Richer, Faster—But for Whom? Vietnam’s rise and Thailand’s inequality problem

“Vietnam is about to overtake Thailand” has become a familiar headline over the past several years. The author recalls that around three years ago, when reporting on this issue as a journalist, such headlines still sparked a sense of urgency among Thai readers. Today, however, comments beneath these news articles increasingly reflect resignation rather than concern—phrases such as “Let them overtake us,” “Vietnam will definitely surpass Thailand,” or even “Go Vietnam!” appear frequently, as if offering sportsmanlike encouragement to a neighboring country. 

This shift raises the question of when Thai people began to lose hope in the possibility of economic catch-up, especially considering that during the 1980s and 1990s Thailand still compared itself with Hong Kong, Singapore, South Korea, and Taiwan.

The debate over Asia’s economic “tigers” has been extensively discussed by scholars and commentators in many contexts. Rather than revisiting that literature, this article focuses on the concept of Pro-Poor Growth through a comparative study of Vietnam and Thailand from the 1980s to 2020, viewed through an institutional economics perspective. This approach highlights how institutions—rules, norms, and governance structures—play a decisive role in determining who benefits from economic development. Although Gross Domestic Product (GDP) remains the most commonly used indicator of economic success, GDP growth alone cannot adequately capture improvements in quality of life for all segments of society.

Conceptually, Pro-Poor Growth refers to economic growth that benefits the poor proportionally more than the non-poor, or at the very least leads to a significant reduction in poverty. This article adopts a framework that emphasizes the integration of macroeconomic policies with institutional transformation, aiming to expand opportunities for those at the bottom of the socioeconomic pyramid.

Vietnam’s Experience: Growth with Redistribution

Vietnam presents a compelling case following the Doi Moi reforms initiated in 1986, which marked a transition from a centrally planned economy to a market-oriented system. This reform constituted a major structural transformation. Vietnam’s notable success in achieving sustained poverty reduction can be attributed to its strategy of “Growth with Redistribution.”

Three key factors underpin Vietnam’s success:

Factors of Production

Vietnam prioritized land reform by dismantling collective farming and restoring land-use rights to households. This was accompanied by substantial investment in human capital through the Education for All program, which prepared unskilled labor for the inflow of foreign direct investment (FDI).

Production Structure

The country systematically shifted its production structure away from agriculture toward manufacturing and services, with a strong emphasis on employment generation that absorbed unskilled labor and gradually upgraded skills.

Spatial Dimension of Production

Vietnam invested heavily in infrastructure to connect rural areas with growth centers. Notably, electricity coverage reached 99.9% of rural areas by 2018, alongside fiscal and administrative decentralization that empowered local governments to manage their own budgets.

As a result, Vietnam sustained average growth rates of 5–7% over several decades and continued to reduce poverty even during periods of global economic crisis. Per capita income increased eighteenfold, supported by a resilient grassroots economic structure. Nevertheless, this is not a moment of unqualified celebration. Vietnam still faces the risk of falling into the middle-income trap, prompting the launch of Doi Moi 2.0 to achieve high-income status by 2045.

Thailand’s Path: Growth without Redistribution

Thailand, once hailed as a future Asian tiger during the 1980s, experienced rapid economic expansion. However, its growth model has differed markedly from Vietnam’s. Thailand largely followed a trickle-down economics approach, premised on the belief that benefits accruing to the wealthy would eventually reach the broader population. Several institutional weaknesses help explain Thailand’s current situation of low growth and high inequality:

Fragmented Policy Design

Economic growth policies are often formulated separately from poverty reduction and redistribution measures. When structural problems remain unaddressed, inequality becomes a long-term barrier to development.

Institutional Weakness

Thailand exhibits characteristics of a “middle-income state” lacking institutional upgrading. The economy relies heavily on foreign labor and capital, while coordination for domestic technological and innovation development remains limited.

Hierarchical Capitalism

Particularly after 2014, state–business relations increasingly took the form of close cooperation with large conglomerates, creating a “big brother–small brother” dynamic. While this may generate growth, it concentrates resources and disadvantages small and local enterprises.

Political Discontinuity

Frequent government changes undermine policy continuity. As a result, poverty reduction policies often take the form of short-term relief measures—such as cash transfers or debt moratoriums—designed to meet immediate political demands. This is less a failure of individual political parties than a structural flaw within Thailand’s political system.

Rethinking Development: Lessons from Vietnam

It would be inaccurate to suggest that Thailand should simply emulate Vietnam, as Vietnam itself has yet to complete its transition to high-income status. Nonetheless, Vietnam’s experience offers an important lesson: escaping the middle-income trap while addressing inequality requires embedding redistribution within the growth strategy from the outset.

The central policy argument of this article is that inclusive development must begin by placing those at the bottom of the socioeconomic pyramid at the center of economic policymaking. Pro-poor growth can only be achieved by simultaneously addressing economic expansion (growth) and income redistribution (redistribution). 

For example, opportunities arising from the digital economy and large-scale infrastructure investment should be designed not only to promote growth, but also to provide targeted social protection for the poor during periods of economic transition. Decentralization policies should aim to spread prosperity to peripheral regions while creating employment and improving local quality of life.

Ultimately, Vietnam’s reform success cannot be explained by regime type alone. Rather, it stems from policy continuity and institutional design that explicitly integrates the poor into the growth strategy. Vietnam learned from China’s post-1978 reforms and from the experiences of the East Asian “miracle” economies. These experiences demonstrate that:

Sustainable growth in a market economy requires outward orientation, macroeconomic stability, and investment in human capital.

Market economies can function under authoritarian governance structures.

Growth with equity is possible, and market economies do not inevitably produce poverty or exploitation.

Thailand should therefore reconsider its development paradigm—not by adopting Vietnam’s political system, as the author remains committed to democratic principles during Thailand’s transition toward high-income status—but by rethinking economic policy design. The shift must be from treating growth and poverty reduction as separate objectives toward creating institutional rules that ensure the benefits of development are broadly and sustainably shared, especially with the poor.

Note:
This article is part of the author’s master’s thesis entitled “Institutions and Pro-Poor Policy : Case Studies of Vietnam and Thailand” 

Reference: Pitsuwan, Ilada.