A new report recommending steps to help lift Vietnam to upper middle-income status in two decades suggests that the country build a more competitive private sector, support smart urbanization, promote innovation and take advantage of increasing trade opportunities to enact broad structural reforms.
The “Vietnam 2035” report, prepared by the World Bank and the government of Vietnam, lays out key reforms for the lower-middle income country to grow its economy, become more equitable and put in place modern governance over the next 20 years.
Reaching the ambitious goal of upper middle-income status would require Vietnam to grow at least 7 percent annually, raising the average income level to more than $7,000 — or $18,000 in purchasing-power parity terms — by 2035, compared with $2,052, or $5,370 in PPP terms, in 2014.
“In the last 30 years, Vietnam has become one of the world’s great development success stories, rising from the ranks of the poorest countries,” said World Bank Group president Jim Yong Kim. “On the strength of a nearly 7 percent average growth rate and targeted government policies, tens of millions of people have lifted themselves out of extreme poverty.”
Kim said the report, with inputs from international and Vietnamese experts, reflects the Southeast Asian country’s aspirations of becoming a modern, industrialized nation within a generation.
“Improvements in productivity, environmental protection and economic innovation can help Vietnam maintain high levels of growth,” Kim said. “It will be critically important to remove barriers that exclude marginalized groups and deliver quality public services to an aging and urbanizing middle-class. The report recommends that Vietnam build modern and more transparent institutions — those steps will help the country meet its ambitious goals.”
The agreement to work on the joint report was made in Hanoi between Prime Minister Nguyen Tan Dung and Kim in July 2014. The report was produced by a joint team from Vietnam’s Ministry of Planning and Investment, the World Bank Group and private sector experts from Vietnam.
The report focuses on three areas: improving productivity and private-sector competitiveness, promoting equity and social inclusion, and improving public sector effectiveness.
The report recommends Vietnam take steps to strengthen the economy and financial sector, with a focus on more effective regulation, protection of property rights and enforcement of competition policies. It suggests that Vietnam consider new policies and investments supporting the growth of industries linked to global supply chains, along with smarter use of major international trade agreements like the Trans-Pacific Partnership.
The 12-nation TPP, now awaiting ratification from the participant countries, including the U.S., is aimed at lowering or eliminating tariffs and other barriers to trade. President Obama said Monday the pact faces a difficult road to approval in Congress, but that he was “cautiously optimistic” it would eventually be OK’d.
Improvements to the agriculture sector, which employs nearly half Vietnam’s workforce, as well as stronger environmental protections and better planning for clean energy generation are also recommended.
The report says Vietnam can continue fostering social inclusion and equality by providing greater access to opportunities for minorities, people with disabilities and women, and providing services to an aging, urbanizing and middle-class society. Though Vietnam has made impressive progress on the inclusion agenda, the report noted, ethnic minorities comprise half of the country’s poor despite being only 15 percent of its population of 94.3 million.
In addition, the report recommends governance improvements to help boost accountability and transparency, and ensure Vietnam has strong institutions to keep pace with its rapid development. The report suggests adopting a more unified government structure that more clearly defines the economic functions of the state, reduces its role in direct production, and clarifies boundaries between the private and public spheres.