Current situation and emerging issues for sustainable development in key economic region in northern vietnam

Nội dung text: Current situation and emerging issues for sustainable development in key economic region in northern vietnam

1. CURRENT SITUATION AND EMERGING ISSUES FOR SUSTAINABLE DEVELOPMENT IN KEY ECONOMIC REGION IN NORTHERN VIETNAM Dr. To Hien Tha tohientha@gmail.com Military technical Academy, Vietnam MA. Le Huu Dung Buithubvtt@gmail.com Vietnam Industrial and Commercial MA. Nguyen Dinh Nguyen totha80@gmail.com Military technical Academy, Vietnam Abstract The Northern key economic region is one of four major economic regions in Vietnam that has an important role in its socio-economic development. Economic sustainability is crucial to sustainably develop the whole Northern key economic region. Economic sustainability is reflected in the harmony between the constituent elements: economic growth, highly efficient use of capital investment, increased productivity of social labor, contribution of total-factor productivity (TFP) to the overall growth rate improvement This paper analyzes the current main indicators of sustainable development in the Northern key economic region in Vietnam to point out the unsustainable aspects and thereby presents appropriate solution recommendations. Keywords: Sustainable Development; Key Economic Region in Northern Vietnam; sustainable economic development. 1. Introduction The paper closely follows the rationale for sustainable development. Sustainable development is a development process that ensures all three pillars: economic sustainability, social sustainability and environmental sustainability. Applying to the industrial sector shows that, in order to develop industry in a sustainable way, it must ensure the speed and quality of high industrial growth, ensuring the contribution of industry to the economy in general. Besides, sustainable industrial development must also ensure increased employment, good settlement of social issues and environmental protection. Based on the above theoretical 296
2. framework, the article focuses on analyzing the process of industrial development in the northern key economic region of Vietnam, pointing out achievements, limitations and proposing solutions. 2. Method This paper uses an overall and comprehensive approach to collect and summarize the recent studies and reports which are related to this topic. All the data and figures are obtained based on the secondary data provided by some Vietnamese public organizations such as the Ministry of Industry and Trade. 3. Results 3.1. Reality of sustainable economic development in the Northern key economic region by principal indicators 3.1.1. Economic growth According to local statistics and the national statistical yearbooks, GDP at current prices of the Northern key economic region reached 451,268 billion USD in 2010, accounting for 28,8% of the GDP and being nearly 4 times higher than that in 2005. Among four key economic regions of the country, the GDP of the Northern one ranks second in size, only to the Southern key economic region. GDP growth rate of the whole Northern key economic region was 12.0% in the period 2001-2010, which is 1.65 times higher than the national growth rate of the same period (7.26%), of which, the number for the period 2006-2010 was 11.9% (1.7 times higher than the national average) despite the global economic crisis and sluggish national economic growth rate1. Industrial and construction sector had the strongest growth in the period 2001- 2010, at an average of 14.4% per year, followed by the services sector, with an average growth rate of 12.4% per year while the agricultural sector grew at only 3.3% on average, lower than the sector’s national growth rate (3.6%). With the highest growth rate of the three sectors, industry- construction of accounted the most for the growth of the whole region in the period 2001-2010, namely 50.7%. Service sector was responsible for 45% and agriculture 4.3%. Therefore, the industrial sector managed to replace services as the largest contributor to GDP growth, from 36.2% in 2000 to 45.5% in 2010. The share of agriculture decreased steadily by 10% in the whole period 2001-2010, from 19.2% in 2000 to 9.4% in 2010. Structural Transformation of Rural Economy Thus, the non-agricultural sectors has emerged in the region, making up more than 90.6%, which can be considered at the threshold of developed countries 297
3. in the world. Among provinces in the region, from 2001 to 2010, Vinh Phuc, Bac Ninh and Hung Yen had fastest in economic transformation thanks to high industrialization, especially the processing industry. Meanwhile, by 2010, the localities with high proportion of services are Hanoi (52.3%), Hai Phong (52.93%), and Quang Ninh (36.9%)3. High economic growth is an important factor to the increase in GDP per capita from 418 USD in 2000 (more than 1.04 times the national average) up to $ 1,468 in 2010 (1.24 times the national average), which is the second highest, only to the Southern key economic region’s. When comparing its growth rates, structural transformation and growth of per capita GDP with those of the Southern key economic region and the country, the Northern key economic region has the better growth rate and the structural transformation of non-agricultural' sectors, but the GDP per capita is still low, much less than in the Southern key economic region (only by 0.7 times). When comparing the GDP per capita in broader scope, namely between key economic regions of the country, the Southern key economic region is superior (13.5 million VND higher than the Northern key economic region's and nearly 20 million VND higher than nation's rate). However, considering GDP density per unit area of geographical territory, the Northern key economic region has the GDP per square kilometer or 29.8 billion VND, higher than that of the Southern key economic region and over 4,4 times higher than that of the whole country. 3.1.2. Incremental Capital Output Ratio (ICOR) With the status of a key economic region, and as an engine or the Northern economic development, the Northern key economic region has been paid much attention by the State. Besides, the amount of ODA which have been signed by the Northern key economic region in the period 2006-2010 reached 4,055 million USD. It has also managed to attract 3,799 FDI projects with total registered capital accumulated in effect through 2012 at 43.8 billion USD, accounting for 22.13% of the whole country. The ICOR in the above table shows that the efficiency of investment to generate an extra GDP unit of the Northern key economic region is substantially higher than the national average. This reflects the region's fruitful use of capital investments in different economic sectors, particularly in services and industrial sectors. In 2000-2008, the Northern key economic region spent over 50% on industrial investment. The significant increase in FDI and capital from the private 298
4. sector in recent years is the main cause. With a lower ICOR, it has gradually become an attractive investment destination for investors. 3.1.3. Labor productivity Labor productivity in the region grew from 11.7 million VND per person in 2000 to 21.7 million VND per person in 2005 and 41.9 million VND per person in 2009 (at the fixed prices of 1994). However, labor productivity ill the region is just slightly higher than the average levels of the country. The growth rate of labor productivity is uneven, and even tends to decline and shows no apparent breakthrough compared to that of the whole country. 3.1.4. Tile proportion of capital, technology and TFP contributed to economic growth The comparison of the contribution of the inputs in Northern key economic region with that of the country and the key economic regions in general and the Southern key economic region from 2000 to 2010 shows that the Northern key economic region has the highest contribution of TFP to GDP growth, at 25.6%. The percentage for the country was only 12.5%, which is 13.1 percentage points (-13.1%) lower than in the Northern key economic region. The number for key economic regions in general (4 regions), was 21.7%, equivalent to 3.9 percentage points lower (-3.9%) and even in the Southern key economic with dynamic development, the percentage contribution or TFP was just 15.2%, which is 10.4 percentage points lower than that in the north (- 10.4%). 3.2. Signals of economic instability in the Northern key economic region 3.2.1. Unsound growth Continual growth has been pretty solid over the years but not commensurate with the potential advantages of the region. It did not meet the planning objectives outlined and development requirements or the country. The economic capacity created is still modest. Despite growth in the period 2000 - 2010, its GDP per capita and proportion of the country's GDP is lower than the Southern key economic region. Low GDP per capita has limited ability to accumulate for development investment and led to labor migration from the north to the Southern key economic region. GDP per capita is uneven among the region's localities shows the increased divergence and inequality between localities, affecting their harmonious development. 3.2.2. Growth model at a low level The region is low in labor productivity, gray matter volume, and technology usage in all economic sectors. Its GDP growth is generally characterized by the 299
5. growth in width, which is intensive in capital and labor. Compared with other countries in the world, the structure of the TFP contribution to the growth in the Northern economic region is lower than that in many countries. For example, in Ireland, the structure contribution is much higher (42.6%, compared with 26.3%). This shows that those economies began to go into depth since the years of 1955- 1973, with the slow growth of investment in capital and labor but the TFP accounted for a good proportion in overall GDP growth. If compared to the developing countries and territories which later became the newly industrialized economies (NIEs). the Northern key economic region in particular and Vietnam in general lags far behind in terms of structural contribution of TFP to UDP growth. For example, in Korea, the contribution of TFP to GDP growth between 1960 and 1973 reached 42.3%, Hong Kong (1960-1970) 47%, Taiwan (1955-1960) 59.5%. Thus, in the 10 years period (2001-2010), the Northern key economic regions in the North in particular and the country in general has a much lower structural TFP contribution to GDP growth than the average levels of emerging countries from the years 1955 - 1973 (the average TFP contribution of developing countries was of 31.7% compared to 12.5% of Vietnam, and 26.3% of the Northern economic region)4. 3.2.3. The proportion of the value and the deep processing industry in GDP increases, but at low pace while competitiveness is limited and supporting industries have not developed The proportion of non-material production sectors and industries with high labor productivity, and technological content and gray matter has been on the rise while the percentage of low productive sectors has been down. These tendencies have developed in recent years, which have not been significant, but somewhat marked structural economic transition more in depth and quality. However, the key sectors have not been as successful as expected in reality. The ratio of national value in many commodities is low, at only 20 - 25 %. Their poor competitiveness thus means less profits for the people in the country and the region, making it less able to accumulate from the internal economy. The investment in the development of the region's flagship products has not been put adequate attention. Apart from the relatively good equipment of a number of areas such as telecommunication, consumer electronics manufacturing, power generation, cement, food and consumer goods production, the development of sciences and technologies in agriculture and fisheries is very weak. Meanwhile, there are not many high-tech industries which account for only 20.6% (whereas the number for Thailand is 31 %, Singapore 73%, Malaysia 51%); the supporting industries as a breakthrough for other industries to develop do not meet the requirements. 300
6. The region's technology level is low, consuming large volumes of raw materials and energy, which results in higher prices in numerous products, making them less competitive compared with those form other countries in the region. In 2010, the total power consumption of the Northern key economic region was 19.801 billion kWh, equal to 21.6% of national consumption. If taking electricity consumption per capita into consideration, the number for the Northern key economic region was nearly 1,370 kWh, nearly 1.3 times higher than the average consumption or the country. However, in terms of power efficiency, the region was poorer than the country ill general. To generate 1 USD of GDP, the Northern key economic region consumes 0.92 kWh of electricity, while the national figure is just 0.89 KWh. 3.2.4. Competitiveness of the region 's localities area are From 2005 to date, the Chamber of Commerce and Industry of Vietnam have been investigated and evaluated the competitiveness of the localities at provincial level throughout the country. The results show that the localities of the Northern key economic region do not have good rankings, except from Bac Ninh which ranked second in 2011 and 10th in 2012. Meanwhile, some localities of the key economic region of Mekong Delta and Central have been archived high rankings in 2012, such as An Giang (2/63), Kien Giang (6/63), Binh Dinh (4/63) . 3.2.5. Transportation services are diverse and fast growing but have not forming a modern and comprehensive logistics system The Northern key economic region is the second largest transportation hub after the Southern key economic region, accounting for about 24% of freight and 10% passenger transport volume of the nation and 80-95% of freight and passenger of the Red River Delta region. Shipments through the ports and passengers through the airports of the region is about 30% of the country. However, the quality of transport and logistics services is not high, with low competitiveness, unreasonable prices and poor connection between the modes of transport because the multimodal transport is just at an early stage and underdeveloped. Traffic accidents are high and complicated. 4. Discussion and Conclusion It is certain that the signals of unsustainable economic development in the Northern key economic region in the past years is due to the absence of in-depth growth factors such as the high-tech sciences and quality of human resources. In addition, the current policy of the local authorities is not attractive enough to draw investment capital. The lack of capital or the invitation of investment partners at all costs has prevented the addition of in-depth growth factors which somewhat reduces 301
7. the attractiveness to investors in the region. So, to ensure sustainable development in economic terms of the Northern key economic region in the coming years, the immediate needs are to focus on the following measures: First, promote the attraction and improvement of the efficiency of capital investment in the region. It is necessary to review, add, adjust and build new mechanisms and policies to continue to improve the investment environment; to move quickly from economies based on factors of production to an economy based on investment and technologies; to keep a balance between investment projects in the localities in accordance with priorities, focuses, unified plans and on the basis of planning situations and conditions or residents, local management, human resource potential, resource reality and environment. Besides, there should be tax policy, policy and management mechanisms for corporate finance, monetary policy that are appropriate to promote structural transformation towards modernization. It is important that the adjustment of investment structure to achieve the objectives of economic growth associated with social goals, creating favorable conditions for the exploitation of the strengths of all internal resources and economic components and the outside capital; in which focus should be placed on an adjustment of state budget, spending an adequate budget amount for development of human resources and social security, creating jobs, reducing poverty, ensuring minimum expense of 1% total budget for environmental protection. Then, it is also crucial to complete and synchronize the legal framework for the management and use of ODA to ensure transparency on the principle of decentralization of powers and tied responsibilities; to build partner relationships, harmonizing procedures for Vietnam's donors; raising proper awareness of the role and nature of ODA at all levels; to ensure the national activeness and autonomy; to have the broad participation of community during the movement and use of ODA; to train staff for developing ODA policy. More FDI should be attracted to invest in improving the quality of labor and for the needed projects, mostly the infrastructure development projects in rural areas through special incentives such as maximum preferential rental rates of land and water surfaces, sea surface. And supports should be given to Vietnamese partners who have the desire to form a joint venture with overseas companies. Second, there is the need to rapidly develop high quality human resources for the region. To meet the requirements of sustainable economic development in the coming years, it is required to improve the quality of human resources with the main contents: 302
8. the structural transformation of labor. must be organically associated with the structural economic shifting. There can be no high quality economic growth and sound economic structure without a workforce with enough quality for the sectors, industries and regions. It is remarkable to meet the requirements of qualified labor for various economic sectors, both capable of taking advantage of full employment, creating jobs, improving efficiency and quality of labor in order to improve the quality and competitiveness of products at lower production costs, and thus generate higher income for workers. More investment should be given in education and vocational training to enhance the specialization and skills of the workforce. More focus should be on training the management forces to meet the development needs of key economic sectors and on training the workforce in rural areas who have been non-agricultural. The development of a team of scientists and experts as a core force to carry out research and promote technology transfer in the sectors and industries in the localities should he given priorities; it is important to increase deep investment and modernization of leading research facilities on sciences and technologies, or applied research facilities of high technology to create favorable conditions for scientists and experts to promote capacity. Develop policies on training, fostering and attracting talents in all fields and professions to serve socio-economic and cultural development; policies to encourage creativity and responsibility of the individuals in starting a career and their contribution to the society; and policies to encourage and support young people to start a career and join social activities. Third, develop a strong scientific and technological basis. There is a need to quickly raise the level of production technology on par with the regional countries’ and narrow the gap in the level of basic science research for developed countries, focusing on the field of research, transfer and application of technology to deliver a higher contribution of TFP; in which more focus should be on completing institutional environment to promote innovation and technology transfer so that the speed of technological innovation can be at 15-30% on average per year. There should be more in-depth investment in research facilities, science labs and industry-leading technologies; encouraging the development of institutions who do research, consultation and technology transfer for production and design, fabrication and technological advances and new applications, testing and quality assessment and organization of all economic sectors. Research should be promoted to develop scientific arguments for the planning of development policy, strategy and tactic; to enhance the application and transfer of environmental technology, clean technology and environmentally friendly development treatment technologies and technologies of recycling and reusing waste; 303
9. Strengthening the application of information technology, computerization of the state apparatus at district and commune levels; building and scaling models of clean production. It is also necessary to encourage and support research activities, deployment of science and technology in all sectors; with priority and incentives to support research, inventions and technical improvements to enhance labor productivity, efficient management, quality and competitiveness of products; to encourage overseas Vietnamese scientists to return home, and international experts to work in the region's localities. It is important to develop and implement programs of scientific research and application of advanced technology in all industries of agriculture, industry and services, with a focus on developing new technological sectors (agro-processing, machine building, electronics, automation) for export; to perform the contractual forms in which the State and corporates make orders and sign contracts with the scientific and technological organizations to carry out the tasks of research, transfer and application of technology. It is then crucial to speed up the construction and operation of the Hoa Lac hi- tech park to promote the development of information technology; the development of a number or high-tech industrial park in Hanoi, Hai Phong, Bac Ninh and Vinh Phuc; and other tech parks in the region's localities. Notes: 1. Ministry of Planning and Investment, 2011, Report on Master Plan of Socio- economic development for the Northern Key Economic Region to 2020, with a Vision to 2030, Hanoi. 2. The periods of 1996 - 2000, 2001 - 2005, and 2006 - 2010 (%). 3. Ministry of Planning and Investment, 2011, Report on Master Plan of Socio- economic development for the Northern Key Economic Region to 2020, with a Vision to 2030, Hanoi. 4. Ministry of Planning and Investment, 2011, Report on Master Plan of Socio- economic development for the Northern Key Economic Region to,2020, with a Vision to 2030, Hanoi. References: 1. Ministry of Planning and Investment, 2011, Report 011 Master Plan of Socio-economic Development for the Northern Key Economic Region to 2020, with a Vision to 2030, Hanoi. 304
10. 2. Ministry of Planning and Investment, 2012, Assessment Report on Coordination ill the Period 2006-2010 and Coordination Plan in the period 2011-2015. 3. Ministry of Planning and Investment, 2011, Proceedings of the Conference on the Third National Sustainable Development, Hanoi. 4. The Government of the Socialist Republic of Vietnam, 2011, The Sustainable Development Strategy of Vietnam in the Period 2011-2020, Hanoi. 5. Kim Quoc Chinh (Director), 2006, General Report of the Project "Collecting and Building an Indicator System to Assess the Potentials and Strengths, Current Situation of Socio-Economic Development in key economic regions in Vietnam ", Hanoi. 6. Nguyen Van Nam, Ngo Thang Loi, 2010, The Policy of Sustainable Development of Key Economic Regions in Vietnam, Information and Communications Publishing House, Hanoi. 7. General Statistical Office, Statistical Yearbook, 2009, 2010, 2011, Statistical Publishing House, Hanoi. 8. Ta Dinh Thi, 2007, Structural Economic Transformation from the Viewpoint of Sustainable Development in the Northern and Southern Key Economic Regions. LATS, National Economics University, Hanoi. 305