Vietnam’s High Income ambitions by 2045

Vietnam has announced its ambition to be a high income country by 2045, which some may consider to be a major challenge. It is true that Vietnam has shown remarkable growth in per capita income from around US$ 100 per year at the end of the 1980’s to almost US$ 2,800 last year, but to achieve high income status we are talking about a figure of over US$ 12,000 (World Bank 2018 figures).

One of the necessities for Vietnam will be greater integration into the regional and global supply chain. In 2018, Vietnam generated only about US$ 20 billion from participation in the global supply chain ranking 55^th out of 174 countries[1]. Greater participation in the global value chain is a necessity to increase productivity and growth and as mentioned in previous Insights, Vietnam has historically performed poorly in comparison to regional neighbours, in this area. It is also interesting to note that there is an inextricable link between high rates of productivity and education and institutional quality.

Also of note is the World Development Report 2020, which confirms that a 1% increase in Vietnam’s participation in the global supply chain would increase per capita income by more than 1% (more than double the increase from international trade.

The movement of manufacturing from China by both Chinese and other foreign companies will of course continue and the pace will speed up after the re-opening of Vietnam’s international borders but this alone will not help Vietnam’s participation in the global supply chain, unless foreign invested companies work more closely with Vietnamese enterprises to help them develop their component supply capability.

Another factor in achieving, the goal by 2045 will be sustainable development in infrastructure and energy and particularly investment in renewables. A positive of Covid is the Government’s policy of speeding up Government spending on infrastructure projects but some of these projects need to be carefully re-evaluated, in the light of expected changes post Covid.  For example, the demand for air travel is likely to take a number of years to recover so the need to build new airports and expansion of existing facilities needs to be re-evaluated.

Vietnam’s aspirations are ambitious but after 30 years working and living here I know the tenacity and the resilience of the Vietnamese people and with the right support from strategic partners and bi-lateral organisations and investment in education and productivity I am sure Vietnam will succeed.

[1] Victoria Kwakwa Vice president World Bank East Asia and Pacific – Vietnam Reform and Development Forum