Vietnam’s service sector has emerged as the largest sector in the economy and the biggest contributor to the overall growth rate, the World Bank says in a new report released last week.

“This trend is being facilitated by two factors: a slowdown in the growth of industrial and agriculture sectors and increasing cross-border trade in services,” the report says.

It notes that Vietnam has seen a big boost in tourist intake in recent years, which has led to significant foreign direct investment into real estate and hospitality sectors. The country is also beginning to receive investment from information technology firms and its software industry is “growing rapidly, albeit from a small base.”

The Washington-based bank forecasts that the service sector will contribute to around 42-43 percent of output this year, compared to 42 percent by industry and 15-16 percent by agriculture

However, it points out that a lack of adequate manpower with tertiary education and appropriate skills set has already emerged as one of the main constraints to future growth of the services sector.

Vietnam seems to be going through a “slow but steady” sectoral transformation, the report says.

Until recently, Vietnam’s growth story has been about its ability to produce low skilled, labor-intensive mass manufactured products and generate massive amount of surplus cooking items and agricultural commodities for exports.

But now the traditional sectors are experiencing lower growth, even though it’s difficult to say whether this is temporary or long-term.

“The industrial sector has seen its growth rate fall after each major macroeconomic crisis: first during the East Asian crisis in the late 1990s and now with the recent global economic crisis,” the report says.

Vietnam’s industrial sector posted double digit growth for most of the time between 1991-2011, but now its growth has slowed to less than 6 percent.