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Cover Page

Contents

1. Introduction
.3-6
a. Economic
Growth
..3
b. Five phases of Economic
development4-5
c. Link between National Competiveness and Economic
growth.6
2. Main
Body
6-8
3. Conclusion
9-11
4. References

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..12-13

1. Introduction
a. Economic Growth
Economic growth is defines as an increase in the capacity of an economy
to produce the goods and services as compared with one period of time to
another. Economic growth is basically attached with technological change.
An example of which is the massive growth In the economy of U.S
because of the introduction of internet and the technology which brought
the whole U.S economy to grow enormously.

Economic growth can be

measured in nominal terms in which inflation is included. In order to


compare one countrys economic growth to another, Gross domestic
Product (GDP) and Gross National product per capita, (GNP) can be used
because

these

also

considers

the

population

differences.

(Investopedia.com, 2005). The principle causes of economic growth are


increase in capital stock, modernization or advancement in technology
and improvement in the quality & level of literacy. Economic growth
usually means an increase in the Real GDP which means that there is an
increase in the national output and national income of a particular country.

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(Causes of economic growth, 2016).

In the most recent years, the idea of sustainable development has created
additional features such as environmentally and ecofriendly sound process
should be considered in order to achieve economic growth. (What is
economic growth? Definition and meaning, 2016)

Economic Development
Economic development refers to an increase in the living conditions and
an improvement in the self-esteem needs of the citizens of a country.
Economic development basically refers to the sustained, actions of
communities and policymakers that enhance the living standard and
economic health of a specific locality. Economic development can be
measured by the Human development index which considers the literacy
rates & life expectancy which in turn has an instant impact on the
productivity

that

could

lead

to

the

economic

growth.

(Economic

development, 2012)
It is quite possible to have economic growth with the economic
development which is an increase in the GDP but most of the people dont
see much of a difference or improvements in the living standards.
(Pettinger, 2011)

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b. Five Phases of Economic Development

Walt Rostow took an historical approach in explaining that developed


countries are required to pass through five stages to attain their current
degree of economic development.
1. Traditional Society
The initial stage of traditional society signifies an archaic society
having no access to modern science and technology. (Guru, 2014) This
is an agricultural economy of primary subsistence farming. In such
society the size of capital stock is limited and of low quality which
results in very low labour productivity and because of such reasons,
only little amount of output is left to sell in the market. (Rostow - Five
stages of economic growth model | economics, 2015)

2. Pre-Conditions for Take of


These conditions mainly consist of fundamental changes in the social,
political and economic fields such as:
a. A change in the societys attitude towards risk taking, science
and profit earning.
b. The labour force adaptability.
c. The political sovereignty
d. The development of financial institutions and the centralized tax
system. (Guru, 2014)
3. Take of
In this phase, the manufacturing industry gets more importance,

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although the number of industries remains small. Under such phase the

political and social institutions start to develop. Savings and


investment grow around 15% of the GDP. (Rostow - Five stages of
economic growth model | economics, 2015)
4. Drive to Maturity
In this phase the industry becomes more diverse and the growth should
spread to more parts of the world to achieve higher level of economic
growth and development. (Rostow - Five stages of economic growth
model | economics, 2015)
5. Age of Mass consumptions
In the last stage, the level of output grows which increases the
consumer expenditure in terms of food, clothing and shelters to articles
of comforts & luxuries on a large scale. (Guru, 2014)

c. Link between National Competitiveness and


Economic Growth:
The Global competitiveness Index is treated and known as the standard to
measure the competitiveness of the countries. Similarly the national
competitiveness index is used to measure a countrys competitiveness as
compare to other nations. The leaders take it very seriously which helps
them to make the policy and resource allocation decisions because global
and national competitiveness can be related to economic growth because
by evaluating the countrys competitiveness the leaders of the country

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could take the decisions accordingly which could help them to achieve

higher economic growth. (Global Competitiveness and Economic Growth:


A One-Way or Two-Way Relationship, 2015)

2. Main Body
a. According to the Global Competitiveness report, 2015-2016,
there is a table mentioned in which all the countries are listed
according to their current stages of development. In that
report, Vietnam exists at the transition from stage 1 to stage 2
meaning that the country is moving from traditional society to
pre-conditions to take off. There was a lack of access and
awareness of science and technology in the country but now
the country is moving towards adapting better science and
technology measures and changing their attitudes towards
risk

taking,

science

and

profit

earning.

Vietnam

is

development success story because political and economic


reforms which was launched in 1986 transformed the whole
country from one of the poorest in the world to having a per
capita income of US $100, to lower middle income status
within a quarter of a century with a per capital income of US
$2100 at the end of 2015. Not only the income has got better
but also the people in Vietnam are more educated and have a
higher life expectancy rate as compare to other countries
which has the same per capita income. Vietnam has also
boosted its international economic integration because it
enters into more free trade agreements with the Eurasian

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European Union, European Union, the transpacific partnership

and South Korea. The establishment of ASEAN Economic


Community which was established in December 31st, 2015 is
more likely to create several opportunities for the country in
order to integrate into regional and global economies.
(Vietnam overview- World bank, 2016)
b. Under the global competiveness index, overall the rank of
Vietnam in the basic requirement out of 140 countries is 72
and the score is 4.5 out of 7. Under the basic requirements,
the 1st pillar of institutions has a rank of 85 and a score of 3.7,
where as in the 2nd pillar of Vietnams infrastructure the rank is
76 and the score is 3.8. The third pillar of macro environment
possesses at the 69th position amongst 140 countries and has
a score of 4.7. The fourth and the last pillar under the basic
requirements is Health and primary education in which
Vietnam holds at the 61st position and a score of 5.9.
The second subindices are the efficiency enhancers under
which Vietnam has an overall holds the rank at 70 th position
with a score of 4. Under the fifth pillar of higher education and
training, Vietnam is at the 95th rank with a score of 3.8. Under
the 6th pillar of Goods market efficiency, Vietnam has a
position of 83 and a score of 4.2. The 7 th pillar of labour
market efficiency has a rank of 52 of Vietnam and a score of
4.4. Under the 8th pillar of financial market development,
Vietnam holds a rank at 84th position and a score of 3.7 out of

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7. The second last and the 9th pillar under the efficiency

enhancer is technological readiness in which Vietnam is at the


92nd position where as it has a score of 3.3. Vietnam is ranked
at 33rd position and a score of 4.8 under the 10 th pillar of
market size.
Lastly under the subindices of innovation and sophistication
factors, Vietnam exists at the 88th position with an overall
score of 3.4, whereas under the 11th pillar which is of business
sophistication, Vietnam ranks at 100 th position with a score of
3.6. Lastly the 12th pillar of innovation depicts that Vietnam
ranks at 73rd position with a score of 3.2 out of 7. (Global
Competiveness Report, 2015-2016)
c. As mentioned above, currently Vietnam is at the transition
stage of the economic development which means that the
country is

looking

forward

to

the next

phase of

the

development. According to me there is a lack of financial


institutions and a proper centralized tax system in Vietnam, if
I would have given a task to make corrective measures so that
Vietnam can move towards the next phase in the economic
development stages. I would have proposed an idea to create
more financial institution through which lending can borrowing
can

be

accessible

because

according

to

the

Global

competitiveness report, 2015-2016, the most problematic


factor for doing business in Vietnam is to have an access to
financing which has a score of 12.5. There is another factor

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which needs to be improved in Vietnam i.e. lack of educated

workforce which needs to be minimized in order to get to the


next level of economic development because under the stage
of pre-conditions for Take-off, people changes their attitudes
towards taking risk and shows an adaptability science and
technology which can be achieved only if there are more
educated people in the country. (Global Competiveness
Report, 2015-2016)

3. Conclusions:
a. Inclusive Growth
Inclusive growth is basically an economic growth which
creates an opportunity for all the segments of the population
and distributes the dividends of the increased prosperity i.e.
both in monitory and non-monitory terms. In many countries,
people have not seen a rise in their incomes for so long.
Therefore, the gap between rich and poor has been widened
significantly. Rising inequality in income and in wealth is a
very major concern but the truth is that money is one aspect
of peoples wellbeing. In every aspect of life, whether it is
education, life expectancy or the employment prospects, the
success is determined by our socio-economic status, wealth,
age, sex or the place where we live, money plays a vital role in
our life. (OECD, 2016) Inclusive growth is basically a concept
that

advances

participants

equal

during

opportunities

economic

growth

for
with

the
the

economic
benefits

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received by every part of the society. Inclusive growth implies

direct connection between the macro and micro economic


determinants of the economy and the economic growth.
b. There are three main aspects of the Vietnam Economy i.e.
firstly it is in the transitional phase, secondly the country has
put forward its foot to globalization i.e. it joined ASEAN in
1995, signed the BTA with US in the year 2000 and joined
WTO in the year 2007. Moreover, Vietnam is still in the
developing phase and tried to its best to increase its per
capita income from US $ 790 in 2007 to US $ 2100 in 2015.
Vietnam has gradually stabilized its economy in the last
decade in terms of its GDP, per capita GDP and its CPI. As far
as the inclusive growth in concerned, poverty reduction and
social protection policies are always amongst the top priorities
of Vietnams government because 70,868 billion VND was
allocated for the poverty reduction in the year 2011 and 2012.
Not only this but also a comprehensive policy coverage has
been provided for the poor and the deprived in almost every
aspect of living i.e. health, education, housing, legal, nutrition,
culture, services, information and vocational training support
etc. The growth in Vietnam is inclusive in the new decade
because several steps have been taken by the government to
provide equal opportunity to the people at large. In the new
growth structure, the government has found ways to reduce
its systematic risk and the Vietnams government is focussing

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on reducing risk so that it can strengthen the social protection.

Not only this but the country has focussed on providing more
jobs to the people living in rural areas due to which the
unemployment rate has also been decreased in the recent
years. The government has also emphasized in providing
medical care to the needy and the government has even
supporting labour intensive manufacturing and small medium
enterprises (SMEs) and household businesses (HHs). In a
nutshell, it can be concluded that the current economic
development and growth of Vietnam is considered to be an
inclusive one and the government is making the best of its
effort to achieve a higher stage in the phases of economic

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development. (Chung, 2015)

4. References

Investopedia.com (2005) Economic growth, in Available at:


http://www.investopedia.com/terms/e/economicgrowth.asp

Causes of economic growth (2016) Available at:


http://www.economicshelp.org/macroeconomics/economicgrowth/causes-economic-growth/

What is economic growth? Definition and meaning (2016) in


Available at: http://www.businessdictionary.com/definition/economicgrowth.html

Pettinger, T. (2011) Difference between economic growth and


development. Available at:
http://www.economicshelp.org/blog/1187/development/economicgrowth-and-development/

Guru, S. (2014) Rostows five stages of growth explained! Available


at: http://www.yourarticlelibrary.com/economics/rostows-five-stagesof-growth-explained/38235/
Rostow - Five stages of economic growth model | economics (2015)
Available at: http://www.tutor2u.net/economics/reference/rostowfive-stages-of-economic-growth-model

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Kordalska, A. and Olczyk, M. (2015) Global Competitiveness and


Economic Growth: A One-Way or Two-Way Relationship? Available at:
https://ideas.repec.org/p/pes/wpaper/2015no63.html

Vietnam overview-World Bank (2016) Available at:


http://www.worldbank.org/en/country/vietnam/overview

Global competitiveness report 2015-2016 (2016) Available at:


http://reports.weforum.org/global-competitiveness-report-20152016/

OECD (2016) Inclusive growth - Organisation for economic Cooperation and development. Available at:
http://www.oecd.org/inclusive-growth/
Chung, D.T.K. (2015) Inclusive Growth in Vietnam. Available at:
http://www.adb-asianthinktanks.org/sites/all/themes/webmateresponsive-theme/knowledgeresources/Inclusive%20Growth%20of
%20Vietnam_Chung.pdf

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