by: Keana Nolasco and Aimee Tang
Terms to know
Đổi Mới (English: “Renovation”): The name of the economic reforms initiated in Vietnam in 1986 with the goal of creating a “socialist-oriented market economy. “The term Đổi Mới itself is a generic term widely used in the Vietnamese language. However, the term “Đđi Mới Policy” (Chính sách Đổi Mới) refers specifically to these reforms, which are aimed at transitioning Vietnam from a command economy to a socialist-oriented market economy.
Vietnam War: Also known as the Second Indochina War, in Vietnam as the War Against the United States or simply the American War, was a conflict between Vietnam, Laos, and Cambodia between November 1, 1955 and the fall of Saigon on April 30, 1975.
Socialist market economy: A market-regulated, multisectoral commodity economy consisting of a mixture of private, collective and State ownership of the means of production.
Centrally planned economy: An economic system in which the prices and distribution of resources, goods and services are determined by the government, rather than by autonomous subjects as in a free market economy.
Vietnam is a country located in Southeast Asia, bordering China, Laos and Cambodia. When the 20-year Vietnam War ended in 1975, Vietnam’s economy was one of the poorest in the world. Under the government’s subsequent five-year central plan, economic growth was lackluster.
But then changes took place, and in 1986 the government introduced Đổi Mới, a series of economic and political reforms, and guided the country to become a “socialist-oriented market economy.” Vietnam’s transition from a centrally planned economy to a market economy transformed the country from one of the poorest in the world to a lower-middle income country.
Today, Vietnam has become one of the fastest growing and most stable economies, and as one of the most dynamic emerging countries in East Asia today, it has a growth rate of 6-7%, rivaling that of China.
So, what made this growth miracle possible?
You are the guest of a CNC News interview and you are asked to give a brief comment on the rapidly growing Vietnamese economy during these years. Here are the specific questions you need to prepare.
What has been Vietnam’s main economic development strategy since the end of the Vietnam War?
Vietnam is located in Southeast Asia, beside China, Laos and Cambodia. Where Vietnam is located could have an effect on it’s development such as Historical Landmarks, Nature, etc. Its tropical climate could also be a factor as to why Vietnam gets a lot of tourists every year, which helps their economy by a lot.
During the Vietnamese War political geography was the main reason why the USA came to Vietnam. After the ending of the French colonization, the USA was afraid that Vietnam would become a breeding place for Russian communism. Moreover, they were afraid of the so-called dominant effect: once Vietnam would become a communist nation, other nations like Cambodia, Myanmar and Laos would eventually become communist nations as well (or at least heavily influenced).
Fellow Rising Economies
Since World War 2, Western countries have grown a lot economically compared to south / southeast Asian countries and as of now, we are seeing an improvement in these southeast Asian countries and it could be helpful to these fast developing countries as we can see here.
Economy and Trade
Vietnam is rich in mineral resources and ecological environment, Vietnam’s manufacturing industry also relies on the foreign trade industry, and with the geographical advantage of its coasts, many Vietnamese goods are exported overseas. Another advantage they have is the demographic structure, Vietnam reformed and has a cheap labor force. This is a way for Vietnam to attract foreign-owned factories. The reason for this is because it is low cost and highly efficient. Making factories, and needing to hire more people which helps employment and income in Vietnam.
Vietnam’s growth could be caused by these three factors, Trade Liberalization, External Liberation with domestic reforms by deregulation and lower business costs and Third, Vietnam made investments in human and physical capital, and many public investments.
In the past two decades, Vietnam signed a lot of free trade agreements. They joined the ASEAN free trade area in 1995, and signed a free trade agreement with America in 2007. In short, Vietnam joined the world trade organization. Since then, they have signed further agreements with China, India, Japan and South Korea. And in 2018, the Trans-Pacific Partnership came into effect – Even though America wasn’t part of this, As an effect of these agreements, tariffs on Vietnam’s imports and exports have been reduced.
To promote an open economy, the Vietnamese government has gone through domestic reforms.In 1986, Vietnam applied its first Foreign Investment Law, after which foreign companies were able to enter the country. The law has been amended several times in order to take a more approach, while aiming to reduce administrative bureaucracy and better facilitate foreign investment into Vietnam, Baker & McKenzie said in a 2016 report.
Vietnam’s efforts have been reflected in international rankings. In the World Economic Forum’s Global Competitiveness Report, Vietnam rose from 77th place in 2006 to 55th in 2017. Meanwhile, in the World Bank’s “Ease of Doing Business” ranking, Vietnam rose from 104th in 2007 to 68th in 2017.In 2017, the Bank said Vietnam made progress in enforcing contracts, increasing access to credit and electricity, paying taxes and trading across borders.
Finally, Vietnam has invested in human capital and infrastructure. Currently, Vietnam has a population of 95 million, half of them are under 35 years of age, up from 60 million in 1986. Faced with the rapid population growth and the increasing demand for jobs, Vietnam has invested in public investment in primary education. Vietnam has also invested in infrastructure to ensure affordable mass Internet access. A developed IT infrastructure was essential for Vietnam to be prepared for the fourth industrial revolution that was getting closer for South-East Asia.
Currently, exports account for 99.2 percent of Vietnam’s GDP. Foreign investment and trade are to a large extent the basis of Vietnam’s success. As the US dollar continues to appreciate, this emerging market could fall out of favor for investment as a result. Yet, even as Vietnam’s interests are undermined by increased Western protectionism, it can still rely on its burgeoning middle class to provide the next engine of growth.
Both domestic and international retailers are watching Vietnam’s rapid rise as more and more people gain the purchasing power to consume goods and services. This may mean that someday in the future, the country will no longer be filled with the hustle and bustle of small shops and motorcycles, but will instead feature large malls and cars. But focusing on the present, there is no doubt that Vietnam is developing at its own pace and in its own way.
“Đổi Mới.” Wikipedia, Wikimedia Foundation, 2 Nov. 2020, en.wikipedia.org/wiki/%C4%90%E1%BB%95i_M%E1%BB%9Bi.
“Vietnam GDP Growth Rate2000-2018 Data: 2019-2020 Forecast: Historical: Chart.” Vietnam GDP Growth Rate | 2000-2018 Data | 2019-2020 Forecast | Historical | Chart, tradingeconomics.com/vietnam/gdp-growth.
“Key Role of the State Economic Sector in Vietnam’s Socialist-Oriented Market Economy Undeniable – National Defence Journal.” TCQPTD, tapchiqptd.vn/en/events-and-comments/key-role-of-the-state-economic-sector-in-vietnams-socialistoriented-market-economy-undeniable/14196.html.
“Vietnam Races Ahead of China in Economic Growth: Opportunities and Challenges for Vietnam in the Post-COVID- 19 Period.” Times of India Blog, 21 July 2020, timesofindia.indiatimes.com/blogs/ChanakyaCode/vietnam-races-ahead-of-china-in-economic-growth-opportunities-and-challenges-for-vietnam-in-the-post-covid-19-period/.
“Vietnam’s Economy Grows Robustly, but Risks Intensify.” World Bank, http://www.worldbank.org/en/news/press-release/2018/12/12/vietnams-economy-grows-robustly-but-risks-intensify.
“Vietnam – The Economy – Historical Background”. Retrieved 3 March 2015.
Baccini, Leonardo; Impullitti, Giammario; Malesky, Edmund J. (2019). “Globalization and state capitalism: Assessing Vietnam’s accession to the WTO” (PDF). Journal of International Economics.
“Economy of Vietnam.” Wikipedia, Wikimedia Foundation, 9 Nov. 2020, en.wikipedia.org/wiki/Economy_of_Vietnam.
“Tourism, Urbanisation and Globalisation in Vietnam.” IIAS, http://www.iias.asia/the-newsletter/article/tourism-vietnam.
“Economic Impacts of Tourism.” Tourism Teacher, 23 Oct. 2020, tourismteacher.com/economic-impacts-of-tourism/.