Rajat Nag Managing Director General of the Asian Development Bank (ADB) has described the “middle income trap” as one of challenges for Vietnam as it gains the middle income country status and at the same time said he believes in its ability to avoid the trap.
“I think all middle income countries are susceptible to the middle income trap. Vietnam of course will not be an exception. But we believe that Vietnam wil get out of the middle income trap. It should take urgent measures right now,” he said.
Vietnam has recognised this problem and the government has adopted its socio-economic development plan for the next decade since January this year, he said, adding that there are three challenges in adopting this plan, namely reform of State-owned enterprises, improvement of the quality of human capacity and meeting infrastructure challenges.
He noted the issue of inequality that Vietnam should continue to deal with. According to the ADB official, it is not a major problem in Vietnam but countries that could be caught into the middle income trap have a lot of inequality.
Vietnam could avoid the middle income trap by reducing inequality, he affirmed, adding if that happens, “I am quite optimistic that Vietnam will be able to avoid the middle income trap, but the country must work very hard” in order to achieve this.
He suggested Vietnam should implement the socio-economic development plan, focusing on reducing inequality, strengthening good governance, including anti-corruption, and pursuing green growth.
“Vietnam is already ahead of the game because Vietnam recognise itself that it faces these challenges,” he affirmed.
According to ADB, countries stuck in middle income trap are unable to compete with low income economies in manufacturing or with advanced economies in high skill innovations. They enjoy short periods of growth followed by stagnation or even decline and are stuck at low growth rates.