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Invest in HCM CityWednesday, 03/09/2005, 05:58

Service sector needs a boost

The world trend is for the percentage of services in an economy's gross domestic product (GDP) structure to rise. However, it is the reverse in Vietnam. In 1997, services made up 42.2% of GDP, but the percentage fell to 38.2% in 2003 and was forecast to fall further in 2004.
Service sector needs a boost  The world trend is for the percentage of services in an economy

Service sector needs a boost

The world trend is for the percentage of services in an economy's gross domestic product (GDP) structure to rise. However, it is the reverse in Vietnam. In 1997, services made up 42.2% of GDP, but the percentage fell to 38.2% in 2003 and was forecast to fall further in 2004.
There are several solutions that could improve the situation.
The State sector still holds the dominant role in the service sector, accounting for 55%, while the private sector's share is 11%. However, State-owned enterprises usually have low efficiency. This is one of the reasons for the fall of the percentage of services in GDP. Therefore, the Government should create favorable conditions for the development of services by sectors other than the State, especially in areas such as telecom, finance, banking and information, to give a fresh boost to the service sector.
In addition, a level playing-field should be created for all economic sectors engaged in services. That is, there should be competition between the sectors. This will help improve the quality of services, and thereby boost economic development. It will also encourage service businesses to try more to be able to compete with foreign rivals.
The Government expects the service sector to make up 45% of GDP by 2010. This means that the sector must achieve an annual growth rate of more than 10%, higher than the GDP growth rate of 8-8.5%. To be able to realize this target, the Government should work out a strategy for development of the service sector. For the time being, it should focus on services with strong advantages and competitiveness, such as the retail trade, hospitality and tourism. At the same time, international cooperation should be expanded in services that need strong competitiveness in the international market like aviation, telecom, banking, finance and technology transfer. These are areas that have the potential to attract foreign investment, as foreign investment in these areas accounts for only 22% of the number of licensed projects and 30.7% of the total capital.
- Nguyen Hoang Xanh, HCM City


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