Monday, February 22, 2016

Vietnam; from golden age to golden oldies

Vietnam's young population is growing, and growing up, rapidly. A burgeoning urban middle class is already driving big changes in consumption patterns. But an ageing population is just round the corner. Catering for its needs will be an economic, social and cultural challenge for Vietnam; it will also bring further opportunities for co-operation with the UK, notably in healthcare, pharmaceuticals and financial services.
This report looks at the unusual demographics of this populous South East Asian country, and the implications for the UK.
Vietnam's population has grown rapidly in the past few decades. In 1990, it was 66.2 million. According to the latest official data, released on 17 December, it is now 90.5 million, making Vietnam the fourteenth most populous country in the world (third in the region after Indonesia and the Philippines).
This trend is set to continue, with the population forecast to reach 100 million in 2025 before peaking at around 110 million in 2050. But the main driver for population growth is changing. It used to be high birth rates. Now it is increasing life expectancy, currently 73 and forecast to rise to over 80 by 2050. The overall birth rate (2.09) is already below replacement level; in urban areas, it is 1.8 – lower than the UK. Whilst there is considerable internal migration, mainly from the countryside into urban areas, levels of immigration (and emigration) remain low.
Vietnam thus finds itself, for now, in a demographic golden age. 25% of the population is aged between 10 and 24; the median age is around 29. There are roughly seven people of working age for each "pensioner". With per capita GDP growing rapidly and set to reach $2,000 in 2015, the middle class is burgeoning. According to a Boston Consulting Group report (2013), Vietnam has the fastest-growing middle class in South East Asia – 12.9% per annum over the period 2012-20. It is also expanding geographically, with new provincial pockets of affluence beyond the traditional centres of Hanoi and Ho Chi Minh City. Vietnamese towns are now full of IT-savvy, brand-conscious shoppers egged on by sophisticated marketing techniques.
Alongside consumer goods, middle class (and aspiring middle-class) parents are investing heavily in their children's education, with proficiency in English seen as indispensable in climbing the social ladder. There is also an appetite for more sophisticated financial services. These are all areas of considerable opportunity for UK plc.
The other side of the coin is that Vietnam's population will age extremely rapidly. In just 20 years, beginning from 2017, the proportion of Vietnamese over 65 will double from 7% to 14%. (The same pro rata increase took 115 years in France and 45 years in the UK; it will take 26 years in China (2000-2026)). Life expectancy at age 60 is already greater than in other South East Asian countries with higher per capita GDP such as Indonesia and Malaysia. By 2050 a quarter of the population will be over 60, with only two people of working age available to support each elderly person.
These trends are already bringing challenges, notably with regard to healthcare: rates of cancer and Type 2 diabetes are on the increase whilst one in four people aged over 25 now suffers from hypertension or heart disease. These challenges will only become more acute, more quickly. The development of physical and social infrastructure is not keeping pace with the dynamics of demographic and cultural change. The traditional family structure – three-generation households, with the eldest child caring for ageing parents – is weakening, yet institutional structures to care for the elderly remain extremely rare.: there are fewer than 3,000 geriatric care beds across the whole of Vietnam. Mental health care is likely also to rise quickly up the agenda.
In sum, therefore, Vietnam's demographic trends are opening up a rich vein of opportunity for companies which are prepared to take a long-term view of this market – both to sell to the young emerging middle class whose lifelong habits as consumers are still in a formative stage, and to meet their needs in their later years. The Ministry of Finance is looking at ways of encouraging private pension schemes, coupled with the development of domestic capital markets, to provide asset managers with long-term investment options (which we have been supporting through Prosperity Fund projects). Healthcare is a primary sector for UKTI Vietnam. There will be a growing demand for hospital capacity, possibly using PPP mechanisms whose development a DFID-funded programme is actively supporting; for care provision for the elderly; and for pharmaceuticals to cope with the growing incidence of "Western" diseases.


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