As policymakers are about to release Vietnam’s socioeconomic development strategies for 2011-2020, Tran Dinh Thien, chief of the Vietnam Institute of Economics, talks to Tuoi Tre about the challenges which lay ahead and provides recommendations for Vietnamese policymakers.

What are the main challenges for Vietnam in the next 10 years?

Though the 25-year economic reforms have really boosted Vietnam’s socioeconomic development, the country is now facing four obstacles that should be addresses.

The per-annum growth exceeding 7 percent that Vietnam has kept for 25 years is yet to qualify as sustainable in line with economic determinations of sustainable development for any nation enjoying an annual growth rate of 5 percent over 10-15 years.

Secondly, despite the high GDP growth rates of the past years, our per capita GDP still lags behind that of other nations in the region.

Thirdly, the country has yet to fully benefit from WTO’s integration as its economic engine seems to be running out of steam.

Fourthly, giving the recent global economic downturn, we had to issue a lot of money to contain the domestic market’s financial crunch, said to spur inflation. But the consumer price index, the gauge of inflation, is weakening, while macroeconomic stability has yet been achieved.

What are chronic downsides of Vietnam’s economy?

Though the national economy seems to have matured, our chronic economic diseases including budget deficit, trade deficit and unequal income distribution, have yet been treated.

Rising issues like corruption, the disproportionate allocation of national resources to large state-run national conglomerates at the cost of the needy private sector and complicated administrative procedures are additional symptoms that may drag the country to the so-called middle-income trap.

What is the middle-income trap?

Many countries have, in the past, reached the US$3,000-8,000 GDP per capita target by relying on cheap labor and abundant natural resources. But they found themselves stuck in the middle-income trap no longer able to achieve sustainable growth.

Since their low-cost labor force and resources advantages have run out, they now have to contain environmental pollution, income discrimination and social conflict all brought upon by their past growth-at-all-cost policies.

It is easy to get caught in such traps as many countries like Mexico, Brazil and Argentina with a per capita GDP of $5,000-$7,000 and Thailand, Indonesia and the Philippines with GDP per capita of $3,000-$4,000 can attest.

But there are also success stories such as our neighbors Korea, Taiwan and Singapore.

Has Vietnam’s past development posed such risk?

Since Vietnam is barely testing the water with a new level of per capita GDP at around $1,200, we should carefully follow good examples to avoid being trapped in the near future when income reaches $3,000-$5,000.

Vietnam is sailing in risky waters since it doesn’t have any large enough corporation able to compete with international counterparts in teams of capitals, management capacity, international standards implementation and high-tech production.

So what will be the way for Vietnam to go?

Vietnam’s socioeconomic development plan for the next decade must factor in the recent global economic slump requiring all nations to rethink their development strategies.

Vietnam’s economy must be redirected to apply hi-tech and environmental-friendly technologies and away from outdated strategies relying on cheap-labor and natural resources’ exploitation.

Most of our resources were set aside for giant state-owned groups, so will they be the drive engines helping Vietnam get out of dangerous waters?

Large groups like Japan’s Toyota and Korea’s Samsung are the backbones of many economies and are the driving forces in technological invention and innovation.

But in the Vietnamese context, state-run conglomerates cannot perform as effectively as those in developed nations, so we should also provide the private sector with a chance to become the driving force.

If the private sector is not taken into account as a main driving force in our development strategies, we might miss a chance for the country’s development.

Do you think that is realistic given state-run groups can access large-scale loans worth some thousands of trillions of dongs while the private sector never stands such a chance?

We have talked a lot about how to stop economic wastage and unequal distribution of resources. Money should not be channeled to those who cannot use it in the most effective way; needless to say they are state-run or private businesses.

So the government’s development strategies should entail allocating privileged resources to needy economic sectors without discriminating private firms.

The responsibilities and cooperation between state management agencies must also be regulated as clearly as possible so as to leave room for creative ideas and better management.