Đang tải... (xem toàn văn)
After the Asian financial crisis (AFC) of 199798, a large number of countries found themselves able to escape their lowincome position and start climbing the higher income thresholds. Many of those thought that they took for a long period of sustained growth in order to catch up with the highincome countries. However, most of these countries were found being stuck in a “middleincome trap” (MIT) phenomenon, like Malaysia
FOREIGN TRADE UNIVERSITY FACULTY OF INTERNATIONAL ECONOMICS -*** GRADUATION THESIS HOW MALAYSIA CAN BREAK THROUGH THE ‘MIDDLE-INCOME TRAP’ AND LESSONS FOR VIETNAM Full name : Dang Thi Huyen Student ID : 1311450020 Class : English – High Quality Program Cohort : 52 Supervisor : Assoc.Prof.Dr Vu Hoang Nam Hanoi, June 2017 i TABLE OF CONTENTS LIST OF ABBREVIATIONS iii LIST OF TABLES iv LIST OF FIGURES v INTRODUCTION CHAPTER I THEORETICAL BACKGROUND ABOUT MIDDLE-INCOME TRAP 1.1 Concepts of Middle-Income Trap 1.1.1 Concept of Middle-Income 1.1.2 Concept of the Middle-Income Trap 1.2 Criteria to be defined as having fallen into the Middle-income Trap 10 1.2.1 Determining the number of years to be in the Trap 10 1.2.2 Countries in the Trap 12 1.3 Causes for falling into a Middle-Income Trap 14 1.3.1 Exhaustion of cheap labor 15 1.3.2 Changes in economic structure 17 1.3.3 Low quality of labor 18 1.3.4 Growing income inequality 19 1.3.5 Poor institutional quality 20 1.3.6 Population ageing 21 CHAPTER II 22 MALAYSIA AND THE MIDDLE-INCOME TRAP 22 2.1 Overview of Malaysia’s economy since getting Middle-Income level 22 2.1.1 Income per capita and economic growth 23 2.1.2 The economic structural change 25 2.1.3 The quality of labor 27 2.1.4 The income inequality 29 2.1.5 Political system reform 31 2.1.6 Population age distributions 32 ii 2.2 Causes of falling into the Middle-Income Trap in Malaysia 35 2.2.1 The inconsistent New Economic Policy framework (1970-2009) 36 2.2.2 Low human capital quality 39 2.2.3 An investment rate slump due to currency crisis 41 2.3 Malaysia towards becoming a high-income nation by Economic Transformation Programme (ETP) 44 2.3.1 Overview of ETP 44 2.3.2 Achievements of Malaysian economy since the launch of ETP 50 CHAPTER III 57 STATUS QUO AND RECOMMENDATIONS FOR VIETNAM AVOIDING THE TRAP 57 3.1 Status quo of Vietnam’s economy since achieving Middle-Income level 57 3.1.1 Situation of Vietnamese economy since achieving the Middle-income 58 3.1.2 Vietnam faces challenges in falling into the Middle-Income Trap 63 3.2 Recommendations for Vietnam avoiding Middle-income trap based on experiences of Malaysia 70 3.2.1 Recommendation for human resources 70 3.2.2 Recommendation for population ageing 72 3.2.3 Recommendation for reducing income inequality 73 CONCLUSION 76 REFERENCES 77 iii LIST OF ABBREVIATIONS No Abbreviations Full name GDP Gross Domestic Product WTO World Trade Organization MICs Middle-income countries L Low-income LM Lower-middle income UM Upper-middle income H High income GNI Gross National Income US United States 10 MIT Middle-Income Trap 11 ICTs Information and communication technologies 12 NEP New Economic Policy 13 ETP Economic Transformation Programme 14 TI Transparency International 15 TFP Total Factor Productivity iv LIST OF TABLES Table 1: GNI per capita US (Atlas Method) Table 2: Economies in the lower-middle-income trap in 2016 13 Table 3: Economies in the upper-middle-income trap in 2016 12 Table 1: Classification of Malaysia’s income threshold in each period 22 Table 2: Sectorial Share of GDP 25 Table 3: Share of employment as %GDP 26 Table 4: Expenditure as percent of GDP 28 Table 5: Enrollment by educational level, 1975-2015 28 Table 6: Gini coefficient by Ethnic group, 1971-2014 30 Table 7: Fertility rate, Life expectation and mortality in Malaysia 33 Table 8: Average rates of increase in labor productivity 42 Table 9: NKEAs- KPI scorecard, 2012-2015 51 Table 10: SRI – KPI scorecard, 2013-2015 52 Table 11: Comparing NKEA targets and actual jobs created (2010-2015) 53 Table 1: Vietnam’s ICOR, 2000-2010 64 Table 2: Some factors about income distribution and inequality in Vietnam 66 Table 3: Income per capita on average in urban and rural areas 66 Table 4: "gold" population structure period in Vietnam 68 v LIST OF FIGURES Figure 1: Development stages of an economy Figure 2: Stages of the catching up process in Ohno’s MIT model Figure 3: Aoki's five phases Figure 4: Becoming stuck in the Middle-Income Trap 16 Figure 1: Malaysia’s growth rate from 1971 to 2015 (%) 24 Figure 2: Malaysian Population per Age Group 2014 34 Figure 3: Malaysia corruption rank, 1996-2016 37 Figure 4: Control of corruption in Malaysia, 1996-2015 38 Figure 5: Trends in Math (left) and Science (right) from 1999–2015 40 Figure 6: The investment rate in Malaysia 42 Figure 7: Fixed capital formation/GDP 43 Figure 8: Determinants of ETP 45 Figure 9: The national key economic areas (NKEAs) 46 Figure 10: Six strategic reform initiatives (SRIs) 48 Figure 11: Traffic Lights of methods and 49 Figure 12: Traffic Lights of methods 49 Figure 13: Employment by sector 53 Figure 14: Investment accelerated post-ETP 54 Figure 15: GNI per capita continues to growth from 2009-2015 55 Figure 1: The ETP Scorecard KPIs 50 Figure 2: GNI per capita in Vietnam, 2008-2015 58 Figure 3: Vietnam GDP’s growth rate from 2008 to 2015 59 Figure 4: Structural change 60 Figure 5: Dynamic economic structure 2008-2015 61 Figure 6: Percentage of trained employed workers at 15 years of age and above by qualification by Qualification and Year 62 vi Figure 7: 2016 A.T Kearney global services location index 69 INTRODUCTION Rationale of the study After the Asian financial crisis (AFC) of 1997-98, a large number of countries found themselves able to escape their low-income position and start climbing the higher income thresholds Many of those thought that they took for a long period of sustained growth in order to catch up with the high-income countries However, most of these countries were found being stuck in a “middle-income trap” (MIT) phenomenon, like Malaysia In 1971, Malaysia became the lower-middle income country with Gross Domestic Product (GDP) per capita at $2.036,859 which was calculated by the World Bank From then on, Malaysia experienced a high growth performance and reached to upper-middle income level in 1996 However, Malaysia’s robust growth over the last three decades was interrupted following the Asian financial crisis (AFC) in the period of 1997-98 Since then, Malaysian growth has been relatively volatile and unable to make the leap to advanced income status In addition to the AFC, some of the factors that also prevent or delay the shift to high-income status include a larger risk of a growth slowdown, insufficient human capital, or the impact of New Economic Policy from 1970 to 2009 By 2010, the country had taken to well over than 14 years to participate as upper-middle income country and become stuck in the “upper-middle income trap”, based on Felipe (2012a)’s method that a country is in the Middle-Income Trap if it has been in lowermiddle-income category more than 28 years and if it has been in an upper middle-income category more than 14 years Up to now, Malaysia has been in the upper-middle income nearly 22 years and still trying to break through the upper-middle income trap, advancing into the high-income phase of development In such context, crucial questions remain whether Malaysia can reach high-income status and which policies it needs to implement to succeed This is why, the author would like to analyze the problems that this country are facing and bring Malaysian economy out of the middle-income trap, so as to recommend appropriate strategies to Vietnam avoiding Middle-income trap because Vietnam is since 2008 in the lower-middle income level, so it is more than 18 years to prepare against the lower-middle income trap To conclude, realizing the essence of the topic and also positive outcome that might be produced during developing the Vietnam economy with purpose of overcoming “Middle-income trap” as the Malaysian has been doing implemented, the topic “How Malaysia can break through Middle-Income Trap and lessons for Vietnam” has been chosen for my graduation thesis at Hanoi Foreign Trade University Objectives of the study The study attempts to determine the causes of falling into the Middle-income trap of Malaysia and how that country can break through the Trap From those dimensions, the author would analyze this problem in Vietnam and give some implications on policies to promote the Vietnam’s growth and recommend feasible suggestions for Vietnam to avoid Middle-income trap Scope of the study Within the framework of a graduation thesis, the author would like to focus on analyzing economic development, outstanding issues and limitations in Malaysia and Vietnam’s economies since getting the Middle-Income level In addition, the thesis also focus on analyzing an idea given by the Malaysian government to turn Malaysia into a high-income economy by the year of 2020, that is titled “Economic Transformation Programme” Research methodologies In order to investigate in the Trap, the theoretical systems of Middle-Income, especially the theory and regulations of World Bank or famous authors, have been used as the basis of the thesis Moreover, the readers will find various sets of data to be quoted and combined in the content; those may come from the statistical data or reports of organizations like UN COMTRADE, World Bank Using that data helps to make a critical comparison, draw logical conclusion and get lessons learned from Malaysia Additionally, other methods such as inductive method, qualitative method and theoretical method will also be used Structure of the thesis Apart from introduction, conclusion, references and appendices, the thesis comprises the following sections as main elements Chapter 1: Concepts of Middle-Income Trap Chapter 2: Malaysia and the Middle-income Trap Chapter 3: Status quo and recommendations for Vietnam avoiding the Trap Acknowledge The author would like to express deep gratitude to Assoc.Prof.Dr Vu Hoang Nam, Ph.D Associate Professor of Foreign Trade University for his critical comments and encouraging support as a supervisor He has employed his strong research expertise and experience not only to orient the topic, structure the outline but also to have overall and detailed looks into the study to help the author accomplish it in a better way Being aware of the importance of the thesis, the author has paid serious attention to study and research However, due to limited time, reference resources and professional competences as well as practical experience, the thesis does expose a number of shortcomings Thus, any feedback or comment for this study would be of great value for the author to improve it later on 64 From that, it is necessary to resolve issues, giving Vietnam’s economy developing to high-income 3.1.2.1 Insufficient economic structural change As noted earlier, Vietnam's economic growth rate has been stable, however, the quality of growth has been low Actually, Vietnam's growth mainly relies on investment capital and focuses on exploiting natural resources and the advantage of cheap labor forces It does not take time to the progress of technology, management skills in order to increase productivities, labor efficiency, and product qualities Although mobilized investment capital per year is relatively large, the efficiency of using the capital is poor and the investment structure plus the management capacity are quite weak All of these problems are reflected in the high ICOR's capital adequacy ratio The incremental capital output ratio (ICOR) is “a metric that assesses the marginal amount of investment capital necessary for an entity to generate the next unit of production”15 Overall, a higher ICOR value is not preferred because it indicates that the entity's production is inefficient The measure is used predominantly in determining a country's level of production efficiency ICOR is calculated as ICOR = 𝐴𝑛𝑛𝑢𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 𝐴𝑛𝑛𝑢𝑎𝑙 𝑖𝑛𝑐𝑟𝑒𝑎𝑠𝑒 𝑖𝑛 𝐺𝐷𝑃 The early years of the 21st century were considered to be the period of rapid economic growth in Vietnam However, ICOR was relatively high at that time, compared to ICOR in the fast-growing period of some countries, such as Japan (1961-1970), South Korea (1981-1990) at 2,3% and Taiwan (1981-1990) at 2,7% Table Vietnam’s ICOR, 2000-2010 Unit: Percentage (%) 2000 2001-2005 2006 2007 2008 2009 Annual investment (%GDP) 32,6 37,7 40,0 40,6 41,3 42,8 Annual increase in GDP (%) 6,8 7,5 8,17 8,5 6,18 5,32 4,80 5,16 5,00 4,76 6,66 8,0 ICOR 15 Wikipedia 65 Source: Ministry of Planning and Investment (Vietnam) Vietnam’s Incremental Capital Output Ratio (ICOR) which is based on the percentage of GDP needed to enable the GDP to grow by 4,76 percent in 2007, 6,66 percent in 2008 and over percent in 2009 This indicates that the efficiency of investment was poor The quality of low economic growth is accompanied by weakness in economic sectors The pace of economic restructuring in three sectors “agriculture-forestry-fishery, industry-construction and services” is slow in terms of production value and has no uniformity among sectors The composition of the economic sector is representing for some imbalances in many aspects The state sector is focusing on the inefficiency sectors, meaning for low economic concentration and business monopoly The private sector grows significantly, however, the scale is still small and the pace of development is not high compared with the requirements and potential for development The foreign investment grow rapidly in all respects In addition to the benefits, the rapid increase of this sector increases the dependence of our economy on foreign investment, leading to be the vulnerability of the economy Moreover, the goal of foreign-invested enterprises is not to create jobs, improve living standards but mainly taking advantage of resources, location and cheap labor in Vietnam in order to make a profit If we not quickly technology improving and experience management, and working environment of these enterprises, Vietnam’s economy will unlikely to move to a higher stage of development 3.1.2.2 Income inequality in Vietnam The issue of inequality in Vietnam has consumed a lot of papers and time and scholars Gini coefficient for the whole country, the common indicator specifying the degree of inequality, has increased recently The coefficient is derived from data of Vietnam Living Standard Surveys (VLSS) conducted by GSO since 1993 (Vietnam Household Living Standard Survey – VHSS from 2002) According to GSO, the gap between the richest and the poorest is in an upward trend The different income coefficient calculated based on “the average income per capita of the 20% richest and 66 that of the 20% poorest”16 has increased quite a lot from 8,4 times in 2006 to 9,7 times in 2014 This reinforces the argument that inequality in Vietnam is becoming worse as stated above In particular, Gini coefficient has been in upward trend since 2006, and already over 0,4 – the level some scholars considered as dangerous, the situation could be worse if there was no action to avoid unequal income distribution among the population Table Some factors about income distribution and inequality in Vietnam Year Unit: current dollars 2010 2012 2014 2006 2008 8,4 8,9 9,2 9,4 9,7 Gini coefficient 0,424 0,434 0,433 0,424 0,430 Proportion of wealth held by the 40% 17,4% 16,4% 15% 14,7% 14,2% Different coefficient of income gap poorest population Sources: GSO of Vietnam, living standards in various year “40%” standard by World Bank looks at the income proportion of the 40% poorest over that of the whole population There exists a high inequality, or medium inequality, or comparative equality if the calculated proportion is below 12%, falling between 12% and 17%, or higher than 17% respectively According to this rule, income distribution among the population in Vietnam is rather equal, but the trend is moving the medium zone, meaning less equal (see at Journal of economics and development) Table 3 Income per capita on average in urban and rural areas Unit: thousand VND 2006 2008 2010 2012 2014 Rural 506 762 1.070 1.579 2.038 Urban 1.058 1.605 2.130 2.989 3.964 Gap 2,09 2,11 1,99 1,89 1,95 Source: GSO 16 Standard by World Bank 67 As the table 3.3 for detail, the income gap between urban and rural areas could also be viewed in a more visual way when looking at level income per capita on average over years The gap goes up from 2006, drops in 2010, and then starts to rise in 2014 3.1.2.3 Population ageing in Vietnam The economic development of a country is of course heavily dependent on the quantity and quality of the "economically active population" group However, if the quantity of "economically active population" is crowded but the number of "economically inactive population (dependent)" is more crowded, expenditure will be more and therefore the rate of savings and investment will be lower and the socio economic development will be stalled (Wikipedia, the free encyclopedia) The relationship between the two population groups could be reflected by the "dependency ratio", defined by the following formula: Dependency ratio of the population can be separated into youth dependency ratio and the old-age dependency ratio The youth dependency ratio indicates that for every 100 people of working age, there are how many children at the age from to 14 years old The old-age dependency ratio indicates that for every 100 people of working age, there are how many people 65 and above years old When the "dependency ratio" down to 50 or less, it means that 100 working age people have to "burden" only 1or less than 50 dependents, or in other words, every two of working age people have no more than one dependent and this is "gold" population structure According to the survey on population changes, labor source, and family planning in Vietnam, in the period of 1970-1975, the "dependency ratio" was only 49,9 It means that Vietnam's population has entered the period of "gold" population structure According to estimation of K.Oizumi, “gold” structure period in Vietnam is defined as the following table 68 Table 4"gold" population structure period in Vietnam Goals of the period "golden population structure" Vietnam Year to enter 1970-75 Year to end "gold" population structure period 2020-25 Total year 50 Source: World Bank, K.Oizumi Under the table, the "dependency ratio" is about 50 The period of "golden population structure" usually occurs only once in a country, so if it is unlikely to take this advantage, the national economy will only grow at a rate of stagnation with facing of falling into the middle-income trap Clearly, according to calculations of Oizumi, Vietnam has only 5-10 years to complete the Gold population phase If Vietnam continues to maintain its current economic development, Vietnam’s trapping in the middle-income trap will be inevitable 3.1.2.4 Low quality of labor For any country, the human resources are extremely important And for Vietnam, the workforce is in the "gold" (Representative of the UN Population Fund (UNFPA) evaluated that Vietnam has entered a golden period of population structure with the youngest population group in the country's history: the population is at the age of 10-24 accounted for nearly 1/3 of the population It will be the implementing motivations of the strategy socio-economic development But "Gold population" is not actually gold if educational policies are not appropriate and practical like today Vietnam has an advantage of large and young labor pool but the quality of the labor force is a big disadvantage Its companies are currently in the lack of skilled employees Whereas thousands of students of majors graduate from universities annually but they cannot find a job This paradox is due to the fact that many new graduates not meet the demand of companies Most of them lack working experiences and language skills In the 2015 A.T Kearny Global Services Locations Index, Vietnam’s people skills and availability were poorly assessed The country ranked the 11th in 55 countries, lower than other five ASEAN countries (Singapore, Indonesia, Thailand, Malaysia, and the 69 Philippines) and far behind India and China (the second and the third, respectively) Vietnam’s weakest criterion was relevant experience with 1,25 point, roughly a half of that of India Figure 2016 A.T Kearney global services location index Source: 2016 A.T Kearney global services location index Moreover, the national resources for human resource development have limited The quality of education and training for young labor forces have not been ensured In addition, the problems of state management for human resource development has many inadequacies Policies have not been completed and others have not suitable for the country's development situation What’s more, the implementation has not timely with the long latency, thereby making slow results Besides, due to differences in regulations on education and training between Vietnam and other countries in the world, international cooperation and integration in the field of human resource development have not met the requirements of international integration in cultural, economic and social dimensions The program and training methods are not in line with the standards of other countries in the region and in the world, leading to the lack of international resources for human resource development Most of the integrated process of education has conducted through studying abroad or student exchanges between Vietnam and other countries 70 3.2 Recommendations for Vietnam avoiding Middle-income trap based on experiences of Malaysia Based on experiences of Malaysia in successful transition from low-middle income to upper-middle income and in trying to become high-income country are considered as good lessons for Vietnam, this part would propose how should Vietnam overcome challenges in falling into the lower-middle income trap (although it will remain more than 18 years to consider whether being stuck in the lower-middle income trap or not until 2035) posed by factors as mentioned in the part of 3.1.2 In comparison with Malaysia, Vietnam has many similarities in history and development conditions Malaysia also started at a very low point of development 17 In terms of human resource and natural resources, Vietnam is even more outstanding than Malaysia However, after 50 years of development, the growth of Malaysia and Vietnam are totally different in which Malaysia is an upper-middle income while Vietnam has just escaped from the low-income group in 2008 For Malaysia, primary conditions are not the key to the development but policy and strategy together with political system reform, semi-skilled and later skilled workforce, policies and political stability are the core which was explained in 2.1 These are greatly valuable lessons that Vietnam should apply in order to gain the development like Malaysia 3.2.1 Recommendation for human resources Development and improvement of the quality of human resources, especially high-quality human resources is a strategic breakthrough and a decisive factor in the process of restructuring the economy and conversing growth model This is also a longterm competitive advantage to ensure the fast, effective and sustainable development of the socio-economy Although the issue of low human capital quality is a cause of falling into uppermiddle income trap in Malaysia due to Malaysian government focus more on quality than the quantity of education, the rate of unemployment in this country is quite low and Per capita income of Malaysia in 1970 was $380 comparing with Vietnam when implemented “Doi moi” policy in 1986 was $437 17 71 the jobs created by Malaysian firms are mainly high-wages In contrast, the literacy rate of Vietnam is about 97% but only 15,6% of total labor forces were under a train (Survey of Labor and Employment Vietnam, 2011) Most of the firms complain about the supply of labor quality in Vietnam The number of senior human resources and skilled workers, experts in business management, programmers, technicians that understand basic requirements of English is still limited The ability to work in a team and adapt to practical jobs of most labors is weak, reducing the value of workers a lot in the judge of the investors Clearly, in comparison with Vietnam’s employment, Malaysia have a more consistent and suitable policy of training, long term programs and a large assistance of Government in expenditure as total GDP R&D for human capital and talent attraction strategy are also two effective contributors (Magnus Blomstrom, 2013) So, here are some lessons for Vietnam based the experiences of Malaysia about these issues Firstly, Vietnam government does have a policy on education and it has worked quite effectively but only at a low level and often emphasizes theoretical knowledge training So, in the short run, the Government should organize short-term training for the employees to possess and improve practical knowledge and professional skills The Government can have a more specific program on training high-skills workers with tightening condition after the course or endowment for those firms pay attention to this issues Vietnam must care for the laborer's life and make them aware of the importance of learning, improving knowledge and skills for themselves This will help workers find employment opportunities that benefit themselves first and gradually overcome the weaknesses in the quality of country's workforce Secondly, to deal with improving human capability, the Government needs to have a suitable long-term strategy of developing stable and quality workforces The education system should focus more on quality than the quantity by adjusting theory and practice ratio in the time of studying The Government can control the labor supply by orienting students to the demanding fields of study with priority on finance, jobs after graduation Moreover, Vietnam should learn from Malaysia in attracting talent people 72 (Magnus Blomstrom, 2003) Vietnam has advantage comparing to them on the amount of workforce, which goes parallel with talents The mission is that keeping them and attracting Vietnamese abroad to contribute money and efforts Vietnam has lost many talents as studying abroad and not returning Finally, the Government must have a long-term policy on talent treatment on financial, working conditions They are deserved of the most favorable environment to live and work that is the benefit for the country No one can invent or discover new thing if he has to worry about how to live by tomorrow We not have a particular national policy for talent attracting yet and that discourages them going back to devote for the homeland The “brain drain” phenomenon is very dangerous through experience from Malaysia because it decreases the internal forces of development Vietnam must utilize the availability of human capital in the best way to move upward The Government has to issue new policies on attracting and managing of talent, the scarce national resources It is possible for Vietnam to learn from Malaysia in improving human capital because of similar the foundations 3.2.2 Recommendation for population ageing Since getting the lower-middle income country, issues of population distribution has not been a big concern to economic growth in Malaysia because Malaysia has taken measures to extend coverage to all people, or shift towards a community-based geriatrics healthcare scheme (Malaysia demographic report, 2016) Although, Malaysia‘s population is ageing due to increase in life expectancy, changing demographic and family structure (part 2.1.6), it is still as good lessons for Vietnam because Vietnam can learn from best practices implemented by this country to deal with ageing populations through many policies as providing financial support in housing purchase for adult children who want to live with their parents or the measures Malaysia have applied to ensure healthy lives or to promote well-being at all ages From that, based on the experiences of Malaysia, considering the ageing Vietnamese population, the Vietnamese Government not only to pay attention to health care for old people as a standalone part in the healthcare system but also consider a total 73 overhaul of social security and health insurance Its end goal should be a ‘successfully ageing society’ – where older people are able to achieve financial security, healthcare insurance, and active engagement in social activities Governments should design innovative policies and public services specifically targeted to older persons, including those addressing, inter alia, housing, employment, health care, infrastructure and social protection Such policies will be essential to the success of efforts to achieve the goals and targets laid out Moreover, Vietnam should learn from Malaysia in concentration on strongly developing the system of healthcare and improving the quality of health services The government continues increasing the investment as well as fostering socialization in order to quickly develop health system and to enhance basic health network Strengthen the capability of communes’ medical stations; complete the construction of hospitals at the district level; upgrade provincial and central hospitals Build more specialized hospitals with high standards in Hanoi, Ho Chi Minh City, and some regions 3.2.3 Recommendation for reducing income inequality Before coming to the details of recommendations for falling income inequality in Vietnam, it could be better to take a look at the most noticeable characteristics of Malaysia given Thanks to NEP which was implemented in the span of twenty years (1971-1990), income inequality in a multiracial society drop, from 0,466 to 0,429 and continued to fall to 0,389 in 2014 (Table 2.6) by ETP policy It is clear that Malaysia’s income distribution become more equally through suitable policy reforms ETP towards raising income levels and increasing employment opportunities for all Malaysians, whereas NEM is concentrating on transition Malaysia’s economy into high-income Besides, human resources development also plays an important role in priorities of implementation of a new policy Based on these features, the following recommendations are given: Firstly, the government of Vietnam should continue implementing the national target program on employment in order to achieve the objective of improving the quality and effectiveness of vocational training, job creation and income generation for workers 74 in rural areas As a matter of fact, the gap between urban and rural areas has hindered the attraction of educated people to live and work in the countryside Therefore, the government should provide incentives and policies to support the intellectualization process in rural areas, which is considered as a fundamental measure to address development issues in those regions Secondly, Vietnamese policies should be taken care on the measure to improve the living standards of Vietnamese farmers This can be done based on new crop varieties of high quality and upgrade the country’s irrigation systems In addition, in order to enhance the value of agricultural products, it is necessary for Vietnam to apply quality management systems for those items which help, on the one hand, meet consumers’ requirement regarding product safety and increase incomes for farmers, on the other hand Furthermore, it is possible to increase income for rural people by diversifying their livelihoods such as creating jobs for farmers between crops, developing industry and services Improving public services including education, health care, clean water supply and waste management services which enhance the living standards of rural people also play an important role in dealing with other aspects of issue In summary, Vietnam can learn a lot from the experience of Malaysia in transition into the new income group and in managing to avoid the Trap First, The Government needs a clear policy on promoting economic growth by a purpose to drive economy development stronger Second, the country must focus on improving the human capital quality and attracting talent by adjust some existed education programs or established new ones The role of private sector is very important and the Government only succeeds if being able to generate them These provide the foundation for sustainable development and also a key factor in the choice of many investors, particularly for high-quality investment Third, Vietnam must be concentrate on strongly developing the system of healthcare and improving the quality of health services The government of Vietnam is not only paying attention to healthcare for old people, but also considering a total of social security and health insurance Its end goal should be a ‘successfully ageing 75 society’ – where older people are may achieve security in finance, healthcare insurance, and active engagement in social activities 76 CONCLUSION Studying the reasons why Malaysia failed at graduating into high-income status it was found that three reasons contributed: the imposition of limits on economic growth by the New Economic Policy, insufficient human capital development, and an investment rate slump because of crisis These reasons represent the effects of the failure of the government to develop the human capital in line with the developments in the industrial sector, which resulted in low labor productivity, and the failures of the government to create strong and competitive manufacturing sector well connected through various linkages with the rest of the economy The government target is to raise the per capita GNI to at least $15.000 by 2020, to become a high-income country In the future, the government predicts that $15.000 will be reached and can achieve this target ahead of the deadline of 2020 Based on what was said above, therefore, the following recommendations could be made regarding policies to tackle the problem of the middle-income trap that might be happened in Vietnam During the time researching on this topic, there have been some main challenges First and foremost, the most updated data related to GNI, GDP, and others in both Vietnam and Malaysia are not always available, so sometimes the thesis cannot approach data of the most recent years Secondly, due to the limited length of a bachelor graduation thesis, it is impossible to analyze into details each NKEAs, or SRIs It leaves some opportunities for later researches to be conducted 77 REFERENCES ENGLISH REFERENCES Agénor, P R and O Canuto, 2012, Middle-Income Traps, World Bank, Policy Research Working, Paper 6210 Aiyar, S., R Duval, D Puy, Y Wu and L Zhang, 2013, Growth Slowdowns and the Middle Income Trap, IMF Working Paper WP/13/71, Washington D.C., International Monetary Fund Aiyar, Shekhar, Romain Duval, Damien Puy, Yiqun Wu, and Longmei Zhang, 2013, Growth Slowdowns and the Middle-Income Trap, IMF WP 71 Bhattasali, Deepak and Yusof, Zainal, 2008, Economic Growth and Development in Malaysia: Policy Making and Leadership, Commission on Growth and Development Working Paper No 27 Felipe, J., A Abdon, and U Kumar, 2012, Tracking the middle-income trap: What is it, who is in it, and why?, Levy Economics Institute of Bard College, Asian Development Bank, Working Paper 715 National Economic Advisory Council: NEAC, 2010 New Economic Model for Malaysia, Strategic Policy Directions, part Nungsari A R and Zeufack A G, 2009, Escaping the middle-income trap, chapter in Readings on Development: Malaysia 2057, Khazanah Nasional Berhad Wing Thye Woo, 2009, Getting Malaysia Out of the Middle-Income Trap, The Earth Institute at Columbia University, New York VIETNAMESE REFERENCES Nguyen Van Cong, Vu Kim Dung, 2012, Economics, National Economics, press Hanoi Tran Van Tho, 2012, Bay thu nhap trung binh nhin tu cac nuoc ASEAN, Journal of contemporary research, No 24 78 WEBSITE Website of World Bank: http://data.worldbank.org/ Website of Department of Statistics Malaysia: www.dosm.gov.my/ Website of UNESCO Institute for Statistics: uis.unesco.org/ Website of Ministry of Planning and Investment: www.mpi.gov.vn/en Website of General Statistics Office: www.gso.gov.vn/Default_en.aspx Website of Ministry of Education: www.moe.gov.jm/