Vietnam's 10-year Challenge

Get Rich Before Getting Old

The Demographic Challenge for All Nations

Photo Source: VnExpress published in Vietnam Plus

The News

There is more newly published data for 2024 and this time it is not good news. As published in the Leveraging VARS second newsletter (https://conta.cc/3CIdVap), the good news was that the

government of Vietnam recorded higher than expected GDP growth of 7.1 percent for 2024 compared to the previously forecasted growth of 6.5 percent. Hopefully, this is the start of a multi-year trend of seven plus percent GDP growth per annum.

However, the newly published demographic data for 2024 revealed a negative trend that might be in the works. For the third year in a row, Vietnam’s total fertility rate (TFR) is below the minimum of 2.1 needed for a stable population. For 2024, it was 1.91 which was based on a TFR of 1.67 in the urban areas and 2.06 in the rural areas of Vietnam. The TFR measures the average number of births a woman is expected to have based on current birth rates. Demographers state that a total replacement rate (TRR) of 2.1 is needed for a population to remain stable. The difference between TFR and TRR is that the latter includes immigration whereby the former is births of new babies only (i.e., new citizens). When a country has limited immigration (like Vietnam and most East Asian countries), the TFR metric is the best means to forecast total population.

Pham Vu Hoang, the deputy director of the health ministry's population authority, reported to the Vietnam News that Vietnam’s population is expected to begin to decline in 2054. This was based on TFR reported data. The current forecasts for Vietnam’s total population in the year 2050 range from 110 to 114 million depending on the data source. In terms of age, the proportion of Vietnamese who are 65 years and older is currently 9.3 percent and it’s projected to increase to 20 percent by 2050.

Using the criteria of an “aging nation” as the basis (meaning citizens who are 65 years and older), there are three designations that demographers and sociologists commonly use to describe a country’s population. These are:

Aging Society – When 7 percent or more of the population is aged 65 and older.

Aged Society – When 14 percent or more of the population is aged 65 and older.

Super-Aged Society – When 21 percent or more of the population is aged 65 and older.

According to the International Journal of Aging, Vietnam will transition from being an ‘aging society’ to an ‘aged society’ around the year 2035. The most telling detail of this trend is the speed of this transition. Essentially, Vietnam will have transitioned from aging (7 percent of the population being 65 years and older) in 2015 to 2020 to aged (14 percent being 65 and older) in just 15 to 20 years (there are different data reports on this metric). By contrast, it took France 115 years to make this same transition. This was mostly due to France’s relatively open immigration policies that welcomed in new citizens and thus delayed its transition to an aged populous. Presently, France is considered a ‘super-aged’ society with 21 percent of its citizens aged 65 years and older.

Vietnamese government leaders are more than aware of this trend. They and others from the private sector to the NGO sector seem to be struggling to find the best next steps. Vietnam is still a developing country and it will need workers. The government has stated numerous times that one of its goal is for Vietnam to be a high-income nation by 2045. This would be around five to 10 years before Vietnam becomes super-aged and its population begins to decline.

The challenge is quite straightforward. Can Vietnam become rich before it becomes super-aged?

The average age of a Vietnamese citizen is 32 years.

Photo Source: VN Express International

Current Context

If there is any good news with this situation, it is that many countries in the world are in a similar dilemma and especially in Asia. Vietnam’s immediate East Asian neighbors of Japan, China, Taiwan, and South Korea are much worse off in terms of population trends and TFRs. The TFR is the better metric compared to TRR since none of these countries, including Vietnam, have easy or welcoming immigration policies. How quickly or slowly these countries grow or decline will be dependent upon its citizens.

Japan’s population peaked nearly 20 years ago at 128 million in 2008 and has since been declining. China’s population peaked at 1.41 billion in 2021 and has since been declining. It was the first decline in six decades. In both Taiwan and South Korea, there were more deaths than births starting in 2020. The TFRs for all four countries are dismal if the goal is to begin to increase the population by having more babies. The TFRs for 2024 were: Japan (1.3), China (1.7), Taiwan (1.1), and South Korea (0.7). The nation of South Korea has the distinction of having the lowest TFR in the world, a title that was previously held by Taiwan. In all these countries, government programs, cash incentives, and even some company leniency for newly married couples (such as expanded paternity and maternity leave) have mostly failed.  

Of course, the real difference between the aforementioned countries is that all of them except for China and Vietnam DID become rich before they got old. According to the World Bank, China is right on the cusp of being a high-income nation, but it has not yet reached that status. Its GDP per capita is around $12,850 with high-income status listed at $13,846. Considering that China’s total population is declining, it does not encourage immigration, it is an aged society with 15.6 percent of its citizens being 65 years and older (Kyodo News – January 17, 2025), and that the citizens of China are living longer than before, the country’s long march to high-income status might be difficult or impossible to achieve unless its economy grows quite dramatically. 

Graph Source: VNetwork, October 4, 2024

Future Impact

The demographic math for Vietnam is easy to calculate. Its current population is 100 million and it is an ‘aging society’ according to the World Bank because nine percent of its population is 65 years and older. It will be an ‘aged society’ in 15 years and close to a ‘super-aged society’ in 25 years. Its goal of being a high-income nation is 20 years away (2045). Finally, its population will reach its peak in about 30 years with a forecast population of 110 to 114 million people.

There’s additional math that is more closely linked to the growth of the Vietnamese economy. The current size of the work force is around 60 million, or 60 percent of the total population. A big reason for this relatively high percentage is the role of women in the workforce. The share of women and men in the workforce is almost the same. The ratio of female workers per 100 male workers is 88 in Vietnam while it is 67 on average for the rest of the world according to the World Bank and the International Labor Organization (September 2020). For decades, Vietnam has taken a “team approach” in the development of its labor force and its economy.

For the past 25 years, Vietnam has been able to grow its economy predominantly through export manufacturing. This means a lot of factories employing a lot of people to manufacture a range of products which are progressively higher in quality as well as with higher margins. In the early 1990s, the country started with the low margin ‘shoes and garments’ industry and it has been able to advance into electronics, food processing, and other more profitable products. For the past few decades, China has legitimately claimed the title of “Workshop of the World.” This is still the case, but the demographic trends noted above on China combined with increasing costs and the new trade war with the USA is changing this dynamic. Moreover, there are a lot of manufacturers in China who are relocating to Vietnam for the above and other reasons. Since it has a 60 million-person labour force, Vietnam may tangibly claim the title of ‘Workshop of the World’ within the next decade.

However, despite all these trends, Vietnam is still on track to being an aged society in 15 years. Therefore, the challenge of ‘getting rich before getting old’ is still very prevalent. Social media campaigns and government incentives to increase the country’s TFR have not really worked in other Asian countries and there’s no tangible evidence to suggest that these measures will work in Vietnam. If Vietnam wants to escape the Middle Income Trap, an obvious prerequisite to becoming a rich nation, it has to grow faster. The government’s bullish forecasts for GDP growth for 2025 of eight to 10 percent is a step in the right direction.