Vietnam approaches the middle-income trap
Vietnam approaches the middle-income trap
Signs of the middle-income trap have appeared since 2008 and they are increasingly clearer, said a researcher from the Institute of Japan National Policy Research, Kenichi Ohno.
"A nation that cannot create addedvalue from the existing advantages of natural resources, trade, FDI, ODA ... is considered to have fallen into the trap," said Dr. Kenichi Ohno at a workshop held by Central Institute for Economic Management in Hanoi last week.
In 2008, Vietnam reached per capita income above $1,000 and became a low middle-income country according to the criteria of the World Bank (WB).
After six years, the signs of "middle income trap" in Vietnam have become more clear due to slow growth, poor productivity, formal restructuring, low ranking in global indexes, and problems arising from growth, the Japanese researcher said.
"Most notably, growth in Vietnam is mainly driven by investment, with very little improvement in productivity, while wages rise faster than labor productivity. The middle income trap of Vietnam is right here," he added.
Vietnam has reached the middle income ($1,730), but the creation of added value is at a stagnant level and the country lacks the ability to promote industrialization and develop a vocational training policy, in addition to a policy to support small and medium businesses. Support industries are also weak.
According to experts, it is important for Vietnam this time to consider whether it has fallen into the trap, but it must take more drastic action.
"Creating value through human resources and local businesses should be seen as the first goal," the Japanese expert suggested.
As the way to escape the trap, he also suggested improving FDI policy, supporting businesses in administrative procedures, strengthening the links among sectors, and improving the quality of training.
