Vietnamese vision: from steps to strides

It's the noise that gets you first. Living and working in Ho Chi Minh City (HCMC) amounts to sensory overload - the squadrons of scooters and motorbikes, the bustling tide of humanity on the sidewalks, the abundance of Vietnamese street food and markets teeming with life - the overwhelming feeling is that this is a city on the move. I've worked all over the Middle East and South East Asia but there is simply no place like it.

The pace of life on HCMC's streets has been mirrored by Vietnam's rapid emergence as a country powered by manufacturing, one where health care and schooling are on the up and disposable incomes are higher than ever. The country's political leaders can derive much satisfaction from this track record but there is always more to do.

The priority now is to protect recent progress and ensure that the country's trajectory remains on an upward curve - not easy given the competition for trade, investment and goods that ricochet across the ASEAN region and beyond. We have used The Boston Consulting Group's Sustainable Economic Development Assessment (SEDA) to examine how Vietnam can continue its forward march to greater prosperity. What did we find?

Under the Vietnamese microscope

That Vietnam has performed well in recent years is borne out from our analysis. SEDA is designed to provide insight into the wellbeing of a country's citizens and how effectively a country converts wealth, as measured by income levels, into wellbeing. Using these metrics, we found that the country is among the top performers globally when it comes to converting wealth into wellbeing and also compares well with peers such as Indonesia, Malaysia, the Philippines, and Thailand.

But while Vietnam has successfully harnessed limited resources for the good of its citizens, moving further forward at pace will require more work in three key areas: strengthening the links between the labour market and education system; improving its infrastructure and strengthening governance.

From classroom to boardroom

All countries want to build a workforce fit for the future and fortunately, Vietnam can point to a highly literate population and scores in maths and science that are comparable to those of many wealthier OECD countries. Meeting the demands of a knowledge-based economy, however, requires more.

This is because the country's labour productivity is less than in many peer countries roughly 18 times lower than in Singapore, for example and Vietnam's base of skilled workers is also relatively small. For instance, 6.9% of workers in Vietnam have completed tertiary education, compared with 12.6% in Thailand. As a result, the country lacks highly trained craftsmen, professional services workers, engineers, and technicians.

Options for remedial action start with strengthening the links between industry and universities and vocational institutions. This will help create education and training programmes that teach the skills that employers are looking for. Vietnam must also improve how it communicates with parents and students about future workforce needs, something that is likely to spark greater interest among students and parents for vocational training. And the country also needs to get better at forecasting and monitoring labour supply and demand.

Closing the infrastructure and governance gap

Vietnam is hardly the only country seeking to improve its infrastructure it's a priority shared by developing and developed nations the world over. And although the country has made substantial recent investments, it still lags behind its peers in areas such as electricity supply and the quality of the rail and road networks.

We estimate that in order to sustain economic growth and remain competitive with other nations in the region, Vietnam will need to invest between $113 billion and $143 billion in infrastructure from 2014 to 2020. To this end, there is a clear opportunity to expand the role of public-private partnerships in infrastructure projects and policymakers should also create special economic zones to get the most out of infrastructure investments by focusing them in key regions. This makes more sense than trying to upgrade infrastructure throughout the country in a relatively short period.

Governance, however, is an area in need of urgent attention. Vietnam compares poorly with its peers and persistent problems abound. Roughly 66% of companies in Vietnam's Provincial Competitiveness Index, for example, indicated that "they have to pay informal charges" when doing business.

Recent government initiatives have sought to reduce bureaucracy in tax, customs, and administrative procedures but in the years ahead, Vietnam will have no choice but to address these deep-rooted issues. Firstly, the country should adopt a system for rewarding and promoting high-performing government workers, the value of such systems have been demonstrated in countries around the world. And secondly, the country should deploy digital tools to increase government transparency. Standardising procedures and digitising government services can improve transparency and reduce the need for face-to-face interaction with government.

Moving on, moving up

The opportunity and potential for Vietnam is huge. The energy, the diversity, the passion of its people is palpable, rippling across its cities and landscapes akin to a tidal wave. The next stage of its evolution is not about a radical transformation which is entirely unnecessary but more a precise targeting of specific areas for development. If such improvements are made, further economic gains and improved wellbeing for the Vietnamese will surely follow.

FURTHER READING

• Lotus Nation: Securing Vietnam's impressive gains in well-being
• Viet Nam: The next chapter. Amidst the sea of scooters that line the streets of Ha Noi, Bakhodir Burkhanov and his colleagues at the UNDP go about their work. He tells us about helping move an already fast-developing country forward
• Why wellbeing works. With global growth continuing to fluctuate, governments are looking at other ways to track and strengthen social and economic performance. Michael Spence explains why policymakers are increasingly agreeing on wellbeing
• From growing pains to growing gains. While governments and businesses are united by their mutual hunt for prosperity and wellbeing, how to achieve it remains an enduring challenge. Douglas Beal and Enrique Rueda-Sabater examine the available options
• Papua New Guinea's pathway to progress. As the UN's Resident Coordinator in Papua New Guinea, Roy Trivedy does not lack for challenges. But what the country lacks in infrastructure it makes up for in a rich blend of culture, natural resources and huge untapped potential. He tells us about charting a new course for sustainable development
• Singapore: from strength to strength. Singapore"s transformation from small fishing port into global powerhouse continues unabated. But the building blocks for this enduring success stem not only from decisions made by its first prime minister, Lee Kuan Yew, but also the consultative approach of his successor, Goh Chok Tong. We hear about the importance of inclusivity in achieving long-lasting impact