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H.E. Mr. Pham Minh Chinh, Prime Minister, H.E. Mr. Tran Tuan Anh, Chairman of the Central Economic Commission, and H.E. Mr. Nguyen Xuan Thang, Director of Ho Chi Minh National Academy of Politics and Chairman of The Central Theoretical Council

I am honored and delighted to represent UNDP at the THIRD ANNUAL INDUSTRY 4.0 SUMMIT and to learn from and exchange views with such an impressive array of leaders and experts in the fields of innovation development and the digital economy.

Thank you Vice Mnister Pham Duc Long (Vice Minister, Ministry of Information and Communications) for the invitation to join this important panel and for your question.

The Impact of the Pandemic

The resurgence of the Covid-19 pandemic in the second half of this year is a serious public health and economic challenge. The government has made tremendous progress in increasing the number of people fully vaccinated, from less than one percent on 1 August to 54% by 1 December 2021.

The pandemic is also an economic crisis as many people are unable to work and many household businesses lost income. The Government introduced new fiscal measures in the second half of the year to help people affected. However, there is evidence that the support package was neither large enough, nor broad enough in scope, to protect vulnerable households from income loss resulting from lockdowns and social distancing.

A recent survey carried out by UNDP and the Centre for Analysis and Forecasting of the Viet Nam Academy of Social Sciences found that the rate of transient income poverty surged from under 10% pre-crisis to 33.4% in August 2021 (based on the 2021-2025 poverty line issued by the Ministry of Labour - Invalids and Social Affairs). According to this report, as of end of September, 90 percent of respondents had not received support since the July 2021 package was approved, and that migrants, the self-employed and the homeless were not eligible for benefits. Thousands of households have resorted to reducing food consumption, including milk for infants and children.

An evaluation report of the new package carried out by the Institute of Labor Science and Social Affairs (Ministry of Labor, Invalids and Social Affairs) with UNDP confirms that the coverage rate of cash assistance programs is low because the program design excludes vulnerable groups such as migrants without registration status and self-employed workers in the informal sector. The report also notes that coverage varies among provinces because the program relies on local authorities to mobilize funding. Cumbersome regulations for recipients and employers have also reduced coverage and disbursement rates.

Overall greater allocation is important. Viet Nam is well below the 1.4 percent of GDP global average. UNDP recommended 5 percent of the GDP (70 trillion VND) be allocated to social assistance in the 4th quarter.

Green Recovery and Sustainable Development LNOB

Over the past decade, Viet Nam has achieved an exceptionally high rate of economic growth driven by the growth of manufactured exports. Growth averaged 6.3% over the ten-year period 2010-1019 and exports of goods increased in real terms by 13% per year. Importantly, 75% of Vietnam’s exports over this period were manufactured goods, which rose at an average rate of 17%.

We know from long experience that export growth is vitally important to sustaining economic growth, especially among middle income countries. The global market offers opportunities to realize economies of scale and hence productivity growth that is not available locally. This is not to say that domestic market is not important, but it is important to recognize that the growth of domestic markets—especially for machinery and other high value-added products—is itself closely related to export growth.

Exports of manufactures are particularly important because productivity growth in this sector is faster than in agriculture and services, and as a famous economist once said, productivity isn’t everything, but it is almost everything. Developing countries, largely in Latin America but also in Asia, that have been unable to sustain growth of manufactured exports have eventually fallen into the middle-income trap.

So, Viet Nam is on the right track. The questions that Viet Nam face today are not about the basic strategy, but rather about how to sustain export-led growth as domestic costs rise with development progress and as the global economy changes and to do so in ways that are sustainable and generate jobs.

I would like to make three points:

First, Viet Nam must nurture and support national export champions, especially but not solely in manufacturing. Key is to create opportunities for domestic firms to innovate, develop technological and managerial capacities, and penetrate new markets.

Public investment is an important instrument, especially if strategic investment in transport, power, logistics, research, education, and training can help domestic firms lower costs and achieve greater competitiveness.

Turning to finance, successful industrializing countries have also used long-term finance as a tool to promote innovation and help companies achieve economies of scale. Finance will be crucial to the development of new industries and to achieve the commitments set out at COP-26 to shift investment from extractive to carbon-neutral opportunities to accelerate climate resilience, biodiversity protection and sustainable development.

Secondly, the digital transition is transforming the socioeconomic architecture in fundamental ways. Viet Nam is well placed to benefit from IR 4.0, but must also be mindful of the risks of allowing the digital divide to widen. Findings from the Viet Nam Provincial Governance and Public Administration Performance Index (PAPI) in 2020 showed that there was a large divide between access to the Internet and access to local e-government portals for administrative services. Only 4.5 percent of those who did their administrative services in 2020 used national and provincial e-service portals, although access to the Internet improved in most of the provinces in 2020 compared to 2019. This is even more challenging in ethnic minority and mountainous areas.

Therefore, advancing e-services while improving digital inclusion is an area that will require urgent attention for sustainable socio-economic rebound.

It is critical to improve digital inclusion especially women as prerequisites for sustainable economic rebound and inclusive IR4.0.

Finally, the Omicron variant of Covid-19 is a reminder that the pandemic is still with us, and that we need to adapt to the ‘new normal’ in creative and productive ways. The need for ‘Triple A Governance’ – Anticipatory, Agile and Adaptive – has never been greater. For example, companies are experiencing labor shortages because of the exodus of workers from industrial areas earlier this year. Anticipating the challenges that employers and migrant workers face, the government can help solve the problem by providing safe transportation for workers back to industrial zones and to subsidize safe accommodation for them once they return. The policy would pay for itself through higher levels of production, exports, and employment.

Similarly, the government can accelerate electronic registration and payment for social assistance programs to reduce administrative costs and cash transfer delivery times and to increase transparency. The ability to register and make payments electronically, if it had been established prior to the pandemic, would have greatly improved the effectiveness of government assistance programs in 2020 and 2021 in reaching people in need, and made a breakthrough toward a cashless society – foundation of the digital economy.

UNDP stands ready to support the Government of Viet Nam’s ambitions to achieve upper middle-income status in ways that deliver the Sustainable Development Goals, the commitments made at Glasgow COP26, and puts people at the center of the country’s development.

Wishing great health, prosperity, and success to you all.

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