The year 2020 is a remarkable one for Vietnam, with the country’s Covid-19 control a success and economic resiliency catching the attention of the world.
Vietnam restrained the second wave of Covid-19 flare-up at Danang in August. It has registered a total of 1,304 infections and 35 deaths under the pandemic. At 13 infections and 0.4 deaths per million population, it counts among the successful countries in controlling the health crisis.
The per capita gross domestic product (GDP) in 2019 for Vietnam will be around $3,500, exceeding that of the Philippines’ $3,300. This year marks the first time that Vietnam’s per capita GDP catches up with that of the Philippines, a member of the original Asean-6. In 1995 when Vietnam joined the Asean, its per capita GDP was $277 as against the $1,062 of the Philippines.
In the economic area, Vietnam is registering growth of around 2.5 percent this year and expected to accelerate to more than 7.5 percent in 2021. The country’s GDP is going to exceed that of Singapore and Malaysia for the first time and rise to No. 4 in the Asean, behind that of Indonesia, Thailand and the Philippines.
Critical drivers for middle-income growth
Physical infrastructure investment and secondary school education are the critical drivers for middle-income country growth.
Vietnam succeeded in attracting many foreign direct investments (FDI), and it is the primary beneficiary in the global supply chain realignment that resulted from the China-US trade tension. The FDI was the key driver in turning the country from low-income to a lower-middle-income one in the last 20 years. Though its success story is overshadowed and not comparable to that of China, the country replicated the Chinese experience in building physical infrastructure and lifting secondary education standards to drive economic growth in the initial phase of economic takeoff. Middle-income country status is defined by per capita gross national income; it currently stands at $1,000 to $4,000 for lower-middle-income countries and $4,000 to $12,000 for the high-middle-income countries.
Vietnam has been consistently spending close to 5 to 6 percent of its GDP on infrastructure in the past two decades. Although it is lower than the 8 to 9 percent of China, it is much higher than the other major Asean countries’ 2 to 3 percent. The increased physical infrastructure investment had lowered business operation cost and attracted foreign direct investment.
The success of Vietnam inspired President Duterte’s Build, Build, Build infrastructure program and Indonesian President Jokowi’s 2019 $412-billion infrastructure program.
Secondary school education should be another focus area when a country is in the lower-middle-income country rank. A sound secondary school education focuses on reading comprehension, mathematics and science and prepares students with a good learning foundation to acquire manufacturing skills that foreign investors need in their operation.
The tri-annual Program for International Student Assessment (PISA) is a worldwide study by the Organization for Economic Cooperation and Development (OECD) in member and non-member nations intended to evaluate educational systems by measuring 15-year-old school pupils’ scholastic performance in mathematics, science and reading. Fifteen is the time of completion of junior high school and a career turning point for students who will decide to proceed to more academically oriented senior high school or employment-geared technical school. PISA results are used by many countries today as a yardstick to assess their secondary school education.
Vietnam has participated in PISA since 2012, but its 2018 data evaluation showed a large discrepancy and was not included in the final 2018 tabulation. Based on the last comparable official 2015 results, Vietnam’s performance ranked 22nd in mathematics, 8th in science and 30th in reading. The composite score of 502.3 placed the country 20th among the 70 participating countries.
Vietnam’s 2015 performance is behind that of the developed East Asian countries or territories that occupied seven of the top ten slots. It is ahead of the OECD member-countries’ 493 average, and of much more affluent Asean neighbor Thailand, which ranked 55th with a 415 score and Indonesia, which ranked 62nd with a score of 395.30.
The 2015 PISA assessment attracted 540,000 students representing 29 million students from 70 countries, and it reflected a good picture of a country’s student ability at 15 years old.
There was some controversy on Vietnam’s high score in 2015 and 2018 PISA. Still, most analysts agreed that Vietnam’s secondary school education improved significantly in recent years as compared to that of its Asean neighbors.
Covid-19 and infrastructure and education investment
Covid-19 highlights again the importance of infrastructure and education investment.
Covid-19 has highlighted the importance of technology and manufacturing in keeping the economy running. Most high skill-set jobs allow a work-from-home arrangement. Also, the manufacturing sector does not require close human contact that the low-value service sector needs.
With a soon-to-be-available effective vaccine likely ending the Covid-19 pandemic by the second half of 2021, the education crisis and the infrastructure inadequacy exposed by the health crisis should serve as the roadmap of government reform. When the Philippines joined the PISA program for the first time in 2018, the country ranked 76th among 77 countries. The Chinese word for “crisis” is a combination of danger and opportunity; the Philippines should take this crisis as a timely driver for serious reforms.
A nation’s progress goes beyond physical infrastructure or government — social organizations, media, the people also have their roles to play in the obstacles and massive opportunities in this game-changing period in the world.
Dr. Henry Chan is an internationally recognized development economist based in Singapore. He is also a senior visiting research fellow at the Cambodia Institute for Cooperation and Peace and adjunct research fellow at the Integrated Development Studies Institute (IDSI). His primary research interest includes global economic development, Asean-China relations and the Fourth Industrial Revolution.
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