By Cesar Polvorosa, Jr.
(Second of two parts)
BEYOND TRADE, structural differences in demographics and education shape both countries’ long-term trajectories.
Vietnam is aging rapidly. Its median age of 33.3 in 2024 is projected to reach nearly 40 by 2040. This raises the risk of “growing old before getting rich,” a challenge like that faced by China. An aging population could slow productivity growth and strain public finances.
The Philippines, with a median age of only 25.7 in 2024, enjoys a major demographic dividend. A youthful workforce offers a long-term advantage for as long as education and job creation systems can sustain it. The Philippines is however hamstrung by some of the worst education outcomes in East Asia. Its PISA scores in math, science, and reading fall far below OECD averages. Without major investments in foundational learning, digital literacy, and tertiary education, the demographic dividend may degenerate into a demographic burden.
Vietnam, on the other hand, has consistently invested in human capital, especially teacher training and STEM education. Its students regularly outperform global averages, ranking second only to Singapore in Southeast Asia. Although recent PISA results show some slippage, Vietnam’s education system remains a key pillar of its competitiveness and is considered a model for developing countries.
Both countries face another long-term challenge: the rise of disruptive technology, particularly AI and automation.
Vietnam’s labor-intensive export model is vulnerable to technological disruption, while the Philippines’ business process outsourcing (BPO) industry faces risks from AI-driven customer service, automation, and generative AI applications. Both could lose millions of jobs if they fail to adapt. Investment in digital infrastructure, AI readiness, and advanced skills training will determine whether they capture AI-driven productivity or fall victim to it.
ECONOMIC PROGRESS THROUGH GOOD GOVERNANCEGovernance quality is among the strongest predictors of long-term development. Here, too, Vietnam and the Philippines diverge.
In Transparency International’s 2024 Corruption Perceptions Index, Vietnam scored 40/100 (88th of 180 countries), while the Philippines scored 33/100 (114th). Vietnam’s score reflects its “blazing furnace” anti-corruption campaign, which is a highly centralized, often politically selective, but impactful effort to discipline officials and signal seriousness to investors.
The Philippines, by contrast, faces systemic and persistent corruption.
The Philippine score on the Corruption Perception Index is expected to substantially deteriorate in 2025 after the shocking revelations of massive corruption surrounding “ghost” infrastructure projects. Most alarming had been the major role of lawmakers and the bureaucrats conniving with favored construction companies.
Over the decades, Philippine governance crises have repeatedly derailed economic progress resulting in the country becoming a laggard in a dynamic region. In 1960, the Philippines outranked South Korea in GDP per capita income. Until the mid 1980s, it compared favorably with Thailand. But political upheavals, weak institutions, and unresolved corruption caused repeated stagnation. Indonesia overtook the Philippines in the early 2000s after stabilizing its post-Suharto governance environment. Thus, the Philippines lagging behind Vietnam can be viewed from the bigger picture of the country losing its economic position to its neighbors over several decades.
The administration of President Benigno “Noynoy” Aquino III (2010–2016) marked a brief renaissance, with 6.2% average GDP growth which was the highest in four decades and that partly recovered lost ground for the Philippine economy driven by improved governance. But the momentum was lost when President Rodrigo Duterte’s catastrophic COVID-19 response led to a -9.5% GDP collapse in 2020, the worst in Southeast Asia. Today, the Philippines is once again embroiled in major political turmoil with revelations of unprecedented massive corruption and the acrimonious divide between politicians and supporters of President Ferdinand “Bongbong” Marcos, Jr. against those of the Duterte family.
The combined headwinds of destructive floods, governance concerns, and trade tensions have driven Philippine GDP growth as of the 3rd quarter year on year 2025 to an anemic 4% vs. 8.2% for Vietnam for the same period!
There is widespread disillusionment with the culture of impunity and sense of entitlement of the powerful political dynasties. For the Philippines, governance remains the decisive element in its long-term development. Demographics, remittances, and strategic location alone cannot offset weak institutions.
CORRUPTION, GOVERNANCE, AND FLOOD CONTROLGovernance failures have real-world consequences, especially in sectors like flood control, which is one of Southeast Asia’s most urgent development priorities. Both the Philippines’ and Vietnam’s geographies — the Philippines being a sprawling archipelago and Vietnam with its long eastern coast and densely populated river deltas — make them vulnerable to typhoons.
Recent Philippine investigations and Senate testimonies have highlighted the depth of corruption in flood control spending, revealing overpriced and substandard projects, “ghost” or non-existing flood control works, huge kickbacks in procurement, chronic delays, and failures in major river and drainage projects. These deficiencies leave millions of people vulnerable to climate-amplified storms and severe flooding. Weak oversight, fragmented authority, and political patronage exacerbate the problem.
Vietnam also faces challenges in flood management, especially in Ho Chi Minh City and Hanoi. However, public reporting shows more frequent use of formal audits conducted by multilaterals like ADB and the World Bank and state-led project reviews such as audits proposed for delayed Ho Chi Minh City flood-defense mega-projects. While this does not eliminate corruption, it reflects a more centralized system of accountability, which can mitigate the worst excesses seen in the Philippines.
Both countries need stronger transparency rules, independent auditing capacity, and genuine community oversight to ensure that flood-risk investments achieve their purpose: protecting vulnerable populations rather than enriching contractors and political intermediaries.
LOOKING AHEADVietnam’s ascent over the Philippines is the outcome of effective industrial strategy, educational investment, relative political stability, and stronger governance. The Philippines, meanwhile, continues to experience cycles of promise followed by reversals — a pattern rooted in institutional weaknesses and uneven policy implementation in the context of a semi feudal society.
Both countries face daunting challenges: Vietnam must avoid the middle-income trap, manage the rapid aging of its population, and adapt to AI-driven manufacturing shifts. The Philippines must overhaul its education system, strengthen institutions, dismantle political dynasties, uphold rule of law and confront corruption especially in infrastructure sectors such as flood control.
As Northeast Asian economies mature, Southeast Asia will increasingly become the center of global economic gravity. Whether Vietnam and the Philippines can seize this moment depends on the quality of their governance, the coherence of their economic strategies, and the strength of their investment in people.
(Read Part 1 here: https://tinyurl.com/2ceq7h29 )
Cesar Polvorosa, Jr. is professor of Economics and International Business at a Canadian University. He is an occasional contributor to current affairs publications including the Philippine Star and Interaksyon. His literary publications in North America and Asia have been anthologized.