Vietnam is among global leaders—ranking number 4 out of 149 countries assessed—when it comes to converting the country's wealth into well-being for its population, according to The Boston Consulting Group's Sustainable Economic Development Assessment (SEDA).
The findings are detailed in BCG's inaugural SEDA report for Vietnam, Lotus Nation: Sustaining Vietnam's Impressive Gains in Well-Being.
The analysis finds that Vietnam, with GDP per capita (based on purchasing-power parity) of approximately $5,200, has well-being levels that would be expected of a country with GDP per capita of more than $10,000. Vietnam is also above average in converting economic growth into well-being improvements.
“The latest findings indicate what we have believed all along—that Vietnam’s success in harnessing its limited resources for the good of its citizens is impressive and comparable to higher-income countries," says Chris Malone, BCG partner and economic development expert based in Vietnam.
"This is particularly noteworthy given the country's remarkable pace of economic growth of about 7.1% annually from 2006 to 2013."
But big challenges lie ahead for Vietnam. To ensure that the country maintains its impressive record, the report suggests action in three critical areas: employment, infrastructure, and governance.
Critical challenges ahead
The report compares Vietnam's performance to that of four peer nations that, like Vietnam, have midlevel incomes: Malaysia, the Philippines, Thailand, and Indonesia. The group is referred to as the ASEAN 4.
Vietnam ranks near the bottom of the ASEAN 4 in income, infrastructure, governance, and environment.
And while Vietnam's score in the employment dimension is in line with that of its ASEAN 4 peers, the country faces a number of significant issues in the labor market—including low labor productivity and a much smaller base of skilled workers—that could create challenges in sustaining the current pace of development.
"Action in three areas—employment, infrastructure, and governance—will go a long way toward determining whether the Vietnamese government can achieve the ambitious growth targets it has set for itself," says Malone.
"At the heart of those goals is the aim to move Vietnam from an industrial economy based on low-cost labor to a modern knowledge-based economy."
Concrete actions needed
The report identifies concrete actions, such as upgrading the workforce by improving the links between industry and providers of training and education, and by steering young people towards high-demand sectors.
Infrastructure requires an estimated investment of $113 billion to $140 billion by 2020, but only 50% to 60% of that can be funded through the government's budget.
Vietnam can learn from South Korea and India by improving the way it plans and executes public-private partnerships, in order to draw in more private-sector investment, and delivering the highest impact from its investment, the report says.
Improving governance is key to increasing foreign investors' confidence in Vietnam and will require the country to strengthen its institutions and to use digital tools in order to help increase transparency.
The government must also upgrade the talent in Vietnam's public service, the report says, and would do well to model itself on Singapore, where talent management strategies are powerful means of attracting and retaining high-quality public servants, including an increasing number of women in leadership roles.