World Bank urges Vietnam growth model shift by 2045
Mariam J. Sherman stated the country's current labour-intensive approach will not achieve high-income status, citing a peak in working-age population in 2014.
New model for high-income status
Vietnam must transition from its current labour-intensive development model to one focused on productivity and higher-quality employment. This shift is essential for the nation to attain high-income economy status by 2045, according to Mariam J. Sherman, World Bank country director for Vietnam, Cambodia, and Laos.
Speaking at the U.K.-Vietnam Business Forum in Ho Chi Minh City on 29 October, Sherman noted Vietnam's significant progress since the Doi Moi reforms. The country's GDP per capita has grown sixfold, now exceeding US$5,000, driven by trade liberalisation and foreign investment.
Limits of current drivers
The World Bank official cautioned that Vietnam's traditional growth engines are nearing their capacity. The working-age population peaked in 2014, and projections show citizens over 65 could double to 14% by 2035. This demographic trend risks Vietnam aging before it becomes rich, making productivity gains critical.
Currently, a manufacturing worker in Vietnam generates about US$6.70 in value added per hour, less than half of China's rate. Furthermore, foreign-invested companies, which account for 73% of exports, often operate with higher productivity and wages than domestic firms, with limited integration between the two sectors.
Infrastructure and climate priorities
The World Bank identified four key areas for Vietnam's next growth phase. First, improving job quality and closing skills gaps, particularly in digital and technical fields. Second, enhancing connectivity across markets, people, and regions. This includes upgrading transport and energy infrastructure, a task estimated to require about US$400 billion.
Third, transforming climate risks into economic opportunities. Vietnam faces a potential 12.5% GDP reduction by 2050 without adequate climate action, but a well-designed decarbonisation strategy could boost GDP by nearly 3% by 2040. Fourth, institutional reform, shifting government's role to enabling and regulating economic activity.
The World Bank's recommendations signal substantial future investment opportunities within Vietnam. The estimated US$400 billion needed for transport and energy infrastructure upgrades presents a clear roadmap for construction, engineering, and energy firms.
Furthermore, the push for decarbonisation strategies could open new markets for green technology and sustainable development projects. Investors should also note the proposed institutional reforms, which aim to streamline economic activity.
This shift could lead to a more predictable regulatory environment for foreign direct investment and foster stronger links between international and domestic businesses in Vietnam.
This article is journalism, not investment advice; consult a licensed professional before making financial decisions. Market data is indicative, may be delayed, and should be verified with your broker or exchange before use.
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