Vietnam Competitiveness Report

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National Competitiveness: Issues for Vietnam
Meeting with Prime Minister Phan Van Khai and his delegation

Professor Michael E. Porter Institute for Strategy and Competitiveness Harvard Business School Cambridge, Massachusetts June 24, 2005 This presentation draws on Michael Porter, Klaus Schwab: The Global Competitiveness Report 2004-2005, Oxford University Press, 2004 and other sources. For further information on the Report and on the Institute for Strategy and Competitiveness see www.isc.hbs.edu

200506 GCR Vietnam – KC 2005.06.24.ppt

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Copyright 2005 © Professor Michael E. Porter

Topics for Discussion

• • • •

National competitiveness: essential concepts Competitive assessment of Vietnam Key issues for Vietnamese policy Profile of the Institute for Strategy and Competitiveness

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Copyright 2005 © Professor Michael E. Porter

What is Competitiveness?
• Competitiveness is determined by the productivity (value per unit of input) with which a nation, region, or cluster uses its human, capital, and natural resources. Productivity sets a nation’s or region’s standard of living (wages, returns on capital, returns on natural resources) – Productivity depends both on the value of products and services (e.g. uniqueness, quality) as well as the efficiency with which they are produced. – It is not what industries a nation or region competes in that matters for prosperity, but how firms compete in those industries – Productivity in a nation or region is a reflection of what both domestic and foreign firms choose to do in that location. The location of ownership is secondary for national prosperity. – The productivity of “local” industries is of fundamental importance to competitiveness, not just that of traded industries – Devaluation and revaluation do not make a country more or less “competitive”

• •

Nations or regions compete in offering the most productive environment for business The public and private sectors should play different but interrelated roles in creating a productive economy 3
Copyright 2005 © Professor Michael E. Porter

200506 GCR Vietnam – KC 2005.06.24.ppt

Determinants of Competitiveness

Macroeconomic, Political, Legal, and Social Context Macroeconomic, Political, Legal, and Social Context

Microeconomic Foundations Microeconomic Foundations
The Sophistication The Sophistication of Company of Company Operations and Operations and Strategy Strategy The Quality of the The Quality of the Microeconomic Microeconomic Business Business Environment Environment

• A sound macroeconomic, political, legal, and social context creates the potential for competitiveness, but is not sufficient • Only firms can create wealth, not government 200506 GCR Vietnam – KC 2005.06.24.ppt

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Copyright 2005 © Professor Michael E. Porter

Productivity and the Business Environment
Context for Context for Firm Firm Strategy Strategy and Rivalry and Rivalry A local context and rules that encourage investment and sustained productivity improvement Demand Demand –e.g., Intellectual property Conditions protection Conditions Meritocratic incentive systems across all major institutions Sophisticated and demanding Open and vigorous local local customer(s) competition Local customer needs that anticipate those elsewhere Related and Related and Unusual local demand in Supporting Supporting specialized segments that can be Industries served nationally and globally Industries Access to capable, locally based suppliers and firms in related fields Presence of clusters instead of isolated industries

Factor Factor (Input) (Input) Conditions Conditions
Presence of high quality, specialized inputs available to firms – Human resources – Capital resources – Physical infrastructure – Administrative infrastructure (e.g. business registration, rules, licensing, property rights) – Information infrastructure – Scientific and technological infrastructure –...
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