The Vietnamese economic miracle: What lessons does it offer for others?

Illustration: TBS

After the devastating war that lasted for around 20 years, Vietnam's economy was in tatters. After such a prolonged period of conflicts, it is very natural that the country will struggle to turn the corner and experience an economic rebound.

Yet, against all speculations, Vietnam rose from the ashes like a phoenix, riding on political farsightedness and the indomitable will of its people. Once recognised for its harrowing images of conflict, poverty, and devastation, Vietnam has evolved into one of Asia's most promising economic success stories.

In less than 50 years since the end of the catastrophic Vietnam War in 1975, the nation has transitioned from a war-ravaged, agricultural economy to a vibrant centre of manufacturing, trade, and technology.

While many experts attribute Vietnam's rise as an economic powerhouse to political willingness, other factors such as pragmatic policymaking, global integration, demographic advantages, and strategic decisions have also equally contributed to economic recovery.

Vietnam has developed its political system very systematically. The Party [the Communist Party of Vietnam] has developed a collective leadership within the party. They have prioritised economic recovery and emancipation after the war.

Altaf Parvez, Researcher, South and Southeast Asian history

Right now, Vietnam ranks fourth among the 10 ASEAN member states in terms of economic size. The country's 2025 GDP size is expected to reach $500 billion whereas the GDP per capita is projected to surpass $5,000.

Moreover, projections by the International Monetary Fund (IMF) forecast that Vietnam's GDP could reach $506 billion this year, ranking 33rd globally.

Vietnam is a stark example of how time-befitting policies and political maturity could expedite economic growth. So, how did they do it?

First and foremost, political stability has played an instrumental role in such recovery. The nation was in ruins when the Vietnam War ended in 1975. Millions of people had been killed or displaced, infrastructure had been destroyed, and the economy was mostly dependent on subsistence farming.

Following reunification, Vietnam adopted a Soviet-inspired centrally planned communist model that led to ineffective production, ongoing shortages and economic stagnation. Hyperinflation, being cut off from Western markets, and reliance on Soviet bloc assistance characterised the post-war era.

Against such a backdrop, the then political leadership of Vietnam displayed a calm composure when it came to staying united and adopting the right policies. 

As a result, around 49 years down the line, the Communist Party of Vietnam (CPV) is widely regarded as the vanguard of the Vietnamese people, serving as a loyal representative of the interests of the working class, the working people, and the whole nation.

"Vietnam has developed its political system very systematically. The Party [Communist Party of Vietnam] has developed a collective leadership within the party. They have prioritised economic recovery and emancipation after the war," opined Altaf Parvez, a researcher of South and Southeast Asian history.

Parvez added, "After the epic Vietnam War, the people and the political leaders did not get trapped in the practice of dwelling in the past; rather, they focused on economic competitiveness. That is why they have been able to catalyse dramatic changes in their national economy, turning Vietnam into a big factor in the global economy."

The Party introduced the Đổi Mới (Renovation) measures in 1986 with a resolve to bring about sea changes. A fundamental transition from a centrally planned economy to a "socialist-oriented market economy" was signalled by this set of political and economic developments. The adjustments were a result of necessity rather than merely being ideological shifts.

A lot of changes came in through the Đổi Mới reforms. As part of this reform initiative, drastic changes, including the legalisation of private companies, steps to lure in foreign investment, the introduction of public marketplaces for farmers to sell surplus produce, and the establishment of state-owned industries were encouraged.

Because of this reform initiative, Vietnam's agricultural productivity increased significantly, catapulting the country from a rice importer to the position of one of the top exporters of the grain worldwide. The impacts were evident as the poverty rate came down while rural people were empowered through land reforms and incentives.

In addition to this, Vietnam embarked on a journey of economic integration with the rest of the world in the 1990s and early 2000s. After years of Cold War, it normalised ties with the United States, joined the Association of Southeast Asian Nations (ASEAN) in 1995, and became a member of the World Trade Organisation in 2007.

Owing to such integration and trade liberalisation, the country has been able to attract billions of dollars in foreign direct investment, leading to renewed growth in the following years.

Moreover, Vietnam positioned itself as a manufacturing hub in a strategic way, which has been one of the driving factors behind the economic boom. The government came up with lucrative offers and tax incentives for foreign companies.

Consequently, global firms such as Samsung, Intel, and Foxconn went for greenfield investment in Vietnam, taking advantage of its relatively low labour costs, young workforce, and better infrastructural support.

Vietnam's export portfolio has also been diversified rapidly over the years. From simple textiles and garments, the nation currently exports electronics, machinery, and high-tech products as well.

The Covid-19 outbreak and trade tensions between the United States and China have hastened this structural change, making Vietnam a competitive alternative to China for global supply chains.

As far as garment export is concerned, Vietnam is the second largest garment exporter after China, though there are some contentions regarding this. What is undisputed is the fact that Vietnam's textile and garment exports are projected to increase in the coming years, while they compete for the top spot.

Meanwhile, it is also true that Vietnam is now reaping the benefits of its demographic dividend with a relatively young population, which has supported rapid industrialisation.

In this connection, the government has played a significant role by making consistent investments in education, particularly in science, technology, engineering, and mathematics (STEM), adopting policies conducive to developing a digital economy, and focusing on updating economic policies.

There is no denying that Vietnam stands as a glaring example of economic resilience and a successful development tale. The transformation from a war-ravaged nation to a major economic force is inspiring and offers lessons for other countries striving to bounce back.