Vietnam is an economic success story, not merely in terms of its over 7% average annual growth since the global economic crisis, but also in the country’s above average ability to have wealth growth impact the well-being of its people.
Vientnam has seen considerable development over the past decades, as the country transformed from an agrarian-based economy to industrial- and service-based. The country of more than 90 million people has, like many of its neighbours, seen high and sustained economic growth of around 7% in recent years. Building on the success - in which food is more plentiful, health care more accessible, schooling more affordable, and disposable incomes higher than ever - the country’s ruling party has sought to continue the rapid development of Viatnam’s economy, setting a number of socially oriented plans that seek to further expand the country’s knowledge economy and drive it toward developed-economy status.
The Boston Consulting Group (BCG), in a bid to understand how far Vietnam has come in recent years - and to gain insight on the opportunities for improvement - crunched the country’s vitals within the firm’s Sustainable Economic Development Assessment (SEDA) model. The SEDA is based on the premise that the purpose of economic development is to improve the overall standard of living - the wellbeing - of a nation’s population.
The SEDA model evaluates a number of key indicators to identify how well a country is able to transform wealth into well-being. The SEDA score is comprised of three indices: economics, investments and sustainability, which are further broken into a total of ten sub-indices (dimensions). The model itself allows the firm to generate a number of outputs, including the current-level score; which measures the country’s current score based on the ten sub-indices, and the recent-progress score; which is a measure of the change in the ten indices over a seven year period. The SEDA score has been developed for 149 countries, allowing the firm to compare the current-level score and recent-progress score of Vietnam to local countries, the ASEAN (excluding Singapore), and the globe.
Above the bar
The research finds that the country has performed strongly in recent years in term of transmuting rapid economic development into well-being for its people. As it stood in 2015, Vietnam’s SEDA score was 42.4 - placing it in the middle (79) of the 149 country’s measured. The country, while having a GDP per capita of around $5,200, holds a well-being score in line with countries that have twice its GDP score, such as China and slightly behind regional neighbour Thailand. Vietnam further outperformed Indonesia and the Philippians in terms of well-being, even while the latter two were out ahead in terms of economic standing.
In terms of converting the GDP growth of the past seven years into well-being, the country is performing slightly above average. The country, like many of the ASEAN economies, has seen significant and sustained growth in the past seven years. Indonesia and Vietnam have averaged close to 7.1% annual growth while Cambodia comes in at nearly 8% and Laos is in double digits. Furthermore, Vietnam’s recent-progress SEDA score, 74.8, is just a bit off the average of 76.6 of the other ASEAN nations.
The research further considers Vietnam’s SEDA score in relation to its standing with its four largest middle-income ASEAN regional neighbours (ASEAN 4), Indonesia, Malaysia, the Philippines, and Thailand. The ASEAN 4 current-level score is 45.2, thus slightly above that of Vietnam, although their recent-progress scores come in at 69.6, which is more than five points behind.
The country, when considering the individual scores, performs relatively well with respect to most key indicators assessed within the SEDA framework. The country outperforms the average in economic stability, employment and health. In the categories of education and income equality Vietnam significantly outperforms the average and is on par with the best in class. The country has the strongest civil society measured, although its environmental record is something that needs consideration.
Chris Malone, BCG Partner and economic development expert based in Vietnam, says, “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. This is particularly noteworthy given the country's remarkable pace of economic growth of about 7.1% annually from 2006 to 2013."
BCG recently conducted a similar analysis for Nigeria, and found that, contrary to Vietnam, the African country is failing to transform its growing wealth into well-being for the country's 186 million inhabitants.