Launching of Taking Stock Report - “Education to Grow”: Speech by Carolyn Turk, Country Director for the World Bank in Vietnam

Hello and thank you for joining us today for the launch of our bi-annual Taking Stock Report. As you know these reports contain our analysis of Vietnam's recent macroeconomic trends and projections about Vietnam's economic prospects in the short to medium-term.

We are launching this report at a time, when the global economy has been experiencing a series of very large and very negative shocks including ongoing COVID-19 related disruptions and the supply shock associated with the war in Ukraine. Vietnam's economy has shown relative resilience and staged a strong rebound after last year's COVID-19 induced slowdown.

GDP expanded 6.4% in the first half of 2022, and we expect it to perform well for the rest of the year and 2023. Despite these strong headline figures, Vietnam faces heightened risks including rising inflation, continued disruptions in GVC supplies, reported labor shortages, and new COVID outbreaks that could hamper recovery both at home and in the rest of the world. If major economies and export markets such as the US, the euro zone and China slow down more sharply than we currently expect, Vietnam's exports could be further affected.

This edition of Taking Stock analyzes the major economic developments of the first half of 2021 and provides our medium forecast for the economy together with major domestic and global risks that could affect the outlook. We also lay out a set of policy recommendations that could help mitigate the impact of these risks and make the economy more resilient going forward.

As in previous editions of Taking Stock, we also include a second chapter that tackles a critical structural issue that we would like to highlight for you to think about and the authorities to act on. This time, we are focusing on tertiary and higher education, hence the title of the report which is "Educate to Grow."

This topic is critically important. Vietnam will need a skilled workforce to transform itself into an upper-middle-income economy by 2035. If Vietnam wants to transform its economic model to a dynamic, knowledge driven, productivity driven, digital and resilient economy, it needs a workforce with 21st century skills to grow.

Of course, we recognize that the authorities have done a great job in providing quality general education. The numbers show it: Adjusted for learning,Vietnam's average years of schooling is 10.2 years, second only to Singapore among the Association of Southeast Asian Nations (ASEAN) countries and its human capital index is 0.69 out of a maximum of 1, the highest among lower middle-income economies. However, when it comes to tertiary education, which includes both university and vocational training, the numbers are not as good as they should be. While most jobs in Vietnam continue to be for unskilled or skilled manual workers, firms do report difficulty in securing employees with technical, managerial or leadership skills. According to the World Bank skills and enterprise survey (2019), 73 percent of sampled Vietnamese firms report difficulties in recruiting employees with leadership and managerial skills, 54 percent with socio-emotional skills, and 68 percent with job specific technical skills.

The problem is related to both quality -relevance of the skills and employability of current graduates- as well as quantity - the number of graduates. In terms of quality, Vietnam currently ranks at the bottom third of the 140 countries listed in the 2018 Competitiveness Index on skills relevance of university graduates In terms of quantity, only 10.2 percent of the population aged 25 or older had completed a bachelor's degree or equivalent, as of 2019. Vietnam's tertiary gross enrollment rate was 28.6 percent, below regional comparators, and the average of 55.1 percent for upper-middle income countries. Right now, Vietnam has about 2 million enrolled at tertiary education institutions. In the long run, to meet upper-middle income enrolment levels, enrolment would have to rise to an estimated 3.8 million students, almost double the numbers in 2019.

To obtain this workforce, the authorities will need to undertake structural and policy reforms in the tertiary education sector, and we discuss these reforms in the second part of the report.

Thank you again for coming.