Can Vietnam mirror the success of ‘Miracle on the Han River’? | Daily News Byte

Can Vietnam mirror the success of ‘Miracle on the Han River’?

 | Daily News Byte

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This photo shows the audience at the 2022 Korea-Vietnam Economic Cooperation Forum.

This photo shows the audience at the 2022 Korea-Vietnam Economic Cooperation Forum, “Great Together, Next Prosperity 100!” (Park Hae-mook/The Korea Herald)

HANOI, Vietnam — Behind Vietnam’s explosive economic growth, which has seen real gross domestic product grow by 5 percent a year over two decades — 1.7 times faster than the world average — lies its dependence on government aid for development and direct capital investment projects.

As Hanoi looks to set the stage for full-scale modernization across the country, there is a growing need for Southeast Asia’s fourth-largest economy to be independent, in part by promoting higher education, encouraging young generation entrepreneurship and improving infrastructure.

These agenda items were discussed by panelists during the 2022 Korea-Vietnam Economic Cooperation Forum, “Great Together, Next Prosperity 100!” co-hosted by Herald Corp., publisher of The Korea Herald and Herald Business.

“Since opening the door (in 1986), Vietnam has pursued modernization and industrialization and maintained a high level of economic growth,…so we have high hopes of achieving the ‘miracle of the Red River’ alone. said Bui Quang Tuan, director general of the Vietnam Institute of Economics.

Bui Kuang Tuan, director general of the Vietnam Institute of Economics (Park Hae-mook/The Korea Herald)

Bui Kuang Tuan, director general of the Vietnam Institute of Economics (Park Hae-mook/The Korea Herald)

Vietnam appears to have a long way to go to achieve what could be the equivalent of Korea’s “miracle of the Han River,” given its heavy reliance on direct capital inflows from foreign investors as well as official development assistance, the panelists noted.

An entity that receives foreign direct investment can enjoy an inflow of capital and at the same time the opportunity to gain access to the technical knowledge of foreign investors. Vietnam cumulatively received $241.6 billion in foreign direct investment by the end of 2021.

Often even those helping Vietnam achieve self-sufficiency were foreign investors.

For example, Samsung Electronics partnered with Vietnam’s Ministry of Industry and Trade to cultivate electronic component vendors for its smartphone and home appliance manufacturing base across Vietnam — which generated a total of 25 percent of the nation’s total GDP. Also, Samsung has moved to train molding experts in Vietnam and help Vietnamese factories adopt automated unmanned factory systems.

Vietnam President of Samsung Choi Joo-ho (Park Hae-mook/The Korea Herald)

Vietnam President of Samsung Choi Joo-ho (Park Hae-mook/The Korea Herald)

The moves increased the number of Vietnamese tier-one and tier-two suppliers for Samsung tenfold to 257 in 2022 in eight years, according to Samsung Vietnam President Choi Joo-ho at the forum.

But the increasing contribution of foreign direct investors to Vietnam’s economy, however, could be detrimental to Vietnam in the long run, as their dominance in national exports could slow the growth of domestic players.

Foreign direct investment companies exported a total of $247 billion in goods in 2021. That represents 73.6 percent of the country’s total exports, up from between 60 and 70 percent in the past, according to an estimate by the Vietnamese government.

“The capital accumulation of domestic private sector companies in Vietnam appears to be extremely low,” said lawmaker Hong Sung-kook, a lawmaker from the main opposition Democratic Party of Korea.

“This is a worrying sign… In the long term, this is likely to halt Vietnam’s self-sustaining growth.”

Also, now is the time to reduce Vietnam’s reliance on official development assistance from foreign countries, with Korea being Vietnam’s second largest official aid provider after Japan.

“Vietnam cannot be a recipient of ODA all the time,” said Tuan of the Vietnam Institute of Economics. “It is time for independent development.

From left: Seoul Institute of Art President Lee Nam-sik;  Democratic Party of Korea, Representative Hong Sung-kook;  Le Khac Hiep, Vice President of Vingroup;  Vuong Thanh Long, Head of Foreign Direct Investment Banking at the Investment and Development Bank of Vietnam;  and Han Seung, head of overseas development group at Daevoo E&C (Park Hae-mook/The Korea Herald)

From left: Seoul Institute of Art President Lee Nam-sik; Democratic Party of Korea, Representative Hong Sung-kook; Le Khac Hiep, Vice President of Vingroup; Vuong Thanh Long, Head of Foreign Direct Investment Banking at the Investment and Development Bank of Vietnam; and Han Seung, head of overseas development group at Daevoo E&C (Park Hae-mook/The Korea Herald)

The key to independence would be greater infrastructure for higher education and the promotion of entrepreneurship of the young generation, in a country where almost half of the population is between the ages of 20 and 49, the panelists pointed out.

The Democratic Party’s Hong said Vietnam should have more universities for tech-savvy high school graduates, while Cho Bong-hyun, vice president of the Industrial Bank of Korea, said limited access to financing for Vietnamese SMEs in Vietnam could ” hinder the innovation” of the national economy.

Other panelists emphasized the need for improved infrastructure for sustainability and improved living standards for Vietnam to achieve the miracle.

Han Seung, head of the overseas development group at Daevoo E&C, said its smart city infrastructure project across Vietnam is aimed at ensuring the safety of residents, while Kim Chun-jin, president of the Korea Agri-Fishery and Food Trading Corporation, said food technology is key to ensuring the safe delivery of fresh food.

Cho Bong-hyun, vice president of the Industrial Bank of Korea (Park Hae-mook/The Korea Herald)

Cho Bong-hyun, vice president of the Industrial Bank of Korea (Park Hae-mook/The Korea Herald)

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