Vietnam’s Road to Rising Star

In 2024, Vietnam's GDP grew by 7.09%, surpassing every country in the world. This wasn’t a miracle but the result of prudent planning. In fact, in just a few decades, Vietnam has transformed from an agrarian, war-torn country to one of Southeast Asia’s most dynamic economies. The country has used a combination of bold economic reforms, FDI attractions, global trade integration and a skilled workforce to propel its growth.

After the wars in Vietnam that took place between 1955 and 1975, the government entered a period of economic stagnation. The economy was primarily agricultural, underdeveloped and struggling with poverty, especially due to the years of centralised economic planning under communist rule. Vietnam was also isolated from other countries, with limited access to foreign markets.

The country appeared hopeless in the 1980s due to multiple conflicts such as the Cambodian-Vietnamese War and Sino-Vietnamese conflict. After these clashes, the government’s main concern was to bounce back economically, which led to transformative policies, global trade integration and strategic positioning in global supply chains.

In the past, the country’s low GDP was reflected in its widespread poverty and underdevelopment. The economy was largely dependent on subsistence agriculture, especially rice farming, which didn’t attract much foreign investment. Due to its centrally planned economic system and isolation following the wars, Vietnam also had limited foreign investment and trade relationships.

Hence, Vietnam realised they were on the brink of economic collapse, especially since they were following the same development model as the Soviet Union and Eastern European bloc.

This caused their leaders to adopt new economic and political regulations in the early 1980s to spur economic growth. In 1986, Vietnam adopted its Doi Moi policy and started to modernise and liberate their economy. After implementation, the government began to transition from a state-controlled centralised economy to a market-oriented economy.

Factors that then contributed to Vietnam’s speedy economic transformation included implementing an export-oriented strategy and removing restrictions on foreign trade, leading to foreign direct investment and increased economic activity in the private sector. These economic reforms over the past nearly four decades transformed the underdeveloped state of Vietnam into a more industrialised country, with many small businesses, foreign investment enterprises, and high exports, much because of their growing skilled labour force. This led to increased investment and trade while many Vietnamese turned to Singapore forex broker platforms and trading opportunities to grow their wealth.

According to Nguyen Khac Giang, a researcher and visiting fellow at the ISEAS Institute, China is Vietnam's biggest trading partner, but, more importantly, it plays a crucial role in Vietnam's manufacturing sector as most of its required materials come from China, and he doesn’t think this will change in the foreseeable future.

Furthermore, the United States has been Vietnam's second-biggest trading partner and largest export market. In September 2023, Washington and Hanoi upgraded their diplomatic relations, signing a "Comprehensive Strategic Partnership for Peace, Cooperation and Sustainable Development". Analysts said this agreement was largely to boost economic benefits. But, this is about to change as the Trump administration has hit Vietnam with a 46% tariff on their exports to the US, they say to adjust the current trade deficit.

The United States has been one of Vietnam's growing list of strategic partners, including Australia, China, India, Russia, South Korea and more recently France. Vietnam had been hoping for huge investment from the US, but now, who is to know? Vietnam is now trying to negotiate with the US over their tariffs. Before this, Apple, the US tech giant, had selected Vietnam as a key manufacturing location for the company, with Apple investing over USD15 billion (€13.76 billion) in the country in the past five years.

Meanwhile, Vietnam initiated their Economic Planning and Strategies directive. Vietnam's economy uses both directive and indicative five-year plans, to support their open market-based economy. Vietnam is also pivoting towards high-tech development, massive infrastructure projects and institutional reforms, attracting global tech investment.

Vietnam aims to transform its economy and achieve high-income status by 2045 by attracting global tech investment, implementing aggressive anti-corruption measures and pursuing a nuanced diplomatic approach. In addition, Vietnam has implemented a renewable energy policy to transition to greener industries, which is part of its long-term growth strategy.

The country’s monetary policy is managed by the State Bank of Vietnam with a flexibility that stabilises the exchange and interest rates, controls prices and ensures a balanced economy.

At the same time, Vietnam closely monitors global developments as well as the fiscal and monetary policies of Vietnam's main trade and investment partners. It also proactively prepares timely response plans for emerging situations. It will be interesting now to see how Vietnam reacts to the US tariffs and what changes they may implement.

Furthermore, Vietnam remains focused on digital transformation, high-value manufacturing and sustainable development. To prepare efficient, skilled labour to support their economic growth and development, Vietnam is implementing a nationwide policy to provide free tuition for all 23.2 million public school students, from kindergarten to high school. This policy is expected to reduce financial burdens on families, especially low-income households, ensuring all children have access to education without economic barriers. Even in higher education, government university tuitions are low, from free to about USD 1,000 for Vietnamese students.

In 2024, Vietnam's economy saw robust growth, exceeding the National Assembly's target, with GDP growth reaching 7.09%, driven by strong exports and foreign investment while inflation remained under control. Vietnam continues to solidify its position as one of the world's leading exporters of agro-forestry-fishery products, achieving an export turnover of USD 62.4 billion last year, an 18.5% increase compared to 2023.

In 2024, according to Reuters, Vietnam's exports saw impressive growth, with a total value of USD 405.53 billion, a 14.3% increase year-on-year. The domestic sector contributed USD 114.59 billion, a 19.8% increase while foreign investment generated USD 290.94 billion, a 12.3% increase.

Until the implementation of the new tariffs, the US remained Vietnam's largest export market, with machinery, electronics and wood products leading the growth. Vietnam's foreign trade reached an all-time high of USD 786.29 billion in 2024, up 15.4% against the previous year. US imports totalled USD 136.6 billion in 2024, up 19.3% from 2023 while the US trade deficit with Vietnam reached USD 123.5 billion in 2024, an 18.1% increase over 2023.

Now, Vietnam has been hit by Trump’s reciprocal tariff of 46%. It is hoped the investment infrastructure that has been previously established together with the skilled labour developed in the past two decades will ensure a minimally affected future, which Thailand is also now concerned with.

In 2024, Vietnam's GDP grew by 7.09%, followed by the Philippines at 6.3%, Indonesia at 5.05%, Malaysia at 5.9%, Singapore at 2.9% and Thailand at 2.3%. Now, the question is whether Vietnam and the other ASEAN members will be able to weather the storm.

Business / Business

Vietnam’s Road to Rising Star

Kamol Kamoltrakul 19 Posts

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