Vietnam is in trouble. The country, in recent years, has become one of South-East Asia’s most talked about and exciting economies. The capital, Ho Chi Minh City, has become a thriving powerhouse of investment. However, demographics tell a different story. In 2015, Vietnam was declared an ‘aging’ country. Meanwhile, by 2035, it could become an ‘aged’ country. With a significant percentage of the population over 65, the momentum of the Vietnamese economy is coming to a gradual halt. When the birth rate dropped to 1.91, lower than the recommended replacement rate of 2.1, the government quickly acted and repealed Vietnam’s two-child policy.

Vietnam’s Two-Child Policy

Since 1988, the Vietnamese government has kept a rule of no more than two children per mother – this was in response to an extremely high birth rate of more than four babies in the 1980s. Given Vietnam’s struggling post-war economic state, it introduced the policy to control overpopulation. Demographics could, however, quickly stagnate the emerging Vietnamese economy in the 2030s, primarily hurting the poor the most, with rural and underdeveloped areas struggling to grow economically.

Challenges for the Elderly

Elderly Vietnamese often move from thriving cities, with developed infrastructure, to rural areas after retirement. With only two children to care for elderly relatives, many Vietnamese struggle in their old age, coupled with the lack of infrastructure in certain peripheral provinces. Younger Vietnamese workers are reluctant to move to these rural areas, with a lack of work opportunities and limited access to services. This disconnects retirees from their family, keeping young people in cities such as Hanoi.

The Vietnamese government spends a significant amount on health and social care. In the late ‘80s and early ‘90s, the percentage of state budgets spent on health, population and family-planning was around 30%. The rising elderly population would only continue the burden on government services, should the situation worsen. Many wonder what effect this rise will have on the existing poor in Vietnam; will the burden increase if poor families are having more babies? It is unclear that those in poverty will have more children as a result of these reforms.

Boosting Birth Rates

Vietnam already spends 5% of the state budget on health, population, and family planning. If these birth-rate boosting measures were not put in place, social programs for the elderly are expected to cost 0.4% of GDP by 2050. The long-term costs clearly outweigh the risk.

The Vietnamese government also seems to be specifically targeting population centers such as Ho Chi Minh City, for increased fertility. Compared with the overall birth rate of 1.91, Ho Chi Minh City saw levels as low as 1.39. The government, in response to this, instituted a ‘baby bonus’ – a grant of around $120 for those having two children before 35.

By encouraging wealthier areas to have more children, alongside a robust family planning safety net, Vietnam can increase its birth rate whilst taking the burden away from poorer families. This allows the long term economic development and diversification necessary for Vietnam to continue its economic growth, further providing for the poorest in the country.

Why This Was Necessary

The window of opportunity was shortening. Vietnam has been clearly moving towards a situation all too common in Asian countries with strong or developing economies. An aging population, rapidly turning into an aged one, and not enough working-age adults to combat this. 

Short-term fixes have been put in place, such as a raise in the retirement age from 55 to 60 for women, and 60 to 62 for men. The Prime Minister has even made personal pleas, asking women to marry before 30 and have two children before 35. These efforts, however, are only small aspects of a larger story.

Repealing Vietnam’s two-child policy demonstrates a structural shift in the Vietnamese government’s approach to combating the aging population. This move will not only help the poor in the long-term, but future-proof the Vietnamese economy against imminent stagnation.

– Lee Stonehouse

Lee is based in Newcastle upon Tyne, UK and focuses on Good News and Politics for The Borgen Project.

Photo: Wikimedia Commons