World Bank: Vietnam able to reach US$18,000 annual income by 2035

By    February 29, 2016 | 03:47 pm GMT+7

The World Bank has laid out the road map for Vietnam to become an upper-middle-income country in the next 20 years in the report titled Vietnam 2035: Toward Prosperity, Creativity, Equity, and Democracy.

In the report titled "Vietnam 2035: Toward Prosperity, Creativity, Equity, and Democracy" it says Vietnam will need to grow at a minimum rate of 6 percent a year to reach an annual income of US$18,000 in terms of purchasing power parity in 2011, equivalent to a more than threefold increase from the average income of US$5,370 in 2014.

The report, jointly prepared by the Vietnamese government and the World Bank Group, presents a series of recommendations for Vietnam to become an upper-middle-income country in the next two decades.

The World Bank forecast Vietnam’s US$200 billion economy is likely to grow to a trillion dollars by 2035 with more than half of its population, compared with only 11 percent today, expected to join the ranks of the global middle class with consumption of US$15 a day or more.

The Vietnam 2035 report includes recommendations based on three major pillars that would help Vietnam to achieve such development targets: (i) economic prosperity, balanced with environmental sustainability; (ii) equity and social inclusion; and (iii) state capacity and accountability.

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The growth target is specifically supported by increased technology innovation, efficient and sustainable urbanization and resilience against climate change.

The report highlights the importance of empowering the private sector so that Vietnamese private businesses will be more competitive both in the domestic and global market.

A stronger private sector will greatly contribute to Vietnam’s economic development. So it is important to create a favorable environment for domestic private enterprises, said the report, urging Vietnam to facilitate its long-running equalization of state-owned enterprises (SOEs).

Statistics show that SOEs take up nearly 40 percent of total investment but contribute only a third of Vietnam’s GDP.

More than 3,000 SOEs “continue to inhale too much oxygen out of the business environment, undermining economy-wide efficiency and crowding out the productive parts of the private sector”, stated the document.

The World Bank suggests because Vietnam has “too many” SOEs, the government should retain its stake in about 20 “parent” companies by 2035.

But economic growth alone would not be enough to improve the quality of life of all Vietnamese people. Hence the report advises the country to promote political and institutional reforms, foster social equity and inclusion, and sustain the natural environment.

Vietnam is one of five countries likely to be most affected by climate change. And agriculture is projected to be severely hit as “annual rice production could reduce by three to nine million tonnes by 2050 and highly productive areas of coffee plantations may become unsuitable for the purpose”. In the face of such challenges, Vietnam is advised to have strong policies and institutions to enforce regulations for the effective management of natural resources and mitigation of environmental pollution.

According to the report’s data, Vietnam’s extreme poverty rate has fallen from 50 percent in the early 1990s to three percent today. That three percent is mostly ethnic minorities in the least developed areas of the country. The World Bank experts suggest Vietnam focus on closing “the gap in opportunities” for these most vulnerable people. Other reforms include expanding the pension system to cover a majority of the population; increasing the number of upper-secondary school students; and achieving universal health coverage based on a high-quality primary care system.

Last but not least, Vietnam will be more likely to attain its goals for 2035 with comprehensive governance reform, as the report suggests, which depends on “institutions that are accountable, transparent, and firmly rooted in the rule of law”.

 
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