**

Vietnam's Economic Crossroads: Why a Model Revamp is Crucial for Sustained Growth

Vietnam's remarkable economic ascent over the past few decades is undeniable. Boasting impressive GDP growth rates and attracting significant foreign direct investment (FDI), the "Asian Tiger" has become a global manufacturing hub. However, cracks are beginning to show in this seemingly robust economic model. To maintain its trajectory and avoid the middle-income trap, Vietnam urgently needs to revamp its economic strategy, focusing on innovation, sustainability, and human capital development. This FT View-inspired analysis explores the critical areas requiring immediate attention.

The Limitations of the Export-Oriented Model

Vietnam's success has been largely driven by its export-oriented model, heavily reliant on manufacturing and attracting FDI, particularly in sectors like textiles, footwear, and electronics. This strategy, while effective in the short-term, presents significant long-term challenges.

• Over-reliance on low-value manufacturing: While providing jobs and export revenue, this focus limits Vietnam's potential for higher value-added production and technological advancement. The country remains vulnerable to global economic fluctuations and shifts in manufacturing trends. This vulnerability is clearly demonstrated by the recent global supply chain disruptions.

• Dependence on foreign investment: Attracting FDI is essential, but over-reliance can lead to a lack of domestic innovation and technological independence. Vietnam needs to cultivate its own technological capabilities to drive future growth.

• Environmental concerns: Rapid industrialization has taken a toll on Vietnam's environment, posing long-term risks to sustainability and public health. Addressing environmental concerns is crucial for long-term economic viability and enhancing Vietnam's global image.

The Path Forward: A Multi-pronged Approach

Revamping Vietnam's economic model requires a multifaceted approach encompassing several key areas:

1. Investing in Innovation and Technology

Vietnam needs to shift its focus from low-value manufacturing to higher-value-added industries driven by innovation and technology. This requires:

• Increased R&D spending: Government investment in research and development (R&D) is crucial to foster technological innovation and boost domestic capabilities.

• Supporting startups and entrepreneurship: Creating a supportive ecosystem for startups and entrepreneurs is essential to encourage innovation and the development of new technologies. This includes improving access to funding, mentorship, and resources.

• Developing a skilled workforce: Investment in education and training is critical to equip the workforce with the skills needed for a technology-driven economy. This includes STEM education and specialized training programs.

2. Prioritizing Sustainable Development

Integrating sustainability into Vietnam's economic model is paramount. This involves:

• Implementing stricter environmental regulations: Stronger regulations are needed to curb pollution and promote environmentally friendly practices across all industries.

• Investing in renewable energy: Transitioning to renewable energy sources is essential to reduce carbon emissions and enhance energy security.

• Promoting sustainable agriculture: Sustainable agricultural practices are crucial to ensure food security and protect Vietnam's valuable natural resources.

3. Strengthening Human Capital

A skilled and productive workforce is the backbone of any successful economy. Vietnam must:

• Improve education quality: Focus on improving the quality of education at all levels to ensure a well-rounded and highly skilled workforce.

• Invest in vocational training: Provide access to vocational training programs to equip workers with the skills needed for specific industries.

• Improve healthcare access: Ensuring access to quality healthcare improves worker productivity and overall well-being.

4. Deepening Regional Integration and Trade Diversification

Vietnam’s economic future cannot solely rely on its current trade partners. Strategic diversification is vital:

• Strengthening regional economic partnerships: Actively engaging in regional economic initiatives, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), is critical for market access and economic growth.

• Exploring new export markets: Diversifying export markets reduces dependence on any single trading partner, making the economy more resilient to external shocks.

Conclusion: Embracing Change for a Brighter Future

Vietnam stands at a crucial juncture. While its past economic model has yielded impressive results, maintaining its growth trajectory requires a fundamental shift in approach. By embracing innovation, sustainability, and human capital development, Vietnam can navigate the challenges ahead and unlock its full economic potential, avoiding the middle-income trap and achieving lasting prosperity. Failure to implement these reforms risks stagnation and a missed opportunity to become a truly high-income nation. The time for decisive action is now. This requires bold leadership, strategic planning, and a commitment to sustainable and inclusive growth. The Vietnamese government, businesses, and citizens all have a role to play in shaping this crucial transition.