A rice farming hamlet of about 400 Tay ethnic minority people without telephones, television or even electricity, Na Lia is part of another Vietnam, the rural hinterland that is struggling to catch up with the boom. In that time more than 25 million people escaped poverty. Travel spending increases sharply when Southeast Asians enter the ranks of the affluent. License number: 71/GP-CBC, Ministry of Information and Communications, September 22, 2021. For Jamesa successful Filipino talent agent and former restauranteur who is in his late 40stravel is a passion. Such material is made available in an effort to advance understanding of country or topic discussed in the article. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful. One of the ten children of a peasant, he formed a joint venture with a Hong King investment firm in 1990 which grew into a $20 million conglomerate by the late 1990s controlling distribution of John Deere farm equipment, Mercedes and Honda cars, and Johnson and Johnson baby products. Rice is the most important crop. In the 1990s there were an estimated 20,000 street kinds in Ho Chi Minh City alone. New UNDP resident representative Gordon Ryan also says that the emerging challenge for Vietnam today is to maintain equality. Graph, map and compare more than 1,000 time series indicators from the World Development Indicators. There are few countries in the world whose economic growth can compare to Vietnams. The poverty and equity agenda is no longer only about raising minimum living standards and tackling chronic poverty; it is also about creating new and sustainable economic pathways for a more aspirational population. Progress in poverty reduction was set back but did not reverse in 2020. Vietnamese policy-makers now think that by promoting both economic development and human development, they will gradually narrow the gap between rich and poor. Those tire-sandaled troops who bested the French colonial army and outlasted the Americans embodied frugality and egalitarianism. For decades, the dominant economic trend in Southeast Asia has been the growth of the middle class. "People from other villages have come to take a look," he said. In the early 1990s, 45 percent of the children in Vietnam were regarded as malnourished and 51 percent of the population ate less than the World Bank's 2,100 calorie a day subsistence level. Blog:Reducing gaps in education remains important in Vietnam as new school year kicks in, A Year Deferred Early Experiences and Lessons from COVID-19 in Vietnam (2021), 2012 Vietnam Poverty Assessment Well Begun but Not Yet Done. Vietnam is determined to pursue rapid and sustainable economic growth combined with environmental protection to progress to prosperity. In addition to the current situation, Vietnam will add 36 million people to its middle class by 2030 . Despite their wealth, however, they and their three children share a minuscule house with outdoor plumbing. All of my international travels have to have a shopping component to them, said Jen, 27, a Singaporean marketing manager. These consumers spend an average of 40% more than older members of the segment. Vietnams middle class population currently at 10% is believed to be the fastest growing in Southeast Asia. To finance the public investments needed to eliminate poverty and grow the economically secure and middle classes, Vietnam can broaden its tax revenue base (personal income tax, property tax), and explore the use of new taxes which both raise revenue and address negative externalities. The middle class is defined as households with per-capita spending of between $11 and $110 a day. Van, for example, enjoys pampering herself at the salon with massages and manicures. Meanwhile, market research firm Nielsen has estimated that the number of middle class Vietnamese will reach 44 million by 2020 and 95 million by 2030. (See Exhibit 1.). Companies must clearly understand the income-consumption curves for their products: Do these curves remain stable as household incomes increase, rise steeply as incomes grow, or increase and then plateau at a certain point? Clean water is more accessible. The hot-rodding episode underlined how out of sync Vietnam's crusty communist image has become with the freewheeling frontier capitalism that is taking root here. Klaus Rohland, who is due to leave his World Bank post in Hanoi this month to take up his new position as country director for the Russian Federation, says in an online video interview that 35-year-old Vietnamese employees in his office all faced the reality of hunger in the 1980s. To understand the mass-affluent market in the ten-member states of the Association of Southeast Asian Nations (ASEAN)Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnamits important to set aside the typical Asian stereotypes: high-net-worth individuals who inherited their wealth or won windfalls in property and security trades and the lavish-spending ultrarich who are depicted in the movie Crazy Rich Asians. In Vietnam, for example, brands heavily promote returning expatriates, who are known as Viet Kus, as Instagram personalities to influence online buyers. "The middle-class suburb also houses the imposing National Convention Center that has been built over the last two years for the APEC gathering at a cost of at least $260 million. (See How the Digital Revolution Is Integrating Southeast Asias Consumers, BCG Focus, September 2018.) Many settled on the damp ground along the city's network of four large canals. Many children in Saigon sell cigarettes, postcards and souvenirs to tourists. Within the ASEAN region, Vietnam was predicted to have the highest CAGR in terms of middle income population with 10.1 percent from 2016 to 2021. She and a friend visit Bangkok every two or three months, and they buy a suitcase of stuff.. For example, middle-class consumers may upgrade their refrigerator from a basic two-door model to one with four doors and an icemaker. According to Vietnamese press accounts, Cuong earned his nickname when he was just 11 years old by paying exclusively with U.S. dollars, which are circulated widely in Vietnam. However, households in Southeast Asian countries often significantly underreport their incomes. COVID-19 also caused large learning losses, which were more hard felt by children without access to digital technologies. In 2004, though one in five households lived in poverty, per capita expenditures were steadily rising for all including the ethnic minorities. WebRICH, POOR AND MIDDLE CLASS IN VIETNAM DISPARITY OF INCOME IN VIETNAM Vietnam remains a poor country, with most people earning about $1,500 a year, but it has made tremendous strides since opening its doors up to capitalism in the mid-1980s. When we asked affluent consumers what makes a brand premium to them, I identify with the product and its story was one of the top responses. "And I would never tell him how much they cost. The poverty and equity agenda is no longer only about raising minimum living standards and tackling chronic poverty; it is also about creating new and sustainable economic pathways for a more aspirational population. In the one-party state, the Communist Party leadership has made clear that as far as the economy goes, there is no turning back. ////, The room has been changed since I last visited. That is why in the major cities of Hanoi and Ho Chi Minh City, the focuses are on boosting production, protecting the environment and fighting "social evils". Huge crowds overrun beaches as long holiday break begins, Hollywood actress feared crossing roads in Vietnam, My boyfriend thinks that paying for sex is a normal thing, Foreign tourist numbers reach nearly half of full-year target, Wives resent insecure husbands controlling their clothes, Airlines buying planes for more intl flights, Mothers love brings son from overweight to over-wow, Vandals spray graffiti again on Saigon metro train, Foreign tourists explore historical sites during holiday break. Reaching the ambitious goal of upper-middle-income status would require Vietnam to grow at least 7 percent per year, raising the average income level to over $7,000 or $18,000 in purchasing-power parity terms by 2035, compared with $2,052 or $5,370 in PPP terms in 2014. It was clean." Another reason for buying abroad is confidence in a products authenticity. Vietnams per capita income is expected to increase to US$3,000 by 2020 from its current level of US$1,960. In Burberrys new flagship store in Beijings Sparkle Roll Plaza, for example, customers are surrounded by giant video screens for projecting fashion shows, musical performances, and elaborate holograms. Cuong and his pals were convicted of disturbing the public order Sept. 8, four months after their midnight thrill ride. Global data and statistics, research and publications, and topics in poverty and development. One casino patron told the Yomiuri Shimbun, "I made a fortune thanks to my connections with the [Vietnamese] government. There was significant progress in poverty reduction from 2010-2020, but Last Mile challenges in tackling poverty remain. They are well fed. As a result, these experienced affluent individuals tend to plan their purchases more carefully, and they are less swayed by emotion than the newly affluentthose who have become affluent in the past ten years. Updated country income classifications are available here. Because affluent consumers are comfortable with digital channels, they make a significant percentage of their purchases online. However, all attempts to find out the names of the owners were met with a stony silence, while the club's manager, who gave his name as Minh, simply said the stakeholders were "Vietnamese people". In the analysis process, these six social classes are grouped into three social strata: the upper stratum (including upper and upper-middle classes), the middle stratum (consisting of the middle and lower-middle classes), and lower stratum (comprising of the upper-lower and lower classes). But as countries GDPs have continued to rise, this large middle class has started to graduate to the affluent class. International Comparison Program & Purchasing Power Parity, International Household Survey Network (IHSN), Trust Fund for Statistical Capacity Building, Poverty headcount ratio at $2.15 a day (2017 PPP) (% of population), Unemployment, total (% of total labor force) (modeled ILO estimate), Personal remittances, received (% of GDP), Annual freshwater withdrawals, total (% of internal resources), Electricity production from renewable sources, excluding hydroelectric (% of total), People using safely managed sanitation services (% of population), Intentional homicides (per 100,000 people), Central government debt, total (% of GDP), Statistical performance indicators (SPI): Overall score (scale 0-100), Individuals using the Internet (% of population), Proportion of seats held by women in national parliaments (%), Foreign direct investment, net inflows (% of GDP). Living standards have also improved tremendously. Meanwhile, market research firm Nielsen has estimated that the number of middle class Vietnamese will reach 44 million by 2020 and 95 million by 2030. Here drugs, crime and prostitution flourish. An additional difference is that newly affluent consumers increase their spending on items such as skin care products, cosmetics, and international travel. She is a pleasant, round-faced woman with her hair tucked into a bun. It is crucial that companies understand the income-consumption curve for every one of their products and then match each products price ladder to that curve. He eats meat or fish once or twice a month -- a far cry from Hanoi, where sushi bars have mushroomed, fast-food chain KFC opened its first outlets this year, and health authorities warn of rising obesity rates. "Vegetables, meat, household utensils, everything. [Source: By Tran Dinh Thanh Lam, Inter Press Service, April 10, 2002 ++], "Economists warned that Vietnam country appears to be reaching relatively high inequality rates much more quickly than China. Companies should also use affluent consumers as digital influencers by actively engaging them through social media. As there is no private land ownership in Vietnam, trade in land-use rights is roaring, creating a housing bubble in the country. The World Bank assigns the worlds economies [1] to four income groupslow, lower-middle, upper-middle, and high income. Most of it was in $100 bills, and Cuong suggested the officers use the $400 to buy themselves some coffee, Thuyet said. Several buyers in Ho Chi Minh City were interested in the car but Khai offered the highest price which was, however, not disclosed. Most street kids have either been abandoned or have been sent by their families to the cities to earn money. Companies must prepare not only to meet exploding demand in new product categories but also to shift to masstige and premium products in other categories. Companies need a robust online presence to enable consumers to discover their products in both official and unofficial channels, but it is also critical that brands maintain some level of exclusivity to protect their image. The report concludes with policy suggestions following the Last Mile to Next Mile framework. Even though members of the affluent class will remain a minority of the regions population, they will become an increasingly meaningful share of the target market for a wide variety of products. A typical table might drop between $1,000 and $2,000, he said. We estimate that 57 million people in this dynamic region have gained affluencethe purchasing power and intent to sharply increase their acquisition of a wide variety of premium and luxury goods and services. Fiscal policy can support the development of a prosperous and inclusive middle-class society. This is in contrast to the term lower middle class, which is used for the group at the opposite end of the middle-class stratum, and to the broader term middle class. Chronically higher poverty rates among certain groups is the Last Mile challenge but some positive trends emerged. Vietnam has its sights set on becoming a developing, upper-middle-income country with modern industry by 2030, when it celebrates the 100th anniversary of the founding of the Communist Party of Vietnam. We arent referring only to an income level. To help the street kids in Ho Chi Minh City one Australian-Vietnamese opened up a caf called Koto that employs only street children. Moreover, the social protection system can play a larger role (discussed as part of the Next Mile agenda). The tariffs will be lowered gradually to a maximum of 70 percent now that Vietnam is in the WTO. Those born in the baby boom years that followed the Vietnam War have turned 30, and a group known as the 8X-generation born in the 1980s strive to make their mark as professional choices increase. ////, But in recent years, as it has opened up the economy, the government has been portraying capitalism as a force for social improvement -- a way of generating jobs and income in a developing country yearning to raise its standard of living. Updated country income classifications are available here. "I'll never forget how we had to queue for any necessity during the (post-war) subsidised period," said retired teacher Tran Thi Hoa, 56, pushing her shopping trolley through Hanoi's new Citimart. The regions economic transition is a major reason for the expansion of the mass-affluent class. Some companies are also customizing products or increasing exclusivity through access. Access to new knowledge and innovations, including application of appropriate digital technologies, would support productivity growth by substituting for labor intensity. The broad based growth in Vietnam in the 1990s and 2000s contributed to rapid poverty reduction across all regions of the country. ////, AFP reported from Hanoi: "Over a generation, urban Vietnam has emerged from post-war austerity into a fast growing consumer society, a trend set to speed up as WTO membership attracts more foreign companies, analysts say. [Source: Agence France Presse, November 8, 2007 ], In 2006, Reuters reported: "World Bank senior poverty economist Carrie Turk said the rate at which poverty was being reduced in Vietnam was "almost globally unprecedented" and the benefits widely shared. ***. The income segments are affluent, established middle class, emerging middle class, aspirant, and poor. Working and studying to fulfill their ambitions leave almost no time for them to take care of each other and their children, she added. Susan, a Singaporean in her mid-30s, told us that she has a whole room filled with bags, purses, and perfumes and that she buys limited editions for the thrill of it. Her collection includes a purse that is one of only two made in the world. Define a premiumization journey. The classifications are updated each year on July 1 and are based on the GNI per capita of the previous year (2021). The country is expected to achieve by 2015 most of the ambitious Millennium Development Goals set by the United Nations. In those parts, sewage is still dumped straight into the water, so it stills flows through parts of the city. "Instead, the children we talked with said they were deposited at the gates of the centers and expected to find their way. These consumers are impacting some categories more than others. [Source: Reuters, October 8, 1998 |+|], In 2002, Xinhua reported: "With Ho Chi Minh City's divorce rate increasing in recent years, more kids make a home on streets of the Vietnamese city. The 1986 reforms came at a time when, faced with severe famine and a failing Soviet-style command economy, the government began to experiment with market mechanisms and carried out an "egalitarian" distribution of communal land to farmers. Vietnam has seen annual economic growth of 7-8 percent in recent years but the scrapping of state subsidies and farm cooperatives has widened the wealth gap and sent poor rural families and lone children to cities looking for work. The government aimed to boost this further, with a 2018 target of 135,000. (Photo BMI also takes a limited number of accredited institutions on chauffeured visits to top-rated private high schools in Bangkok, Hanoi, HCMC and Jakarta and to meet top high school counsellors at the Vietnam Internation School Workshop & Forum. With a total of 56 million middle-class people by 2030, Vietnam is set to leap up eight places from the current 26th position to 18th in the global ranking of 30 economies with the largest middle-class populations. However, as these consumers mature, they increasingly prefer goods that few others have and seek out exclusive and niche, harder-to-find brands. James tries to be on the road at least one week every month. [Source: Bojana Stoparic, Women's e-news, February 15, 2007]. Develop a regional strategy to target the affluent. Vietnam's government remains intolerant of criticism, Human Rights Watch's 2007 World Report finds. Hanging on the porch and from poles set in the driveway are the cages where An keeps his laughing thrushes, golden-fronted leafbirds, magpies, canaries, and other songbirds. Communist Vietnam is now on track to raise average per capita GDP to 1,000 dollars a year by 2010, moving the country of 84 million to middle-income status. In Vietnam, for example, 16% of the population will be affluent by 2030, compared with 5% now; this proportion is projected to jump from 9% to 21% in Indonesia. Vietnam is expected to add 36 million people to its middle class by 2030, according to a recent report by McKinsey. Target travelers. The World Bank assigns the worlds economies to four income groupslow, lower-middle, upper-middle, and high-income countries. This site uses cookies to optimize functionality and give you the best possible experience. TNS research showed that in an average household in the city most still call by its old name, Saigon, people spent 2.5 to seven times more than they said they earned. About one-third of the respondents in Vietnam, for example, said that they always share their cosmetic recommendations with people they know online or in person, and half reported that they sometimes or usually share their opinions with acquaintances. For some basic products, such as toothpaste, shampoo, and instant noodles, spending by Southeast Asian households remains very stable as incomes rise. ////, "Everybody around here is very angry about the racing,'' Quang said. Providing you the unique ability to connect with influential leaders at the secondary school level from across Vietnam. In fact, our research found that as incomes increase, the affluent who previously bought well-known consumer brands are passing over well-known premium brands and gaining the confidence to move directly to superpremium, niche, and boutique brands. Hold 15 meetings and network with school leaders who advise teenagers and their parents on the next steps in their academic careers. On the migration of the poor to the cities, The BBC reported: "For poorer people, the recent economic changes mean rapid urbanisation and large-scale migration from the countryside to the cities. [Source: Reuters, October 8, 1998 |+|], Khai said sexual abuse of children, child labor and the sight of children breaking the law was painful for all society. And when he travels, James says, It is all about dining and shopping. He reads blogs to stay abreast of trends in destinations, food, and luxury brands, and he conveys his discoveries to friends who share his passions. But what he really enjoys is the hunt for something unique. A surprisingly small percentage of peopleless than 5%inherited their wealth, except in Thailand, where a greater proportion has family wealth. Logging onto the Internet, he demonstrated a vocabulary lesson, repeating the words on the monitor: Bob and Jane are staying with their Uncle George in Pittsburgh. Beaming with pride, his father told me, My dream is that he becomes an engineer, a doctor or a lawyer, and cares for me when I retire. I wished the youngster good luck. Over the past decade, the main reason for the rise of Southeast Asian markets was the expansion of the middle class. Vietnam remains a poor country, with most people earning about $1,500 a year, but it has made tremendous strides since opening its doors up to capitalism in the mid-1980s. This has taken place even as Vietnam was posting strong economic growth in the past decade. "Families that don't have the money to pay for school fees and supplies are more likely to take girls out of school than boys," she said. Efforts to clear them began 15 years ago, but up to quarter of a million people still live in them. Blog:Connecting Vietnams youth to high-skilled jobs: What does it take? Over this period, the number of affluent people in those four nations alone is projected to grow from 46 million to 125 million, and their share of the population is projected to more than double, to 21%. (See Exhibit 5.) And they shun tourist traps and seek out niche retail outlets instead. Herms, for example, tightly limits access to VIP events, and the product selection depends on customers status with the brand. The digital interactions of affluent Southeast Asians evolve as they grow more experienced. Earlier this year, he said, rich kids would show up every weekend to race their high-priced motorbikes along the same road. For example, an affluent Filipino reporting a monthly household income of about $5,500, when measured in local purchasing power, may appear to be in the upper middle class. Manufacturing accounts for a mere 8% of all employment. Thuyet said, repeating the Vietnamese word for 100 with a look of disbelief on his face. Earlier this month, three youths died and two were badly injured racing their motorbikes in another part of the city. The Vietnamese government is committed to "market-oriented socialism with Vietnamese characteristics" but sensitive about the growing gap between rich and poor. The canal stinks, with a sickly smell of human waste and rotting vegetation. Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings. While shopping during a recent trip to Taiwan, for example, no purchase cost more than $40. Nearly 40 percent of the middle class in 2016 slid to a lower economic group by 2018. WebRICH, POOR AND MIDDLE CLASS IN VIETNAM DISPARITY OF INCOME IN VIETNAM Vietnam remains a poor country, with most people earning about $1,500 a year, but it has made tremendous strides since opening its doors up to capitalism in the mid-1980s. said Ha Ngoc. -, "The government is naturally sensitive about the slums. By its own estimates, the most affluent 20 percent of the population is seven times better off than the poorest two percent. Vietnams economic growth over the past two decades has been steady and impressive, averaging 5.5% since 1990 and nearly 8% annually through the 1990s. Yet spending on cars, restaurant dining, travel, and spirits dramatically accelerates as consumers enter the ranks of the affluentand keeps rising in step with increases in income. Associated Press reported from Ho Chi Minh City: "In a country whose peasant army once marched on flip-flops cut from old tires, Gucci beach sandals priced at $365 can come as a shock. More than 29 percent of juvenile delinquents come from broken home. The poorest neighborhood in Ho Chi Minh City in the 1990s District 4 was known as the district of the "five no's""no sewers, no water, no electricity, no jobs, no hope." 1 JPY = 207.33 VND Business owners constitute the second-biggest cohort. There are a bunch of people like me, explained Jaydren, 40, a self-described adidas fan and a project manager for a construction company. (See Exhibit 7.). However, considering peoples awareness, 96 percent of Vietnamese think their incomes are high enough to be among the middle class. WebDemocratic president Lyndon Johnsons escalation of the Vietnam War in 1965 gave SDS a cause of its own, as well as a recruiting boost. She recently bought Cuong a home in Saigon worth about $350,000, according to a story on VN Express, a Vietnamese Web newspaper. They indulge their urge to splurge at Dolce and Gabbana, Burberry, Escada, Rolex, Clarins, Shiseido and the like. In addition, companies must master newways to market productsways that appeal to a consumer psyche that is dramatically different from that of the middle class. "Under the communist style regimes that are becoming a dim memory, the governments role was critical and domineering. Their teenage son Hung sat at a makeshift desk in a corner, learning English on a computer. The mass affluent already constitute a critical market. This is particularly true with luxury brands. The income bands for these segments are different in each country, since they measure the purchasing power for a basket of goods. They can show this by pursuing sustainable, local sourcing of materials; creating jobs by manufacturing products locally; and supporting social programs in the communities in which they operate. (In using the Gini coefficient, zero represents perfect equality and 1 perfect inequality.) In fact, the internet is by far the most important source of product information for Southeast Asias mass affluent. All rights reserved. If you are the copyright owner and would like this content removed from factsanddetails.com, please contact me. Lt. Col. Truong Van Thuyet led the 16 officers who chased down the young men in front of a large crowd that had gathered to watch the race along Dien Bien Phu street, an eight-lane divided boulevard. Only 12% cited physical, point-of-sale retail outlets. One is the Nhieu Loc canal district, on the road used by visitors arriving in Saigon from Tan Son Nhat airport. The gains enjoyed by the urban population, however, are not limited to such things as increased income per capita. Specifically, these consumers are embracing premiumization, searching for quality and value, seeking exclusivity, relishing immersive experiences, using digital media, and traveling frequently. This has contributed to the economic well being of the population and is reflected in the high Human Development Index and the Gender Development Index relative to other countries at similar levels of development. One of her friends has 50 Louis Vuitton bags, Van said. Poverty levels in Vietnam have dropped from around 70 percent of the population to less than 20 percent in the past 15 years, according to the World Bank. ::: "Car sales keep growing, although Vietnam is one of the most expensive places in the world to buy a vehicle with import tariffs of up to 90 percent. Part of the reason for strong economic growth since the mid-1980s is a strong inflow of foreign direct investment from American and other multinational companies. Exclusive events can be particularly useful for local retailers that have little control over the products they sell. Over the next decade, 36 million more consumers may join Vietnams middle class, defined as consumers who spend at least 11 USD a day in purchasing power parity terms.