The average income was much higher than US$2,052 or US$5,370 in purchasing-power parity terms in 2014, said a review of the Vietnam 2035 report. 

Jointly prepared by the Vietnamese Government and the World Bank Group (WB), the report presents recommendations to help Vietnam reach the upper-middle-income status over the next 20 years.

The Vietnam 2035 report “Toward Prosperity, Creativity, Equity and Democracy” comprises seven chapters with six key transformations serving as the foundation for realizing the 2035 aspirations. They include enabling economic modernization with a productive and globally competitive private sector, building the country’s technological and innovative capacity, managing urbanization and other forms of spatial transformation to achieve economic efficiency, charting an environmentally sustainable development path with enhanced capacity for climate resilience, promoting equality and inclusion among marginalized groups, and building a modern state governed by the rule of law.

These six breakthroughs are structured in three key pillars about economic prosperity with environmental sustainability, equity and social inclusion, and capacity and accountability of the state.

As for economic prosperity, Vietnam is urged to urgently improve labor productivity as it is ranked very low compared to other countries in the region.

The low labor productivity is attributable to old economic and labor structures. More people are working in the informal sector than in the formal sector and over 44% of the total workforce is in agriculture, a sector which produces low added value.

“Improvements in productivity, environmental protection and economic innovation can help Vietnam maintain high levels of growth,” WB Group President Jim Yong Kim said.

Other problems are slow improvements in the country’s market economy model and inefficient allocations of capital, land and natural resources.

Regarding the third pillar dealing with the enhancement of the state’s capacity and accountability, the report said the productivity stagnation and the weak environment for private sector development are related to state effectiveness.

State effectiveness rests on three supporting pillars, which are a well-organized government with a disciplined and meritocratic bureaucracy, an adherence to market rationality in economic policy making, and a mechanism to ensure checks and balances in the government and public participation.

Vietnam’s legal framework has given citizens some space to participate in governance. But in practice, there lies a gap between statements about citizen participation and the actual space for them to influence decisions.

Minister Vinh warns of middle-income trap

Vietnam will not be able to make full use of opportunities and overcome challenges and be likely to fall into a middle-income trap if the country does not speed up reforms, according to Minister of Planning and Investment Bui Quang Vinh.

Vinh made the comment on February 23 at the launching ceremony of the Vietnam 2035 report, which was attended by representatives of the Government and the World Bank (WB), ambassadors, and hundreds of local and international guests. The event was co-chaired by Deputy Prime Minister Vu Duc Dam and WB Group President Jim Yong Kim.

According to Vinh, the reform and development needs are now more urgent than ever.

Vietnam has just around ten years left for its golden population structure. Besides, motivations of the previous reforms are now becoming less effective while room for growth based on investment capital, cheap labor and natural resources is getting narrow.

Vietnam is intensifying international integration, so it is a must to improve the economy’s competitiveness. 

With the aforementioned reasons, Vietnam must step up reforms, Vinh said.

“To reach our goal of becoming a prosperous, creative, equal and democratic Vietnam, our only choice is to implement the reforms recommended in the Vietnam 2035 report,” Vinh said.

He added without the reforms, it would be hard for Vietnam to avoid falling into the middle-income trap. “We see these reforms as a continuation of the historic Doi Moi (reform) process and we believe the current and future generations of the Vietnamese have the will, determination, courage and capacity to successfully implement these changes.”

He said since 1986, the average income per capita has quadrupled and the poverty rate has dropped from over 50% to 5%. However, Vietnam is still a poor country in comparison to many other regional countries. 

According to the minister, in the early 19th century, Vietnam held a respectable position in the region in terms of population and economy. Vietnam’s per capita income was close to the world’s average then.

Nonetheless, average per capita income of Vietnam in 2014 was one-fifth of the world’s (US$2,052 compared to US$12,000), a third of Thailand’s US$5,977 and a fifth of Malaysia’s US$11,307.

Vinh noted Vietnam had to go through difficult times in the past but it has had 40 years living in peace, which was long enough for South Korea, Japan and Taiwan to grow from poor agriculture-based to developed economies.

According to Kim of the WB, Vietnam has risen from one of the poorest countries to a lower-middle-income country over the past decades.

Kim said the Vietnam 2035 report reflects Vietnam’s aspirations to become a modern, industrialized nation, adding the recommendations in the report will help Vietnam achieve its goals.

Source: Saigon Times.