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Vietnam among economic outperformers: McKinsey
By Thanh Thom
Thursday,  Sep 13, 2018,18:50 (GMT+7)

Vietnam among economic outperformers: McKinsey

By Thanh Thom

Workers are seen on a production chain of Samsung Vietnam in the northern province of Bac Ninh. In Vietnam, global players such as Foxconn, Intel, Samsung and Wintek have invested heavily to set up local production facilities and build partnerships with local part manufacturers – PHOTO: VNA

HCMC – Vietnam is classified as one of the 11 more recent, less heralded and more geographically diverse outperformers among the emerging economies, according to a report by U.S.-based McKinsey Global Institute.

The report, titled, “Outperformers: High-growth emerging economies and the companies that propel them,” was released on September 12 as part of activities within the framework of the ongoing 27th World Economic Forum on ASEAN in Hanoi City.

Vietnam is listed among the 11 economies that achieved average annual per capita gross domestic product (GDP) growth of at least 5% over 20 years between 1996 and 2016. The other countries are Azerbaijan, Belarus, Cambodia, Ethiopia, India, Kazakhstan, Laos, Myanmar, Turkmenistan and Uzbekistan. This implies that these economies grew at a faster pace during a shorter period.

This was enough to raise low and lower middle-income economies by one income bracket as defined by the World Bank, setting these countries 3.5 percentage points above the per capita GDP growth of the United States in the same period, according to the report.

Besides this, seven of the 18 outperformers rank among the top 30 countries globally for connectedness, with Vietnam in the 26th spot.

The report notes that many governments have collaborated with the private sector to co-create solutions in multiple areas, including infrastructure, technology and financial services.

Vietnam, for example, has moved rapidly from being a socialist-market economy without a private sector to becoming a deregulated capitalist economy that has seen an influx of private enterprises and foreign investment.

Interaction with global players is another driver of productivity. Larger players usually provide access to global value chains and demand stricter quality specifications, according to the report.

In Vietnam, the most productive electronics companies are subsidiaries or joint ventures of global players, such as Foxconn, Intel, Samsung and Wintek. These companies have invested more than US$15 billion since 2010 to set up local production facilities and build partnerships with local part manufacturers.

The institute views Vietnam as a country that has executed reforms to enhance production and add value in electronics manufacturing. The country set up three major focal industrial zones in the southern, central and northern regions, with special conditions for investment, such as tax exemptions, subsidies and better infrastructure.

The Vietnamese Government offered loans with a rate cap for high-tech companies and capital spending subsidies of as much as 50% on infrastructure development. It also leveraged free trade agreements with the 10 members of the Association of Southeast Asian Nations, as well as with China, Japan and South Korea to support integration with the value chains of electronics firms in the region.

These policies, coupled with low labor costs, have made Vietnam the fastest-growing exporter of electronics.

Small and medium-sized enterprises, which are often the main source of job creation, have been a policy focus of many outperformer economies. This is why Vietnam and other countries focus on creating vibrant startup and innovation hubs through accelerator and incubator programs, according to the report.

The McKinsey Global Institute is the business and economics research arm of McKinsey & Company headquartered in the United States. It was established in 1990 to develop a deeper understanding of the evolving global economy.

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