Vietnam seeks to avoid middle-income trap before time runs out and population ages
Vietnam has become richer, but it remains a lower middle-income country facing a risk of being left behind. It aims to become a high-income country by 2045.
“We need to make right and timely decisions, because time is gold and it is also our enemy,” said Minister of Planning and Investment Nguyen Chi Dung at a conference reviewing the 2016-2020 period.
He said that Vietnam’s position and power has improved considerably, but the risk of falling into the middle-income trap still exists.
Vietnam’s economy, as revised by the General Statistics Office (GSO), had value of $332 billion in 2019 while GDP per capita was $3,442. The figures were expected to reach $340 billion and $3,490, respectively, in 2020.
Based on the recalculations, Vietnam has set new goals for socio-economic development in 2021-2025: 6.5-7 percent GDP growth rate and $4,700-5,000 GDP per capita by 2025.
In its report on socio-economic development in 2016-2020, the Ministry of Planning and Investment (MPI) pointed out that the economic growth rate was lower than targeted, while the gap between Vietnam and other regional countries still has not narrowed. The risk of falling into the middle-income trap and the possibility of lagging further behind remain big challenges.
Minister of Industry and Trade Tran Tuan Anh, in his article published in Tap Chi Cong San (Communist Review) in November, pointed out that the middle-income trap occurs when a country slows down in development or becomes stagnant after attaining GDP per capita of between $1,000 and $12,000 under World Bank standards.
Japan, South Korea and Singapore succeeded in the last 60 years in maintaining uninterrupted growth to turn from low income to high income countries. Meanwhile, other countries are still among middle income countries and have not become high income countries (Malaysia, Thailand, Indonesia and the Philippines).
According to the World Bank, Japan became a middle-income country in 1966. Singapore reached GDP per capita of over $1,000 in 1971. South Korea and Malaysia both reached the threshold in 1977, Thailand in 1988, and Indonesia and the Philippines in 1995.
The GDP per capita of these countries in 2019 were: $40,248 for Japan, $65,233 for Singapore, $31,761 for South Korea, $11,414 for Malaysia, $7,808 for Thailand, $4,135 for Indonesia and $3,485 for the Philippines.
|Vietnam became a middle-income country in 2008. Vietnam still needs to build many platforms to become a high income country. Time is not waiting. Speeding up is a necessity, especially when Vietnam has entered a new development stage, striving for an ambitious goal of becoming a high income country by 2045.|
As such, only Japan, South Korea and Singapore have become high income countries.
A study by the Asian Development Bank (ADB) in 2018 found that the average time a country needs to go from a lower average country to a high income country is 30 to 40 years. After the ‘golden period’ finishes, if the income of a country doesn’t increase, it will be officially be seen as falling into the middle-income trap.
Vietnam became a middle-income country in 2008. Vietnam still needs to build many platforms to become a high income country. Time is not waiting. Speeding up is a necessity, especially when Vietnam has entered a new development stage, striving for an ambitious goal of becoming a high income country by 2045.
The speech delivered by Dung at the conference on January 8 conveyed the minister’s message that it is necessary to proceed and go fast.
“As general staff, we need to persevere, pioneer and accelerate reform, and conduct research policies on the economy, accelerate investments in infrastructure to improve our strength, prepare a high-quality labor force, and carry out digital transformation, science and technology research and innovation,” he said.
He said that it was necessary to take full advantage of human resources to develop the country in the golden population period, before Vietnam enters the aging population stage.
This is also a task assigned by PM Nguyen Xuan Phuc to MPI when he attended the conference on the 75th anniversary of the sector establishment.
At the conference, Phuc once again repeated a task that he has mentioned during his term – taking full advantage of the golden population structure 'to get rich before becoming old, not get old before becoming rich' .
“In order to go fast, Vietnam needs to choose the right way,” Dung said. “All policies need to aim at people’s happiness, because people are both the subjects and the targets. We must not once again stand outside or go behind,” he said.
A recent article in the French daily newspaper Le Figaro spoke highly of Vietnam’s economy amid the adverse impacts for the global economy brought about by COVID-19.
The COVID-19 pandemic has had a heavy impact on every aspect of life in 2020, and the global economy had been especially hard hit.