Is Vietnam spending too much on infrastructure?

Statistics show that Vietnam is among Asia’s biggest spenders on infrastructure.



Bloomberg has cited a report from the Asian Development Bank (ADB) which says that Vietnam’s public and private sector investment in infrastructure has averaged 5.7 percent of its GDP in recent years, the highest proportion among South East Asian countries, and close to China’s 6.8 percent.

Meanwhile, Indonesia and the Philippines spend less than 3 percent, while Malaysia and Thailand spend 2 percent of GDP on infrastructure.

ADB estimates that emerging economies in the region would need to invest $26 trillion through 2030 to develop their transport networks and strengthen power supply capacity.

Roughly $15.8 billion worth of FDI was registered in 2016, while a high 6 percent growth rate has been predicted from now to 2019.

Vietnam strives to a 6.7 percent GDP growth rate in 2017, compared to 6.21 percent in 2016.

However, some economists believe that there is no need for Vietnam to run the infrastructure development race.

Le Dang Doanh, former head of CIEM, said it would be better not to run after growth rates, but to strive to have higher added value, which is more important than GDP.

He believes that it is necessary to set new targets. Instead of showy GDP, it would be better to set targets in productivity, new products, market expansion, technology renovation and the proportion of added value in products.

Instead of striving for quantitative growth and increasing investments to obtain high GDP, it is necessary to improve investment efficiency and increase the added value per product unit.

Doanh cited Ha Giang province’s investment in infrastructure. The province has become well known with the slogan ‘one construction work every day’. Investments can help GDP grow sharply, but growth does not bring substantial value.

“It is not necessary to turn other provinces in the country into Ha Giangs,” he said. “It is necessary to ring the alarm bell over the Ha Giang disease.”

Tran Dinh Thien, head of the Vietnam Economics Institute, said in order to obtain high growth rates, investment increase is a solution. In Vietnam, investments contribute 60-65 percent of growth rate, while productivity and other factors just make up 35-40 percent.

As all provinces and cities are striving to have high GDP growth rates, they have tried to ask for more capital to increase investments at any cost.

Ha Vy / vietnamnet