Vietnam needs to choose the path less traveled

Nguyen Dang Anh Thi

When he was 18, my eldest brother faced a tough decision – should he go to university or take up vocational training?

Although he wanted to persist with his academic pursuit, he deferred to the family’s economic needs and decided to join the workforce to support the family.

So, instead of going to university, he decided to go to Tay Loc District in my home province, Thua Thien Hue, and learn tailoring.

One year, with a sudden surge in the need for making windcheaters in HCMC, my brother left home and headed for the southern metropolis in search of better work opportunities. He boarded the crammed bus, not daring to look behind at his sobbing family.

Years later, when I began my university studies, I saw my brother again in HCMC. I went to the factory where he worked - a sweltering concrete building with a welter of cloth inside. In it was my brother, thin and frail from overworking into late hours in the night with hardly any holiday. Covered in sweat, he told me not to tell our parents about his situation.

That first sight of him after years rendered me speechless. I had always imagined his life very differently, my imagination fed by textbook descriptions of an industrial worker leading a pleasant, comfortable life, all needs met, and so on.

30 years after his arrival in HCMC, my elder brother’s situation can be considered as stable. However, despite advancing rather early in his profession to become a technical manager, he is still very far from what the Vietnamese society would consider a middle-class household, with a decent house and a car.

My brother’s story is a vivid example of the hardships faced by Vietnamese factory workers, and of the not-so-pleasant reality of the country’s pursuit of industrialization. The process is taking its toll on those who contribute most to it.

The textile industry, a major export earner of Vietnam, mostly uses low-skilled, cheap labor. Photo by Reuters.

Vietnam has been repeating the goal of "industrialization and modernization" like a mantra and has treated these goals as a given without critical thought applied to what it really means.

Today, the country hopes to become an industrialized, modernized nation by 2030, with industrial sector constituting 40 percent of the nation’s GDP.

Is this goal achievable? That’s one question.

Is it desirable? That’s a question that is never asked.

In reality, the industrial sector (not including construction) has never achieved a third of Vietnam’s GDP in history, and has failed to play the expected role of being an economic pivot.

Despite considerable support from the government, the industrial sector’s proportion of the national GDP only increased from 20 percent in 1990 to 28.5 percent in 2019. The mere 8.5 percent increase in 30 years makes increasing the proportion by 11.5 percent (to 40 percent) in the next 10 years a daunting prospect.

Think again

There is no question that industry has played an important role in Vietnam’s economic development in recent years, alongside the construction, service and agriculture sectors. Yet, considering its benefits and costs, it would be wise for Vietnam’s leaders and managers to reconsider the nation’s development direction and orientation.

Vietnamese industries have for years focused on quantity instead of quality, and three factors have marked this: (1) a persistent focus on processing – manufacturing; (2) unrestrained export of raw materials; and (3) unbridled expansion of heavy industries with high electricity usage.

These labor-intensive, resource-consuming industrial activities are undertaken by developing nations with low labor skills. They yield insignificant benefits compared to the high costs exacted.

In short, they are not very cost effective.

The cost is especially high environmentally, as we have seen in the worsening air, water and soil pollution, not to mention destruction of forests and other natural resources.

Air pollution costs Vietnam approximately 5 percent GDP per year, the Japanese Chamber of Commerce and Industry in Vietnam has estimated. The World Bank estimates that Vietnam loses 3.5 percent of its GDP due to water pollution. Just quantitatively, air and water pollution costs Vietnam 8.5 percent of its GDP, approximately $23 billion, and this is set to go higher if we stick to our current path.

We have to keep in mind that besides the quantitative costs, gigantic on their own, the damage from industrial activities, including loss of natural resources and natural biodiversity, has huge sustainability implications.

We can safely say that through millennia, Vietnam has worked hard for national advancement and prosperity. Vietnam was a major agricultural and commercial nation in the region. Early 19th century, Vietnam was the 5th largest economy in the region, larger than the combination of the Philippines and Myanmar, and 1.3 times larger than Thailand. This shows our potential to be a strong and prosperous nation.

Yet, for decades now, Vietnam has mindlessly imitated the economic structures of the Soviet Union and China, overlooking the nation’s strong history of agriculture to focus excessively on unfamiliar, heavy industrial activities. The evidence is that this has only slowed Vietnam’s advance towards prosperity, more importantly, sustainable prosperity.

Imitating China in manufacturing cheap products is something Vietnam should not do, says Professor Michael Porter, a Harvard Business School researcher. He says the mindset of copying other nations’ success is a trap that will make a country less competitive.

If we consider the nation a major conglomerate, what is its competitive advantage? With the strong foundation of being an agricultural nation, in my opinion, Vietnam should choose agriculture and services sectors as the nation’s economic pillars.

I do support industrialization, but in agriculture, in hi-tech, clean, and supporting industries rather than ones that use a lot of energy and labor while exacting a huge environmental cost.

No nation can compete in every industry, Prof. Porter says. A nation can only be prosperous if it can sustain its competitive advantage in certain industries.

The industrialization mindset of "develop now, pay later" has not just hurt Vietnam’s sustainability, the world as a whole is suffering its repercussions like the existential climate crisis we are experiencing now.

We have already paid a heavy price for walking the industrialization path. Can we afford to stay on it?

*Nguyen Dang Anh Thi is an expert on energy and environment. The opinions expressed are personal.