VietNamNet Bridge – Local and foreign experts have projected Vietnam could face high socio-economic risks by 2035 while other countries in Eastern Asia may have made breakthroughs.

They gave the warning in a draft report on Vietnam in 2035, a joint study by the Vietnamese government and the World Bank (WB) focusing on how the country can achieve its objectives to become a modern-oriented nation that is wealthy and provides room for its people to prosper.

Economic challenges

According to initial calculations by economists composing the Vietnam 2035 report, Vietnam would experience a bumpy development path towards 2035.

Nguyen Dinh Cung, president of the Central Institute for Economic Management (CIEM), said if Vietnam’s gross domestic product (GDP) grows 5% a year, Vietnam’s GDP per capita in 2035 would be just 75% of China’s and 83% of Thailand’s at present.

For a 7% growth rate, Vietnam’s GDP per capita in 2035 would be 98% of the current level of Malaysia and 83% of China’s. However, 7% growth is a hefty challenge if the Government fails to remove institutional barriers to economic growth, Cung said.

Expert Nguyen Quang Thai said Vietnam’s GDP per capita in 2035 might reach over US$10,000 or US$15,000, or equivalent to that in Malaysia at the moment. In 2014, Malaysia’s GDP per capita hit the world average.

This suggests that Vietnam’s GDP is currently equivalent to only 20% of the global average. Vietnam’s plan to become a modern-oriented industrialized economy is too ambitious, he said.

Vietnam may also fail to realize other targets such as industrialization and economic restructuring to become an industrialized country by 2020.

According to the Knowledge Economy Index (KEI), Vietnam ranked 102nd out of 103 economies worldwide in 2008-2012. The Asian Development Bank (ADB) predicted that Vietnam would get near the average growth of the world by 2050 if conditions are favorable, Thai said.

Sandeep Mahajan, chief economist of the WB in Vietnam, said Vietnam recently has made the most of its deeper participation in international markets to support sustainable growth of GDP per capita and reduce poverty quickly.

In 2013, Vietnam’s ratio of commercial activities over GDP was 164%, which was among the highest in ASEAN. Since 2000, exports of manufactured goods have increased strongly with a nominal growth rate of 23% a year, reaching US$94.6 billion in 2013.

However, Mahajan said Vietnam will benefit much from trade liberalization. For instance, the Trans Pacific Partnership (TPP) is expected to help Vietnam boost GDP growth.

Social pressure

The WB expert said Vietnam is entering a period of pressed growth and this has piled pressure on policymakers.

More young people are leaving the agricultural sector in rural areas to work in industrial and services sectors in cities. While Vietnam has been ready for rapid development, it is necessary to implement overall reforms in infrastructure and business environment to obtain sustainable growth.