Vietnam’s abundant labor force is a major factor in its long-term economic growth in general and a key to attracting foreign investment in particular. This advantage will decline in just over a decade. In Asia, many countries like Japan, South Korea, China, and Thailand have witnessed slowing growth rates as their demographic structure shifts towards an aging population.

While the “quantity” of labor decreases, the “quality” of Vietnam’s labor has been slow to improve. The General Statistics Office reported that by the end of 2023, 27% of the country’s workforce had been trained and held degrees or certificates. Thus, 73% of working age people remain untrained. This is a big reason why Vietnam’s labor productivity lags behind that of other countries in the region.

An aging population also puts pressure on the social security system. More than 60% of working age people are not participating in social insurance. This means that a large number of the above-mentioned workers face the prospect of being outside the social safety net, without pensions and other benefits in their old age. The pressure on the shoulders of those still working, who are the group directly creating material wealth for the country, will become increasingly heavy as the population ages.

At the same time, studies show that the proportion of people with chronic diseases such as cardiovascular disease, hypertension, and diabetes in Vietnam is quickly rising. According to data from the Ministry of Health, 65-75% of inpatients in hospitals have non-communicable diseases. These conditions require long treatment times and high costs.

A larger percentage of elderly people facing more health problems puts pressure on healthcare spending. A study by the General Statistics Office in collaboration with UNFPA pointed out that the average health expenditure per person for those aged 75 and over is nearly VND 9 million per year, 2.7 times higher than for children. With a rapidly aging population structure like Vietnam’s, the healthcare system will need much more investment in the coming years.

Adding value

To adapt to the fast changing demographic structure, the most important recommendation made by international experts was this: “Vietnam needs to actively implement solutions to increase labor productivity”. Increasing labor productivity has always been considered the key to high and sustainable economic growth in the long term. This requirement is even more urgent in the context of rapid population aging. 

To increase productivity at the national level and raise the economy higher on the global production value chain, investing in education and training and science and technology is a top priority.

In parallel, the rapidly increasing number of elderly people can be a solution for some fields if this healthy older workforce can be utilized. Vietnam should continue to study and perfect policies and appropriate roadmaps to increase the retirement age for certain occupations, according to a report recommended by UNFPA and the General Statistics Office. This helps older people have a more proactive income, while reducing the pressure on the social security system.

At the micro level, population aging also brings opportunities for the development of the healthcare and pharmaceutical industry in Vietnam. In 2023, Vietnam’s healthcare industry witnessed 11 mergers and acquisitions (M&A) deals with a total value exceeding half a billion USD, doubling after one year, according to statistics from Kirin Capital. This figure has made healthcare the third most exciting M&A sector in the market, after only the financial and real estate sectors. Notably, most of the capital pouring into this field is from abroad, showing that Vietnam’s healthcare sector is particularly attractive in the eyes of foreign investors.

The potential of the healthcare industry in Vietnam comes not only from the changing demographic structure but also from the fastest growth rate of the middle class in Southeast Asia. According to Statista,  the middle class currently accounts for 13% of Vietnam’s population and will double by 2026. These factors will help drive the demand for high-quality healthcare services in Vietnam, a Kirin Capital expert noted.