Vietnam’s Economy all set to Grow

Communist Party Chief Nguyen PhuTrong has at least three reasons to celebrate after the conclusion of the 13th Party Congress held late last month. First, Trong has been nominated to serve third term and is visibly happy to state that “under the leadership of the Communist Party, Vietnam have never had the position and fortune like it is now”.

Second, under his leadership, Vietnam has successfully contained the COVID-19 pandemic and only 1,882 cases and 35 deaths were recoded till February 3, which by all counts is a major achievements. The Vietnamese General Statistics Office (GSO) has noted that Vietnam has successfully “battled against the virus but at the same time kept our economy open. The pandemic is more or less under control in Vietnam.” Mean while, the US Centers for Disease Control and Prevention (CDC) plans to open a regional office in Hanoi to increase public health engagement in Southeast Asia and monitor the spread of the pandemic.

Third, Vietnam has witnessed unprecedented economic development under Nguyen PhuTrong leadership and his aim is to make Vietnam a developed country by the middle of the 21st century albeit with a ‘socialist orientation’. According to the five-year economic blueprint approved at the recent Congress, the country will “focus on measures to basically complete the elements of a socialist-oriented market economy, better handling the relationship between the state and the market and society,”

Vietnam has drawn plans to raise its economic growth from 6% from the pre-pandemic time to 6.5 to 7 % for the 2021-2025 period. Also, there are calls for greater role and opportunities for the private sector who could “account for more than half of the economy by 2025” from the current 42%. Furthermore, the plans are to double per-capita GDP from $2,750 at the end of 2020 to $4,700-$5,000 by 2025. It is useful to mention that Vietnam’s per-capita GDP in 2010 was $1,331.

Vietnam has been consolidating its economy for several years now and its growth miracle attracted international attention. The 2017 World Economic Forum’s Global Competitiveness Report placed Vietnam 55th in 2017 from 77th position in 2006; and the World Bank’s Ease of Doing Business rankings catapulted it 68th place in 2017 due to its commitments at “enforcing contracts, increasing access to credit and electricity, paying taxes and trading across borders”.  

In 2018 it was labeled as one of the “stars of the emerging markets” and economist attributed this to three factors i.e. willingness to embrace trade liberalization; domestic reforms through deregulation and lowering the cost of doing business’ and investments in human and physical capital, predominantly through public investments.

According to an analyst, Vietnam will attempt business reforms at home, remove corruption, tackle environmental pollution and address climate change; and externally, the country will “will continue to pursue open trade and investment, while trying to manage the South China Sea dispute peacefully and navigating the turbulences generated by intensifying U.S.-China competition,”

Today, Vietnamis party to 16 multilateral and bilateral free trade agreements. The notable among these are the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) predicted to increase Vietnam’s GDP by 1.3 percentage points by 2035.The recent Regional Comprehensive Economic Partnership (RCEP) could give Vietnam accessto markets which are “double the size of GDP of those under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)” in the export categories particularly in the IT, footwear, agriculture, automobiles, and telecommunications. Also, its march to becoming high-tech manufacturer, local firms would be able to focus on high-quality goods and attract increased demand for exports. As regards Rules of Origin is concerned, RCEP would be beneficial for Vietnam as it would help in “reducing manufacturing costs and make life easier for companies by letting them export products anywhere within the bloc without meeting separate requirements for each country”.

At the bilateral level, the EU-Vietnam Free Trade Agreement (EVFTA) could boost GDP by 15 percent. Similarly, the Vietnam - U.K. Free Trade Agreement under which Vietnam will save US$151 million in tariffs. The CPTPP and EVFTA require “Vietnam to conform to the International Labor Organization’s (ILO) standards” for which it must “modernize its labor laws and industrial relations systems”. This is symbolic of Vietnam’s willingness to adapt to as also uphold multilateral international organisations.

In fact Vietnam is considered as “one of the most open economies in Asia with trade value two times larger than the GDP”.The 2020report of the World Bankwas positive about Vietnam and had ranked the country at 70thposition out of 190 economies. Furthermore, according to the report the Vietnamese economy would continue to grow and its medium-term outlook was assessed to be “broadly positive despite persistent downside risks in the world economy”. That will surely add to the attractiveness of the Viennese economy and it will benefit from its multilateral economic engagements such as the CPTPP and RCEP.

Dr Vijay Sakhuja is Consultant Kalinga International Foundation, New Delhi.

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