Embracing Global Trade Opportunities for Vietnam
Until 2017, Vietnam proudly stood as the only country worldwide to secure free trade agreements (FTAs) with major global powers, including the United States, the European Union, Russia, India, Japan, and China. Despite the United States withdrawing from the Trans-Pacific Partnership (#TPP) in 2017, Vietnam continued to thrive in international trade, ascending from the 50th position in 2006 to an impressive 20th spot among the world’s largest exporters by 2022.
Heading Towards Economic Radiance
1. Vietnam’s Astounding Growth Trajectory
Despite potential headwinds, Vietnam finds itself strategically positioned to capitalize on the escalating Sino-American competition. Recent forecasts by the International Monetary Fund and the World Bank underscore Vietnam’s economic prowess. The IMF revised Vietnam’s economic growth projection for 2022 upward from 6 to 7 percent, the only significant upward revision among Asia’s economies. Similarly, the World Bank adjusted its projection, predicting a remarkable 7.2 percent growth for Vietnam, the highest figure in East and Southeast Asia.
2. The Doi Moi Reforms: A Transformative Journey
Vietnam’s remarkable economic journey can be traced back to the transformative Doi Moi reforms of 1986. Emerging from a centrally planned economy, Vietnam embraced market forces, encouraging private industry, recognizing land rights, and abolishing collective farming. This marked the beginning of a period of rapid economic development, elevating Vietnam from one of the poorest economies in the region to one of the fastest-growing.
3. Socioeconomic Progress and Global Integration
The socioeconomic progress achieved through the Doi Moi reforms is evident. By 2020, the poverty rate had plummeted from over 70 percent in the 1980s to a mere 5 percent, with over 10 million people lifted out of poverty in the 2010s alone. Vietnam’s GDP per capita experienced a tenfold increase, surging from under $300 in the 1980s to $2,800 in 2020.
4. FDI Surge and Global Supply Chain Integration
Vietnam’s economic ascent is intertwined with its attractiveness for investment. The nation has become a crucial player in the global supply chain, particularly in textiles, footwear, and electronic manufacturing. Major corporations like Adidas, Nike, and Samsung have established manufacturing presences, driving foreign direct investment (FDI) to grow over 200 times since 1986, reaching around $15.8 billion in 2018. Notably, Vietnam’s exports witnessed a 19 percent increase from 2020 to 2021.
5. Beneficiary of Global Power Dynamics
Amidst the escalating tensions between the United States and China, Vietnam emerges as a beneficiary. The Chinese Communist Party’s less business-friendly approach, coupled with China’s stringent COVID-19 policies, prompted businesses to diversify their supply chains. In 2021, over 11,000 foreign firms canceled their registrations in China. Major companies such as Apple, Samsung, and Hasbro redirected manufacturing operations to Vietnam. The country’s FDI surged by 8.9 percent between January and June compared to the previous year.
Challenges on the Vietnamese Horizon
While Vietnam revels in its economic triumphs, challenges loom on the horizon that could impact future growth.
1. Population Size and Workforce Limitations
Vietnam’s population size remains a limiting factor compared to its regional counterpart, China. The workforce, although abundant, is relatively low-skilled, posing challenges for certain industries.
2. Energy Supply and Infrastructure Development
Meeting the energy demands of a burgeoning economy proves challenging. Despite significant strides in infrastructure development, Vietnam ranks 47th out of 160 countries, signaling a need for continuous improvement.
A Glimpse into the Future
Vietnam’s economic journey has been nothing short of extraordinary. While challenges persist, the nation’s resilience, strategic positioning in global trade, and adaptability to changing dynamics make it a beacon of growth. As the world witnesses the evolving landscape of Sino-American relations, Vietnam’s role as a favorable investment destination is expected to strengthen further, painting a bright and promising future for its economic landscape.