The Doi Moi economic reforms of the late 1980s helped the country move away from its centrally planned economy towards globally market oriented economy. This contributed to a stunning growth rate of about 7 percent for three decades. This experience provides some important lessons, which can be helpful for other aspiring export powerhouses, including Pakistan:
Continuity in economic policies with strong political will can help change economic outlook
The consistency and continuity in policies helped Vietnam give a strong positive signal to stakeholders, who benefited from a stable business environment. With a democratic governing structure, Pakistan can also achieve consistency in its economic and financial policies by involving all democratic partners and giving them due ownership in the policymaking process, so that critical policies and development plans could not be reversed in case of a change in the government.
Removing energy shortages
One of the key enablers of Vietnam’s economic transformation was the increase in the country’s power generation capacity. Vietnam initiated a number of traditional as well as alternate energy projects, which proved critical in ensuring that its industrial units had constant access to power supply. Pakistan has been facing severe energy shortages, which had virtually crippled the country’s manufacturing sector – before the power sector received a sharp policy focus quite recently. Encouragingly, the recent energy projects under the China-Pakistan Economic Corridor (CPEC) are likely to ease energy constraints in the country in near future.
Dealing with public sector enterprises
Vietnam successfully handled the inefficiencies of its state owned enterprises (SOEs) through their restructuring and putting them into competition with the domestic and foreign private firms. Pakistan also needs to effectively implement its plans for restructuring and privatization of ailing public sector enterprises.
Vietnam showed substantial progress in strengthening its regulatory regime. Regulations were issued to protect ownership rights of firms, facilitate ease of doing business, and strengthened corporate governance of public institutions. It also took appropriate measures to improve governance and transparency of regulatory bodies, and upgraded the financial-reporting standards and risk-management framework for banks. As a result, business sentiments improved, which, in turn, encouraged private firms (both local and foreign) to invest in the country.
Investment in export oriented sectors
This is a very important lesson drawn from Vietnamese experience; as it adopted a deliberate and well thought policy to attract foreign investment in its export oriented sectors. With this, despite the pressure of profit repatriation by foreign firms, the country’s overall balance of payments remained comfortable with the help of booming exports. Pakistan can also offer incentives to foreign firms (also to domestic firms) to invest in export oriented sectors.
Skilled workers can lead an economy towards high standards
Vietnam paid substantial attention towards skill development of its labor force and incentivized corporate-sponsored training programs for the workers. This helped improved productivity of their workers. In case of Pakistan, as CPEC related investments are picking up pace, the demand for highly skilled labor force is expected to increase; this not only requires policy focus and investment by the public sector, but also is an opportunity for private sector educational institutions to design tailor made skill improvement programs.
To sum up, some of the main policy measures adopted by the Vietnamese government were:
- Improving energy supplies
- Infrastructure development
- Special economic zones
- Development of human capital
- Trade liberalization
- Supportive exchange rate regime
- Macroeconomic stability
- Favorable business environment