economies in the world. The Vietnamese economy is now a model for other developing countries, showing that reform and liberalization can lead to increased economic growth and prosperity. 

Viet Nam's rapid middle class growth is a crucial development that will surely contribute to its goal of becoming a prosperous, high-income country by 2045. By driving domestic consumption, increasing labor productivity, and stimulating innovation and entrepreneurship, a growing middle class supports economic growth.

Viet Nam must, however, maintain sustainable and inclusive growth to ensure that economic development benefits everyone. This includes improving access to education and healthcare, promoting environmental sustainability, upgrading its infrastructure, addressing skill shortages, and adapting to the changing global economic landscape./.