“Indonesia has a population more than two and a half times larger than that of Vietnam and an economy three and a half times the size of Vietnam’s, but its gross national income (GNI) per capita is only 41% larger than Vietnam’s. This implies that Vietnam is much better at utilizing and benefiting from its indigenous resources in an efficient manner.”
How does it imply that?
It seems to me that the relative sizes of population and economy implies the stated difference in GNI anyway. 3.5/2.5 = 1.4. So it doesn’t surprise me that Indonesia’s GNI is around 40% larger. Anyway, putting that to one side, how does all this imply that “Vietnam is much better at utilizing and benefiting from its indigenous resources in an efficient manner.”?
*Managing Country Risk: A practitioner’s Guide to Effective Cross-Border Analysis by Daniel Wagner
Indonesia:
Gross national income: 1.188 trillion PPP dollars
Gross domestic product: 878 billion USD (2012)
Population: 246.9 million (2012)
GNI per capita: $4810
GDP per capita: $3555
Vietnam:
Gross national income: 305.6 billion PPP dollars
Gross domestic product: 141.7 billion USD (2012)
Population: 88.78 million (2012)
GNI per capita: $3433
GNP per capita: $1592
Ratios - Indonesia to Vietnam
GNI: 388%
GDP: 618%
Pop: 277%
GNI per capita: 140%
GDP per capita: 223%
The 40% more they’re talking about is the ratio of Gross National Income between the two countries, just as the quote said. I’m not sure why you used the numbers you did but that ratio has no meaning. True, the other ratios are off from what the quote said, but that’s also mostly irrelevant.
The difference between GNI and GNP is that “The Gross national income (GNI) is the total domestic and foreign output claimed by residents of a country, consisting of gross domestic product (GDP) plus factor incomes earned by foreign residents, minus income earned in the domestic economy by nonresidents.” Presumably two countries that were equally efficient would have per capita ratios near 100%. Indonesia is slightly better in GNI but much better in GDP. To me that indicates that Indonesia is extremely good “at utilizing and benefiting from its indigenous resources in an efficient manner” but Vietnam is much better at getting foreign residents to earn money there, the opposite of what the quote says.
Something seems missing or wrong here, and with the quote taken out of context it’s hard to know what. You need to know a lot of information outside the quote to make sense of it and the information actually given is irrelevant, since the point of per capita comparisons is to negate raw size differences. I’m baffled.
Is the implication simply that Indonesia’s lower GNI implies more of the work done in their economy (as measured by GDP) is being done by foreigners and foreign companies?
Of course, it could just as easily imply that Vietnam’s economy is more dependent on remittances made by its citizens working abroad.
Another confusing thing: the quote says “Indonesia has a population more than two and a half times larger than that of Vietnam” when it apparently means “Indonesia has a population more than two and a half times that of Vietnam”. 2.5 times larger would mean 350%, but it’s really 277%.
“Two and a half times larger” is synonymous with “two and a half times”. You’re thinking of “250% larger”, which is synonymous with “three and a half times larger”.
I tried something similar, but I separated the PPP from the nominal figures.
Indonesia:
Gross national income (PPP): 1,188 billion
Gross national income (nominal): 853 billion
Gross domestic product (PPP): 1,223 billion
Gross domestic product (nominal): 878 billion
GNI per capita (PPP): $4730
GNI per capital (nominal): $3420
GDP per capita (PPP): $4876
GDP per capita (nominal): $3557
Vietnam:
Gross national income (PPP): 305.6 billion
Gross national income (nominal): 149 billion
Gross domestic product (PPP): 323 billion
Gross domestic product (nominal): 141.7 billion
GNI per capita (PPP): $3620
GNI per capita (nominal): $1550
GDP per capita (PPP): $3787
GDP per capital (nominal): $1755
I use World Bank figures through Wiki or Google.
GNI is basically an alternative measure of GNP. They’re the same basic idea, but the data is gathered in a different way so there is always a measurement discrepancy between GNP and GNI, just as there’s always a discrepancy between GDP and GDI. But that doesn’t help. I thought the quote might make more sense given this broader context. I was wrong. It is just as baffling after working through the other numbers. I have no idea why he used GNI instead of GDP, as if the distinction mattered.
GNI per capita (PPP), Indonesia is 31% bigger.
GDP per capita (PPP), Indonesia is 29% bigger.
GNI per capita (nominal), Indonesia is more than twice as large.
GDP per capita (nominal), Indonesia is also more than twice as large. This implies a more undervalued currency for Vietnam. This can also be seen from the straight GDP figures. Both Vietnamese GDP and GNI more than double when we compensate for purchasing power. Their money goes much farther within the country than it does for international currency exchange.
So…
I don’t get it. When we compensate for local purchasing power, and the difference in population, Indonesia creates roughly 30% more per person.
Maybe there’s some context missing that would make this quote sensible, but I can’t think of what it would be.
I’ve never heard anyone technical (and in person) claim that “X times larger” is synonymous with “X times as large”. “Larger” (in my experience) always means on top of a 100% baseline. I find the distinction especially weird when “X% larger” is treated differently.
At any rate, the original sentence is phrased quite poorly–(s)he should not have used three different ways of stating a multiplicative increase.
I mostly agree with you, but it’s sloppy phrasing, as a logical reading would suggest that it means 3.5 times. If I have 100 widgets and you have an amount “one time larger,” that would mean 200 widgets. I would phrase it differently so there’s no potential for this sort of confusion, like “two and a half times as large/much.”
I wouldn’t say it has no meaning. The ratio I came up with is the ratio of ‘Economy’ per capita between the 2 countries. It is not totally clear what ‘Economy’ refers to in this sentence but it is probably GDP.
GDP is simply GNI adjusted by net revenue earned overseas. If we assume that the relative effects of net income earned overseas are not drastically different then my ratio and the authors ratio should not be drastically different.
All I’m saying is that it is not that surprising that Indonesia’s GNI per capita is 41% larger than Vietnam’s. The author suggests that he expected it to be larger by using the word ‘only’.
I took a look at the cited text. The statement that Indonesia’s GNI is only 41% larger than Vietnam’s does not really refer to the two countries’ relative populations and economies, but to the assertion made in the beginning of the next paragraph, “By all accounts, the average person in Indonesia should be much wealthier than the average person in Vietnam.” The text goes on to explain that Vietnam has experienced relative economic weakness, has had difficulty competing with its neighbors, suffers from being a centrally planned economy with stifled innovation and growth potential, and ranks much worse than Indonesia in terms of protecting investors and trading across borders. Indonesia, in contrast, has a vibrant press, growing social freedoms, and a thriving private sector. In spite of these advantages, for reasons that are explored more fully in the text, Indonesia does only modestly better than Vietnam and in some areas lags behind.
