HANOI - Vietnam must rethink the growth strategy that propelled it from poverty to the ranks of Asia's fastest-growing economies, analysts say, or risk stagnating.
The communist country, which aims to become an industrialised nation by 2020, risks losing out both to poorer, lower-wage nations and richer ones that are more innovative and have a higher-quality labour force, they say.
"Vietnam is at a critical juncture in its economic and social development history," the World Bank's country representative, Victoria Kwakwa, said last week at a seminar organized with the Vietnam Academy of Social Sciences (VASS).
In 1986 the war-shattered, poverty-stricken country began to turn away from a planned economy to embrace the free market, a policy called "Doi Moi," which led to growth rates that ranked among the fastest in Asia.
But the Doi Moi momentum is losing steam, the World Bank and VASS said.
The Vietnamese economy depends too much on exploitation of natural resources and its industry, often dominated by large state-owned groups, lacks dynamism, they said in a joint report which added that transport and other infrastructure is underdeveloped.
Another obstacle is education, which experts have said is far from an international standard, afflicted by corruption and unsuited for providing the skilled workforce the country needs.
Vietnam faces fierce challenges if it wants to avoid being trapped as a middle-income nation, said Do Hoai Nam, president of VASS.
"Vietnam has just got out of the list of poor countries and its achievements are not really sustainable," Nam said.
The economic infrastructure is not well-developed, there is a lack of specialisation and competitiveness and a shortage of skilled workers, he said.
Science and technology standards are low compared with regional rivals, Nam added.
Between 1990 and 2009 Vietnam's annual growth dropped below 5% only once, and peaked at 9.5% in 1995.
Annual income per capita grew from less than $100 in 1990 to about $1,200 this year, while the poverty rate fell from 58% in 1993 to about 12% in 2009, said the World Bank-VASS report.
At the seminar, Prime Minister Nguyen Tan Dung predicted that real per capita gross domestic product will rise to between $3,000 and $3,200 in 2020.
Experts say such figures do not tell the whole story and that growth is coming at the price of increasing inequality between urban and rural areas, and between the ethnic majority Kinh and minorities living in remote areas.
"Many countries have been reaching the middle income status from lower levels, but very few countries (succeeded) in moving to high income," said a study by Le Kim Sa, of VASS.
He noted that while Hong Kong, Singapore, South Korea and Taiwan became high-income countries or territories in about three decades, Malaysia, Thailand and the Philippines have been stuck at middle-income levels.
Western donors have warned that economic growth and development require an open and transparent society, but that Vietnam's restrictions on the news media, Internet sites and civil society threaten the country's progress.
Over the next decade and beyond, Vietnam could either further accelerate its economic and social development to become a prosperous industrialising society, or it could face "stagnation on both economic and social developments fronts", the World Bank's Kwakwa said.