Renovating the economic growth model, restructuring the economy towards improving productivity, renovation, reducing emissions, being green and smart

Dr. TRUONG THI MY NHAN
Assoc., Professor, Dr. DINH THI NGA
Institute of Economics,
Ho Chi Minh National Academy of Politics

1. Introduction

Economic growth model renovation is the establishment of a common framework or common model to guide economic operations on the basis of optimizing national resources with a reasonable, effective, and modern economic structure, aiming to achieve a high economic growth rate in the direction of sustainable development.

The renovation of the growth model and economic restructuring in Vietnam has been implemented since 2011, with a roadmap for gradual transformation from an economic growth model mainly based on breadth to a reasonable and effective combination of breadth and depth to the establishment of an economic growth model based on productivity, quality, efficiency and improving the competitiveness of the economy on the basis of mobilizing, allocating and effectively using resources, especially science and technology resources, renovation and digital transformation. The renovation of the growth model and economic restructuring since 2011 has achieved many achievements, but there are still many difficulties and challenges, posing new requirements that need to be further studied and supplemented in both theory and practice.

2. Content

2.1. Renovating the growth model, restructuring the economy towards improving productivity, renovation, being green, and smart

Based on the advantages of the new growth model, overcoming the limitations of the current economic growth model, while exploiting and promoting the country's comparative advantages, in accordance with the new development context, is an inevitable transformation trend.

From the perspective of input: the growth model mainly relies on science and technology resources, and renovation will contribute to reducing consumption and preserving, developing resources, and ecological balance, while improving labour productivity, efficiency of using other resources such as capital and labour, ensuring fast, stable, and sustainable growth in the long term. This is an economic growth model in depth, based on modern science and technology, improving the efficiency and quality of growth, such as: improving the efficiency of capital use, increasing labour productivity, improving the contribution of total factor productivity (TFP), directing economic activities to industries and fields with high added value, reducing production costs, proactively producing and exporting goods with high technology content, on the basis of fully exploiting the country's advantages.

From the perspective of economic structure: this economic growth model will promote creative startups, enhance design and renovation capacity, encourage enterprises to invest in renovation, absorb and master technology, especially core technology and source technology. Develop industries and fields, especially technology-intensive industries with high added value and low carbon emission industries; develop enterprises on the basis of strong application of science and technology, develop products with competitive advantages, high-tech products with added value and eco-friendliness, and promote participation in the global value chain.

Renovating the economic growth model towards improving labour productivity, renovation, being green, and smart, restructuring the economy in the context of digital transformation will contribute to effectively exploiting the potential and advantages of the country and each locality, creating major changes in labour structure, industry structure, and regional and territorial structure. At the same time, improving the country's endogenous science and technology capacity - the leading important factor in implementing the orientation of strongly shifting the economy to a growth model based on productivity, scientific and technological progress, renovation, high-quality human resources, efficiency, and competitiveness of the economy - determines sustainable growth in the long term.

Renovating the economic growth model, restructuring the economy towards improving productivity, renovation, being green, and smart, and emission reduction is an inevitable step. This is an in-depth economic growth model, focusing on quality and efficiency based on the foundation of science and technology, renovation, and digital transformation, associated with the process of restructuring the economy towards being green and smart to fulfill the commitment to bring net emissions to zero by 2050, linking economic growth with environmental sustainability.

2.2. The current situation of growth model renovation associated with economic restructuring in Vietnam

From 1986 to 2010, Vietnam applied an extensive economic growth model based on expanding investment, exploiting natural resources, and low-skilled labour. Compared to before 1986, the economic growth model has been fundamentally renovated with new operating methods, driving forces, and structures. This economic growth model has had a continuously high economic growth rate for many years, contributing to creating jobs, increasing income for workers, reducing poverty, and narrowing the development gap between regions and population classes. However, the economic growth model still relies too much on investment, resource exploitation, and low-skilled labour, and does not pay due attention to other driving forces of the economy such as science and technology, leading to resource depletion, environmental pollution, low labour productivity, low competitiveness in the international market, etc. Besides, the impact of the financial crisis originating from the US, the public debt crisis in Europe, the unpredictable developments of climate change, the trend of economic restructuring of countries around the world directly impact Vietnam, posing the need to find a new growth model, both to anticipate new trends and overcome bottlenecks in the old model of economic growth.

The economic growth model renovation has been implemented since 2011, through three stages, with quite clear changes in theoretical thinking, goals, operating methods, growth dynamics as well as economic structure. That is the transition from the economic growth model according to the viewpoint of the 11^th National Party Congress: "from mainly developing in breadth to developing reasonably between breadth and depth, both expanding the scale and focusing on improving quality, efficiency and sustainability"(1) to "The growth model in the coming time effectively combines breadth and depth development, focusing on depth development, improving growth quality and competitiveness on the basis of improving labour productivity, applying scientific and technological advances, renovation and creativity, improving the quality of human resources, promoting comparative advantages and proactively performing international integration, developing rapidly and sustainably"(2), determined in the resolution of the 12^th Congress and at the 13^th Congress, our Party affirmed: "Continue to promote renovation in the economic growth model, strongly shifting the economy to a growth model based on increasing productivity, scientific and technological advances, renovation, high-quality human resources, and economical and efficient use of resources. to improve the quality, efficiency, and competitiveness of the economy. Improve the investment and business environment, promote creative startups, develop industries, fields, and enterprises on the basis of strongly applying achievements of science and technology, especially Industrial Revolution 4.0; develop products with competitive advantages, high-tech products with high added value, eco-friendliness, effectively participate in the global production network and value chain"(3).

With the correct policies of the 11^th, 12^th, and 13^th National Party Congresses, the process of renewing the economic growth model associated with economic restructuring has achieved remarkable results. The average growth rate in the 2011-2015 period reached 6.17%; in the 2016-2020 period at 6.25%; in the 2021-2023 period at 5.21%. In the fourth quarter of 2023, growth reached 6.72%, among the Top 10 economies with the highest growth rate in the world. This growth rate is even more significant when achieved in the context of the strong impact of Covid-19, tightening monetary policy to control inflation. Growth was achieved in all three industry groups, of which services increased the highest at 6.82% (4). GDP per capita in the period 2010-2023 continuously increased, in 2010 it only reached 1,614 USD/person, in 2020 at 2,779 USD/person (reaching lower middle income), in 2022 at more than 4,124 USD/person, by 2023 at 4,287 USD/person, reaching the upper threshold of a lower middle income country, 60 times higher than that in 1986, ranking 6^th in Southeast Asia, 25^th in Asia, creating a premise to improve the human development index, implement social security policies.

However, the renovation of the growth model has not had many qualitative changes, not really based on the foundation of science, technology, and renovation, when the contribution of the TFP factor is still not high, labour productivity is still low, and the business and investment environment still faces many difficulties and obstacles.

Firstly, the economic growth model relies mainly on exports from the FDI sector

Vietnam's growth from 2021 to present mainly depends on exports, in which the FDI sector accounts for over 70% (equivalent to 60% of GDP); these enterprises import over 80% of components and equipment, only using simple production materials from Vietnam such as land and basic raw materials; not helping Vietnam build supporting industries and domestic enterprises with high competitiveness in the global value chain (Vietnamese enterprises participating in the supply chain with only simple products) (5).

Secondly, Vietnam's labour productivity is still low, the contribution of productivity growth to economic growth still depends mainly on the shift of economic structure from low-productivity industries to higher-productivity industries, and not really on productivity increases due to investment in technological renovation, improving the quality of human resources, applying science and technology, and renovation.

Vietnam's labour productivity growth rate has gradually decreased, lower than many countries in the region. The average increase in the 2011-2015 period was 4.53%; the 2016-2020 period was 6.05%, but the 2021-2023 period increased by only 4.6% (6). While starting from the same point as Vietnam, China in the early 1990s increased continuously by 9% each year. According to PPP in 2011, Vietnam's labour productivity in 2023 was only 7.6% of Singapore's productivity (Singapore is 13.2 times higher); 19.5% of Malaysia (Malaysia is 5.1 times higher); 37.9% of Thailand (Thailand is 2.4 times higher); 45.6% of Indonesia (Indonesia is 1.8 times higher) and 56.9% of the Philippines; only higher than Cambodia's labour productivity (1.6 times higher) (7).

Low labour productivity is due to the slow economic restructuring process, a high rate of labour force in the agricultural sector, and limited application of science and technology in enterprises. Moreover, our country's economy has not changed significantly in the nature of growth of each sector; economic growth mainly relies on expanding the scale of labour-intensive sectors with low technology content, so the goal of rapidly increasing the added value of products has not been achieved. In particular, the processing and manufacturing industries play a driving role in development, while leading the increase in labour productivity of the economy, but is highly concentrated in sectors that create export products based on low and medium-technology. High-quality human resources in most sectors are still poor and lacking; the capacity of linkage between domestic enterprises and FDI enterprises is still low.

Thirdly, science, technology, and renovation have not really become the driving force for economic growth in Vietnam. Renovation activities are not really diverse, have not promoted the participation of scientists in various fields, and the support of the State and local authorities for renovation activities has not created motivation for research and renovation.

The economic growth model has shifted from breadth to depth in a number of sectors and fields, but the level of shift is slow. The driving forces for depth growth are low labour productivity and TFP. The level of productivity and quality improvement has not met expectations, and the resilience of the economy is still weak. The current economic growth model still relies heavily on increased investment and labour, accounting for over 55% of GDP. The output factors of renovation are not yet the driving force to promote productivity. The technology absorption capacity of enterprises and production and business establishments is still limited. Technology transfer through FDI is still limited due to the weak linkage between FDI enterprises and domestic enterprises, especially in high-tech fields. Investment to develop science and technology and renovation, becoming the driving force for increasing labour productivity of the economy, is still low.

Fourthly, green growth and economic restructuring towards sustainability, greenness, and smartness are still slow, and the effectiveness is unclear.

The viewpoint of rapid and sustainable development based on science, technology, renovation and digital transformation has been identified in the Socio-Economic Development Strategy; the National Strategy on Green Growth for the 2011-2020 and 2021-2030 periods; a number of legal documents related to the circular economy, the National Energy Transition Master Plan... creating a legal basis for green development, economic restructuring towards sustainability, greenness and smartness. However, attracting capital, human resources, and technology for green growth and green transformation is still low; the contribution of green economic sectors and the digital economy to GDP is low, too.

The level of energy restructuring towards a low-emission economy (net-zero) by 2050 is still slow, and resource efficiency is lower than that in many countries in the region.

By the end of 2023, according to data from the Ministry of Industry and Trade, Vietnam's primary energy consumption will reach around 100 million tons of oil equivalent. If calculating energy consumption and electricity consumption per capita, each Vietnamese person consumes an average of about 2,500 kWh of power per year(8).

The renewable energy sector has seen a strong change in installed capacity, the shift to a green economy and a circular economy towards green growth is still slow. The situation of exploiting and using resources wastefully and inefficiently is still quite common. Many businesses use old technology, consuming a lot of resources and energy, causing environmental pollution. The shift in production and consumption towards green and clean approach is still slow, not creating a strong change.

Fifthly, economic restructuring is still slow and the effectiveness is not clear, reflected in all pillars: restructuring of public investment, enterprises, state economic groups, state commercial banks, and credit institutions; restructuring of the state budget, and restructuring of economic sectors and fields

Although restructuring public investment has created changes, implementation and disbursement are still bottlenecks. The banking system, after more than 10 years of restructuring, still has many potential risks, and cross-ownership is still common. Some weak banks are at risk of collapse, threatening financial and monetary security. Restructuring the state-owned enterprise system has not created a breakthrough in handling weak enterprises. Many state-owned enterprises are not operating effectively, and have not created strong changes in internal management and governance models.

The economic structure still relies mainly on labour-intensive and capital-intensive sectors and fields. The processing and manufacturing industries are still mainly in the raw processing or processing and assembly stages, with low technology content and added value. The science and technology level of the economy is not high, including many enterprises with foreign direct investment. Domestic enterprises are mainly small and medium-sized enterprises, with low competitiveness, weak management capacity, and technological capacity. The processing, manufacturing, and high-tech industries are mainly dominated by foreign-invested enterprises.

2. 3. Some recommendations

Firstly, to the Central Party

There needs to be a resolution on the economic growth model renovation associated with economic restructuring towards improving labour productivity, quality, renovation, being green, and smart. In particular, clarifying the concept of an economic growth model based on productivity, renovation, being green and smart; paying attention to the requirement of full employment of human resources and having a system of solutions to promote full employment; ensuring employment for workers when Vietnam is in the golden population structure period; combining full employment with the development of high-quality human resources to ensure increased labour productivity.

Secondly, to the National Assembly, perfecting institutions to promote green economy and digital economy

Firstly, perfect the law on circular economy

Currently, the circular economy is mentioned in a number of legal documents. However, the law on circular economy is still quite fragmented, not creating a solid legal basis for practical application, especially when Vietnam participates in bilateral trade agreements such as EVFTA. Meanwhile, many countries in the world have issued circular economy laws such as Germany and China. Therefore, it is necessary to perfect the law on the circular economy.

Secondly, perfecting the law on digital economy

Early establishment of a legal corridor on data protection, protection of user data privacy to create a secure and safe digital transaction environment, protect consumers, promote public trust in performing digital transactions, and use digital services. Continue to complete the decree on electronic identification and authentication to further facilitate electronic transactions and digital services, thereby enhancing support for digital economic activities.

Thirdly, summarize Resolution No. 31/2021/QH15 dated November 12, 2021, on the Economic Restructuring Plan for the 2021-2025 period, issue a new resolution on economic restructuring in line with the trend of the world economy; restructure each industry towards promoting comparative advantages and participating in the global value chain; develop products with comparative advantages, competitiveness and high added value. Restructuring is needed for the public investment sector, the state budget, and the system of credit institutions.

Restructuring manufacturing and service sectors based on science, technology, and renovation, focusing on developing information technology, telecommunications, smart manufacturing, digital trade and services, digital banking and finance; supporting industries; the orientation of economic restructuring also needs to properly take into account the development and conversion of labour-intensive sectors (such as textiles, footwear, mechanical assembly, telecommunications, etc.) to science and technology-intensive sectors; human resource training, participation in value chains, and market penetration need to be focused on.

Restructuring economic regions in the direction of promoting the comparative advantages of each region, strengthening linkages, cooperation, and promoting enterprises in the regions to participate in linkages to supply products to the global value-added chain. Continuing to study appropriate zoning criteria, improving the quality of regional planning in the direction of multi-sector integration, exploiting and promoting the comparative advantages of each region in terms of infrastructure, natural conditions, political and economic position, human resources, and increasing intra-regional and inter-regional connectivity, creating new development space. In addition to geographical zoning, it is necessary to calculate the zoning of digital space according to the value chain, according to production linkages by industry.

Thirdly, to the Government

Firstly, build and promulgate a strategy to develop high-quality human resources, improve labour productivity associated with renovation, application, and strong development of science and technology

This strategy will create a strong shift in implementing 3 breakthroughs (along with institutions and infrastructure improvement), which are conditions for implementing in-depth growth model renovation.

Along with the promulgation of the strategy, the Government needs to perfect the synchronous and unified institutions and policies to create and improve the efficiency of the operation of a flexible, integrated and sustainable labour market, meeting the labour needs of enterprises, the trend of transforming global and regional supply chains, ensuring the ability to supply labour for foreign investment shifting into Vietnam. Develop and implement active labour market policies, proactively implement the motto of training, retraining, and adaptive training for the working workforce.

Secondly, promote effective implementation of the national program on increasing labour productivity by 2030

Thirdly, develop the carbon credit market

Complete the legal environment synchronously so that all types of markets can develop and compete healthily. In particular, the carbon emission rights trading market.

Fourthly, perfecting financial and environmental policies

It is necessary to further accelerate the carbon tax policy in the trend of green economic development. In Vietnam, carbon taxation is a relatively new term, this is an important tool of the circular economy. Carbon taxation is an effective solution to reduce CO2 emissions in each country. Along with that, carbon tax collection contributes to increasing state budget revenue. The government can use this revenue to reinvest in protecting and improving environmental quality, ensuring green growth goals, reducing greenhouse effects and CO2 emissions.

3. Conclusion

Renovating the economic growth model associated with restructuring the economy towards improving productivity, renovation, being green and smart is an inevitable transformation trend, a mandatory requirement stemming from the advantages of the new growth model, overcoming the limitations of the current economic growth model, while exploiting and promoting the country's comparative advantages in the digital age, creating the basis for achieving the double-digit growth target.

Renovation in the green and smart economic growth model requires perfecting institutions and policies for developing the circular economy and the digital economy; mobilizing, allocating and effectively using resources, promoting the role of key growth drivers, which are high-quality human resources, science, technology, renovation and digital transformation on the basis of synchronously perfecting labour markets, science and technology, carbon credit markets; accelerating the energy transition from fossil energy to renewable energy, green energy, and so on.

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Received: February 07, 2025; Reviewed: March 18, 2025; Approved for publication: April 24, 2025.

Author e-mail: truongmynhan76@gmail.com

(1) Communist Party of Vietnam: Documents of the 11^th National Party Congress, National Political Publishing House, Hanoi, 2011, p.107.

(2) Communist Party of Vietnam: Documents of the 12^th National Party Congress, National Political Publishing House, Hanoi, 2016, p.87.

(3) Communist Party of Vietnam: Documents of the 13^th National Party Congress, vol. I, National Political Publishing House, Hanoi, 2021, pp. 120, 121.

(4) Do Van Huan: Economic growth - Identifying 2023, expecting 2024, special issue of Economy 2023-2024 Vietnam and the world, Vietnam Economic Magazine, March 2024, p.6.

(5) The basis for positioning the target to bring the country into a new era and strategic directions, https://danchuphapluat.vn, November 3, 2024.

(6), (7) Nguyen Thi Thu Hien: Solutions to improve labour productivity in Vietnam, https://tapchitaichinh.vn, September 11, 2024.

(8) Thai Son: Using energy economically and efficiently - Responsibility of the whole society, https://media.chinhphu.vn, May 29, 2024.