Vietnam Needs a New Economic Model: Analysts

Analysts say Vietnam needs a new economic model as it can no longer rely on low wages that had helped propel the nation to some of the fastest growth rates in the world. The nation took grew year-by-year after the Vietnam War with a steady increase in its gross domestic product (GDP). It was built on the back of low-cost labor and factory-driven exports as well as foreign investment. Vietnam is now at a turning point and is looking to a more advanced economy along the lines of Taiwan and South Korea.

Ousmane Dione, the World Bank director in Vietnam said what has been working in the past 30 years may not necessarily work in the future. He said the impacts of initial institutional and structural reforms seem to have reached their limit; he was referring to the Doi Moi reforms. "Hanoi is conducting a review of how well Doi Moi turned out, and how to chart an economic path for the next three decades."

According to experts, the internet including high-tech sectors; services and other value-added industries; and upskilling employees will help drive Vietnam towards the new economy. "Vietnamese factory hands are accustomed to assembling phones and cars, and could one day move up the value chain, such as by providing tech support to people who buy these products."

Pham Hong Hai, CEO of HSBC said Vietnam could do more to collaborate with the rest of Southeast Asia. "That may range from ensuring electronic payments go off without a hitch across borders, to cooperating on a response to cyber threats," Hai said businesses are crying out for tangible developments that will smoothen intra-regional trade. He believes Vietnam should continue the momentum to further integrate into the region and gain more benefits from globalization.