This is a free newsletter about Vietnam’s journey toward becoming a high-income country by 2045. The lead researcher and writer is Sam Korsmoe, author of five published books of which four are about Vietnam.

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Passing Indonesia

The News

The economic news of the week has been all about numbers and math. The numbers are GDP per capita between two different countries. The math is what happens when one country’s economy (Vietnam) grows more than six percent per year for more than 20 years in a row while the other country’s economy (Indonesia) grows less than five percent per year over the same time frame. The difference of around 1.25 percent GDP growth each year for more than 20 years in a row adds up and makes a difference. It leads to news stories such as the ones published over the past couple of weeks.

For the first time and based on data from the International Monetary Fund (IMF), Vietnam’s GDP per capita of $5,259 has passed Indonesia’s GDP per capita of $5,153. This means Vietnam now ranks fifth within Southeast Asia on a GDP per capita basis. It follows Singapore ($88,814), Brunei ($32,235), Malaysia ($13,125), and Thailand ($8,057). Here is some more math. Vietnam has an economy that is $515 billion in size. This places it as the fourth largest economy in Southeast Asia following Indonesia ($1.45 trillion), Singapore ($604 billion), and Thailand ($577 billion).

Any bets on when the size of Vietnam’s total economy will pass Thailand? How about when or if it passes Singapore? Questions like these are one of the reasons for this newsletter. Staying with the Vietnam v. Indonesia comparison, a good first question is to ask if apples are being compared to apples. In my analysis, the answer is no, or at best, there are two different types of apples being compared.

The two countries are different in several ways. Indonesia’s population of 284 million is significantly larger than Vietnam’s 101 million which means dramatically different consumer markets. Domestic consumption represents a larger share of GDP in Indonesia than in Vietnam. Indonesia also has more natural resources, in particular in energy. For its part, Vietnam is much more integrated into the global economy because of its manufacturing export base. Exports and in particular high-tech product exports represent a significant share of Vietnam’s GDP. The geography of Vietnam is more favorable to GDP growth because it’s essentially a single land mass. Indonesia is a nation of more than 17,000 islands which creates numerous infrastructure challenges. In terms of demographics, Vietnam is more at risk of “getting old before getting rich.” According to data from the United Nations Population Fund, Indonesia’s fertility rate is at the replacement level of 2.1 births per woman while Vietnam’s rate is around 1.9. Indonesia is also younger than Vietnam on a median-age basis (Vietnam – 34.4 years compared to Indonesia – 31.4 years). Vietnam is forecast to be an aged society (meaning at least 14 percent of the population is 65 years and older) by 2035. Presently about 9.5 percent of its population is 65 years or older. For Indonesia, it’s around 7.5 percent. Basically, Indonesia has more time before it becomes an aged society and it has a larger and younger work force.

Of course, it is good news that on a GDP per capita basis Vietnam has “passed” Indonesia. However, on the more important question of who is more at risk of “getting old before getting rich,” Vietnam has to produce more babies and get richer if wants to keep up with and potentially pass Indonesia on this metric.

Current Context

A few years ago, I was in Chiang Mai Thailand visiting Silkworm Books, the publisher of Vietnam – Asia’s Rising Star which I co-wrote with Brook Taylor. On the trip, I met two Thai businessmen who were intrigued by the hypothesis of the book which is whether or not Vietnam was a Tiger Economy and could it replicate the successful economic growth models of South Korea and Taiwan. I asked them if they thought Thailand could become “the next South Korea or Taiwan.” They literally laughed at the idea. They were far more curious about what was happening in Vietnam. One of them had a factory in Chiang Mai and was considering relocating to Vietnam. I pointed out that on a GDP per capita basis Thailand was two times wealthier than Vietnam. It had been operating as a market economy for far longer than Vietnam. Its infrastructure was better and more established, and its economy was also much larger. Lastly, it had a tourism industry that was the envy of all of Asia.

They acknowledged everything that I said, but they also believed that Vietnam would pass them. When I asked why, they said that Vietnamese people worked harder and wanted to grow their country’s economy more than Thai people. They were surprisingly dismissive and pessimistic about their own country. At the same time, they didn’t seem to be too bothered by it all.

What’s next for Vietnam? Of course, it’s to keep growing and eventually pass Thailand just like it has passed Indonesia. This would be on a total economy basis as well as on a GDP per capita basis.

The Thailand v. Vietnam debate is potentially a more apples to apples comparison, or at least it’s a more interesting comparison to make than with Indonesia. The geographies of the two countries are similar (e.g., mostly a single land mass rather than an island nation). The economies are not too far apart in terms of size. The population of Vietnam is a larger with 101 million compared to 72 million, but Thailand’s population is shrinking slightly while Vietnam is still growing slightly. Thailand’s median age is older at around 41 years. The average Thai is generally richer than the average Vietnamese. The level of infrastructure development in Thailand is better than in Vietnam with, for example, a vast metro network in Bangkok and two large international airports. Vietnam has its own car (VinFast) while Thailand has become very good at manufacturing foreign cars. Both nations want to develop strong tourism destinations. Thailand already has several well-developed locations while Vietnam is still building theirs. Both nations are crazy about football. What else?

Coming up with Thailand-Vietnam comparisons is a fun nhậu activity (i.e., hanging out and drinking with your friends), but it’s not terribly useful to determine Vietnam’s economic future. Vietnam is almost certainly going to “pass” Thailand on a GDP per capita basis as well as the total size of the economy. That’s a math and growth issue. A more important and worrying issue is whether or not Vietnamese people will adopt the attitude about themselves that I heard from the two Thai businessmen in Chiang Mai about Thailand. I hope not because it was depressing to listen to them, and such attitudes will doom ideas and potential trends for Vietnam to become a high-income nation by 2045.

Impact on The Journey to 2045

Whenever discussions about GDP per capita growth rates come into play, the Middle Income Trap becomes part of the conversation. This is a tangible metric that is a relatively new concept. It was introduced to global discourse by two World Bank economists, Indermit Gill and Homi Kharas, who coined the phrase in a 2007 report titled An East Asian Renaissance: Ideas for Economic Growth. At least part of the focus of their research was on China which had grown its economy rapidly in the 1980s, ‘90s, and 2000s. A key question was whether or not this growth would continue because for most countries it usually does not. The journey from low to middle income is well trod with plenty of models to emulate. However, the successful journey from middle to high income is rare. Most countries don’t make it. Would China succeed on this journey? That was one of the questions of the two World Bank economists, and it led to the defining of a dilemma that they called the Middle Income Trap.

Vast swathes of forests have been cut down to produce research papers and books on the Middle Income Trap and its central question of why some countries remain poor while others are able to become rich. There are numerous theories and hypotheses that try to explain the relatively straightforward models for a country to move from low income to lower-middle income and even from lower-middle income to upper-middle income. The steps after that (upper-middle income to high income) is where it gets complicated. There are so many reasons why a country can get “stuck” in the Middle Income Trap.

For this November 9 edition of the 2045 Newsletter, I will focus only briefly on one of the issues. This is productivity. More specifically, on a term called Total Factor Productivity (TFP). This is a metric that measures how efficiently a country can combine labor and capital to produce goods and services. It’s a calculation of the cost of labor and the cost of capital compared to the value of what is produced. If a country can produce more and better goods and services that are higher in value and more profitable for businesses without having to significantly increase the amount of labor and capital, its TFP is improving. If the value produced remains stagnant and does not grow significantly, the TFP is flat. In simple terms, TFP measures how effectively an economy turns its inputs into economic output. To get out of the Middle Income Trap and become a high-income country, TFP needs to be continually growing.

How is Vietnam doing?

Not great. Its TFP is flat. When Taiwan and South Korea were the Tiger Economies of Asia, they had Think Tanks, institutions, universities, and sent a lot of young people abroad to study STEM and other topics that led to improvements in productivity. They were able to produce more with less because they had the best of technologies and training at work for the economy. This is starting to happen in Vietnam, but there is a lot more to do. The good news is that Vietnam has the people. There is a labor force of 55 to 60 million, the vast majority of whom are not very productive in terms of the TFP metric. However, based on living and working in Vietnam for 20 years and meeting a lot of people from various walks of life, this will change for the better. The country just needs more time, education opportunities, training programs, and public-private partnerships.

We researched this issue extensively in Vietnam – Asia’s Rising Star. Of the three factors impacting TFP displayed in the graphic above, which one is the most important? This is a very rhetorical and subjective question, but I would place my bet on the Culture and Society input. There needs to be a “hunger for growth and development” among Vietnamese citizens to escape the Middle Income Trap. While there are probably some people in Vietnam with attitudes similar to the two Thai businessmen I met in Chiang Mai, they are in the minority. The majority have totally opposite sentiments about the future of their country. Let’s hope they seize the day.

Graph Data Source: International Monetary Fund

Infographic

One of the blessings and curses of social media platforms like Instagram, Facebook, and LinkedIn are the proliferations of images, charts, and tables that try to provide a snapshot of a trend or situation. They are often designed as click bait. The intent is to pull viewers in and hopefully compel them to click through to an article, website, or some kind of larger document. The images, however, do not tell the whole story.

The above design is a good example. It focuses only on GDP per capita using data from the IMF. The data is sound and the colors are nice, but there’s a lot more to the story that’s not being told. For example, approximately one-half of Brunei’s economy is based on the oil and gas sector. As the price of oil goes up (like at present), the GDP per capita will go up. Since the total population of Brunei is only around 471,000 people, a spike in the price of oil can dramatically increase GDP per capita. Singapore is the wealthiest nation in ASEAN, but it does not have enough water to keep itself going. It must import about half its daily water needs from Malaysia. Is that reflected in the island nation’s GDP per capita of $88,000?

One could go on and on with this kind of dissection. The bottom line message is to do one’s best to not just click through but also deep dive into the fancy charts to learn what’s missing. I will do my best as the writer of the 2045 Newsletter to do my part to explain as well as possible the charts in each newsletter.

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Who is the author of 2045?

Sam Korsmoe is an American writer from the state of Montana. He is the author of five published books. His two most recent books, Vietnam – Asia’s Rising Star (Silkworm Books, 2023) and 40 Years of Innovators (Alpha Books, 2025), focused on the economic future and the Đổi Mới entrepreneurs of Vietnam. He has lived and worked in Vietnam for 20 years over a 36-year time frame (1990 to 2026).

He is the founder and lead instructor of the Saigon Writers Club which hosts private and in-person creative writing classes for people who have always wanted to write and publish fiction. The Club has published five short story anthologies of its students.

Sam has spoken to visiting foreign investor groups, the Ho Chi Minh City Women’s Entrepreneurs Association, alumni associations, and other groups. He has guest lectured at RMIT, Fulbright University, British University Vietnam, and the Diplomatic Academy of Vietnam. He has also been featured in several long form media broadcasts including Vietnam Innovators, Vietnam 360, Talk Vietnam, and Vietnam Today. Sam is frequently interviewed by Vietnamese newspapers about current events.

Contact Sam directly via email at sam@yespi.net