Golden age dawns, but can Vietnam grasp chance?

I’m a fan of American Sid Meier's Civilization (Civ) game series.

For any Civilization player, the moment your nation enters a so-called Golden Age -- signaled by a fireworks display and cheering from your citizens (in old version - Civ3 and 4 ) -- is unforgettable, with rising incomes, increasing popularity of the leadership, widespread happiness among your citizens, and, of course, a strengthening role in international relations.

But in real life, it’s not as easy as pointing and clicking at the screen.

The United Nations Population Fund (UNFPA) said Vietnam has entered a period of “golden age” in its demographics which usually lasts around 30 years.

However, procrastination in the development and implementation of appropriate education-labor-economic policies could see the country miss the bus, the Vietnam Economic Forum warns.

A “golden age” is the period when the national labor force peaks and the number of dependents (persons older than working age and children under 15) is a minority (less than 45 percent of the population).

During this period countries will have historic opportunities to create an economic boom that will not arise for a second time.

An abundant labor force will create wealth and promote economic development while spending on social welfare will be low.

UNFPA said the "demographic golden age" contributed at least a third of the growth that enabled the "East Asian miracle" that occurred in Japan and South Korea in the last century.

But in Southeast Asia, Malaysia and Thailand failed to take advantage and the two countries have been caught in the middle-income trap for over a decade and have not found their way out.

Now, the question for Vietnam is can it take advantage of these opportunities to turn into a dragon?

Cheap-labor trap

The first thing to attract foreign investors to Vietnam is cheap labor. China, though considered the world’s workshop, has a minimum wage that is double that of Vietnam -- $173 compared to $85 -- according to Bloomberg.

In fact, in Asia, Vietnam has the second lowest minimum wage, just above Bangladesh. Many investors admit that the reason they choose Vietnam for their "China +1" strategy is because of the country's cheap labor.

Vietnam pays a high price for this, however: foreign investors focus on labor-intensive sectors to make the most of this advantage but stay away from high-tech and high value-added industries the country is trying to lure them into.

The “cheap labor” tag is often accompanied by the low-quality tag. A survey by the General Statistics Office found that unskilled labor accounts for nearly 40 percent of the workforce.

Only some 16.7 percent are well-trained, meaning high-tech investors, like Intel, have to provide their own training for workers.

The government is aware of this problem but plans to improve education and training remain mired in difficulties.

"Every year nearly one million people enter the labor market, and to train all of them is not that simple," Do Thuc, general director of the General Statistics Office, told the Vietnam Business Forum.

But all preparations must be done before the advent of the golden age to create a driving force for the economic breakthrough. Vietnam seems to have failed.

History shows that success is not a given and countries have failed to grasp the "golden age."

South Korea and Ghana, for instance, were both at similar stages of development when they entered it in 1960. But 30 years later Korea had become a high-income country while Ghana remains poor to this date.

Without an improvement in labor quality, Vietnam can still achieve Thailand’s development level.

But to make the leap to the exalted status of a Japan or Korea, the Vietnamese labor force needs to switch from labor-intensive to high-tech, avoiding the "cheap labor" trap, experts on international competitiveness like American Prof Michael Porter, say.

By 2041 Vietnam will enter the cycle of aging when the number of elderly will increase and the number of children will drop. In 2050 the ratio of the dependent population will exceed 60 percent.

Then the country will have to import people like developed nations in Europe, Australia, and Canada began doing years ago after their policies to encourage childbearing proved useless.

The cost of social welfare will then inevitably increase, creating a real burden, accompanied by a decrease in investment.

"Obviously if we do not invest adequately in education and have strategies to improve the quality of the workforce, then surely the demographic bonus period will lapse and the country will have no chance to develop again,” Thuc warned.

The Ministry of Education and Training has proposed a VND70 trillion (US$3.4 billion) plan to improve education and training in the next five years, mostly focusing on compiling new textbooks.

The project has been criticized for being unrealistic and wasteful, just like many of the ministry’s projects in the past.

It is awaiting government approval.

But for me, if the project fails to do two simple things, to teach Vietnamese to automatically put their garbage in wastebaskets or dustbins instead of littering -- as I saw a group of schoolboys doing recently -- and stay away from smoking and drinking heavily, unlike their fathers and elder brothers, the rise of the Vietnamese dragon is impossible.