Skip to Main Navigation
Speeches & Transcripts July 5, 2018

Opening Remarks: Megatrends affecting Vietnam’s sustainable and competitive development

Dr. Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry (VCCI),

Mr. Kamal Malhotra, United Nations Resident Coordinator in Vietnam,

Colleagues from international and local enterprises, national and international organizations and associations, and representatives from provincial People’s Committees, Ministries, and embassies,

All protocols observed, ladies and gentlemen,

A very good morning to all.

I was asked today to speak about megatrends and how they affect Vietnam’s sustainable and competitive development.

Megatrends are regional or global in nature, and they are sustained and transformational forces that can re-define our world by changing the rules of the game. The pace of change is usually steady, but at times can be fast and abrupt.

In the context of Vietnam’s sustainable and competitive development, I propose to focus on four specific megatrends. They are: (i) shifting trade patterns, (ii) rise of the knowledge economy, (iii) climate change, and (iv) an aging population. Megatrends present risks and opportunities, and the trick is to figure out how to leverage them to work in Vietnam’s advantage.

Megatrend #1 is shifting trade patterns. We note that trade is slowing, which generates greater competition for countries like Vietnam. Vietnam has benefited from a robust FDI sector that has directly employed about 2.4 million workers. Yet neighboring countries, such as Cambodia and Myanmar, are emerging as competitors for low-skilled production jobs. In some cases, rapid technological change is even resulting in reshoring of jobs back to home countries of FDI.

Vietnam can harness the shifting trade patterns to its advantage. For example, there will be an increasing demand for manufactured goods from an expanding consumer class in Asia. The share of households with income for extra consumption in developing Asia countries is projected to rise from 20% in 2002 to 80% in 2030. Here in Hanoi, we see shopping malls like Aeon, Royal City, and Lotte packed with families on the weekends. Middle class families now have time and money for shopping and leisure activities, and this will only expand in the coming years.

The rise of the knowledge economy and automation is the second megatrend. 21st century workers require a more complex set of skills than in the past. This is being driven by automation, where machines are taking over for manual and routine jobs, as well as an increase in demand for products and services driven by the expanding consumer class. For example, there will be less demand for physical laborers, such as loaders at shipping ports. Instead, workers with computer literacy and logistics skills will be needed to ensure that shipments are managed accurately and on time.

A critical challenge in Vietnam is that only 8% of the labor force has a university education, which is insufficient to make the leap into the knowledge economy. Ethnic minorities, older workers, and pockets of youth in Vietnam are particularly vulnerable. While an economy that is more technology intensive has the potential to open up opportunities for better quality jobs, workers need to be equipped with the right skills mix to ride this wave.

The third megatrend poses a significant risk to Vietnam, and that is climate change. Temperature increases per decade in Vietnam since the 1960s is double that of the global average. Rising sea-levels expose a third of Vietnam’s population to the risk of flooding, growing to more than 80% in the Mekong and Red River Deltas. Changing salinity threatens 2/3 of Vietnam’s fish from aquaculture. And land subsidence paired with increased salinity in the Mekong Delta, puts at risk the livelihood of 13.6 million rice farmers. These are sobering facts.

Transformations in how we produce and conduct business are needed, and they are needed now. For example, primary producers could shift to drought, or flood, resistant crops or livestock. Tourism operators could diversify into regions that are less threatened by rising sea levels or high temperatures. The breakout session on the circular economy adds an important layer to today’s conference, in which we commit to extracting the maximum value from each resource in the production cycle.

Finally, the fourth megatrend is Vietnam’s aging population. I am not exaggerating when I say that Vietnam is about to experience the fastest pace of population aging in history. The share of the population that is of working age peaked this year and will now start to decline. The share of the population aged 65 or over was 6.5% in 2017, and that is expected to reach 21% by 2050. That means one in every five people will be elderly. This has many negative implications for Vietnam’s labor supply, long-term productivity growth, the pension and social assistance system,. On the other hand, the care industry will likely expand to cater for the elderly population, as is currently occurring in developed Asia, Europe, and the U.S.

At this point, I would like to propose that we consider the following question. “Is Vietnam missing or embracing megatrends?”

Let us pretend like it is Independence Day, September 2nd, and use the metaphor of a lively parade to represent megatrends. We are safe and sound inside our house, and we hear a parade going by outside. And it is getting louder and louder. It is the parade of the megatrend of shifting global patterns, and it is making quite a ruckus with its demanding consumer class, whirring machines in manufacturing facilities, and fluctuating FDI.

Vietnam has a few options. We may shut the door and close all the windows and stay away. But quite frankly, the noise will be so loud and the vibrations from the footsteps so strong, that we can’t really live in peace. A second option is to open our front door and watch it go by. We may even cheer, but in the end, remain passive observers.

Or, as a third option, we may decide to take the plunge and join the parade. We can learn to navigate its pace and figure out whether we are at the beginning, middle, or end of the parade. And we may talk to other participants to figure out what is happening. Which option does Vietnam take?

I’m curious to know your views. Is Vietnam missing or embracing megatrends, or perhaps somewhere in between? Let’s open the online survey.

We will share the results of the poll at the end of my speech.

Now that we have covered megatrends, let us turn to how they impact Vietnam. I believe that Vietnam’s sustainable and competitive development depends on achieving an economy that is resilient to shifting megatrends, and also develops and deploys different types of capital. Specifically, there are four types of capital that concern us: institutional, human, physical, and natural.

Institutional capital is the building block of creating an enabling environment for private sector growth. It concerns building macroeconomic resilience while encouraging structural reforms for productivity-led growth. For Vietnam, this entails identifying and supporting new drivers of growth, shifting to a lighter touch with respect to the role of the state, and putting in place sufficiently forward-thinking strategies for FDI and capital markets development. To use the analogy of a human body, we can consider institutional capital as the heart of a country’s sustainable and competitive development. It pumps blood and oxygen throughout the system to ensure the overall health of an economy.

Human capital is the sum total of a population’s health, skills, knowledge, and experience. Human capital can drive a country’s competitiveness, particularly at a time of rapid changes that requires increasing amounts of talent to sustain growth. However, human capital does not materialize on its own; it must be nurtured by the state and society throughout the lifecycle. In an aging society where the labor supply shrinks, you can imagine the importance of developing and deploying every person’s human capital to its full potential. Adding to the analogy of the human body, perhaps human capital can be considered the brain of a country’s sustainable and competitive development.

Taking the analogy further, physical capital is the backbone of an economy and includes roads, bridges, ports, buildings, irrigation system, and urban land. The goal here is to efficiently develop and deploy the right types of physical capital, maximizing the role of the private sector, and ensuring that services are well aligned with demand. The impact of technological change needs to be taken into consideration, including declining solar prices, contactless options for mass transit, smart grid, and emerging opportunities for circular and sharing economies.

Last but not least is natural capital, which includes agricultural land, forests and terrestrial protected areas, and also energy and extractives. Here, the aim is productive and sustainable use of natural capital, aligning prices and incentives for climate resilience, and putting the country on a path towards a dramatically lower carbon trajectory. There are also gender dimensions. For example, while women and men have equal rights to land-ownership, only 18% of women are named as sole owners on land-use certificates, and just 22% are recognized alongside their husbands. Since natural capital is all around us, I propose to consider it as the skin that envelops the economy.  

The final point that I would like to make about the four types of capital – institutional, human, physical, and natural – is that for a country to be resilient to megatrends, the four capitals must be developed and deployed efficiently, equitably, and effectively. We must lower the cost of developing all types of capital, we must ensure that everyone has access to them, and we must produce the highest quality possible.

Let’s take a moment to look at the results of the live survey.

As I mentioned before, megatrends represent both sides of the coin – there are both risks and opportunities. The World Bank stands ready to support the government and private sector of Vietnam to strategically engage with megatrends. In other words, to join the parade. I want to affirm that the World Bank will do is best to ensure Vietnam joins the parade with a fit body, one with a heart that invigorates the economy, a thoughtful brain, a sturdy backbone, and healthy skin that can protect the body. I look forward to joining you all on this parade together.

Xin cam on, chuc buoi sang tot lanh.