Posted by: mulrickillion | February 26, 2012

Sustaining Vietnam’s growth: The productivity challenge

By Marco Breu, Richard Dobbs, Jaana Remes, David Skilling, Jinwook Kim  Contributing Practices: Hanoi

McKinsey Global Institute, February 2012 —

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Vietnam’s economy has come an extraordinarily long way in a short time. China is the only Asian economy that has grown faster since 2000. But today Vietnam’s economy faces complex challenges that require a transition to a productivity-driven growth trajectory. Vietnam now needs to boost labor productivity growth by more than 50 percent to maintain its rapid growth.

MGI finds that between 2005 and 2010, an expanding labor pool and the structural shift away from agriculture contributed two-thirds of Vietnam’s GDP growth. The other one-third came from improving productivity within sectors. Vietnam has globally competitive niches across the economy from textiles and footwear and coffee and rice to tourism.

But the first two drivers now waning in their power to drive further growth and Vietnam needs to boost its overall labor productivity growth by more than 50 percent, from 4.1 percent annually to 6.4 percent, if the economy is to meet the government’s target of 7 to 8 percent annual growth by 2020.  Without such a boost, Vietnam’s growth is likely to decline to between 4.5 and 5 percent annually. The difference sounds small, but it isn’t. By 2020, Vietnam’s annual GDP would be 30 percent lower than it would be if the economy continued to grow at a 7 percent pace. . . .

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Sustaining Vietnam’s growth: The productivity challenge | McKinsey Global Institute | Asia | McKinsey & Company

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