Vietnam Case Study

Population

101.6 million (2025)

66 million (1990)

Income per capita (GNI)

US$4180 (2023)

US$100 (1990)

Population below poverty line

4.2% at $2.15/day (2022)

>50% (90s)

Gini coefficient

0.361 (2022)

0.427 (2010); 0.357 (1992)

Expected schooling years

15.5 years (2022)

7.7 years (1990)

Avg schooling years

8 years (2023)

4.4 years (1985)

Life expectancy at birth

73.7 years (2023)

69 years (1985)

HDI

0.726 (2022)

0.473 (1985)

Infant mortality rate (/1000)

15.356 (2023)

32.6 (1993)

Eco growth

- GDP from 26b 1986 to 453.4b 2023

- Exports as % of GDP from 26.4 to 89.44 (90s to 2024)

- Growth in manufacturing, services

- Tourism was 12% of GDP in 2019

Distribution of GDP across economic sectors

- Agriculture: 12% 2024 vs 30% 90s

- Industry: 38% 2024 vs 29% 90s

- Services: 43% 2024 vs 41% 90s

Employment by industry

- Ag halved from 2002 to 2023 (62% - 33%)

- Industry doubled from 2002 to 2023 (14.7% - 31.23%)

- Services changed from 23% to 35.79%

- 51.5 million employed in 2023 with 75% participation rate

Unemployment

- Pre covid was 2.15% → covid led to 2.5m job loss as LFPR dropped to 65.6% and UE rate rose to record 3.7% in 2021

- UE was 12.3% in 1990 but reduced to 2-3% since 2012

- Low official UE rate (2.3% in 2023)

Inflation

- Inflation rate decreased to 3.37% in Jan 2024

- Forecast for 2025 is within 3-4.5% (stable) → rose to 3.63% in Jan

- Main pressure from food/beverage and health inflation

- Runaway growth drove it to 22.16% in July 2011 (highest in Asia)

Investment

- FDI avg USD 7b from ‘91 to ‘23 with peak 38.2b in 2024

- Manufacturing sector expanded a lot as a result

- Biggest FDI sources in ‘24: Singapore, SK, Jap, Chi

- FDI is important source of forex, boosting capital account

Savings

- Gross domestic savings rose from 4.5% GDP to 36.65% (1986-2023)

Trade balance/BOGS

- Trade surplus of USD 28bn in 2023, up from 11.2b in Jan 2022

- Biggest export category was electronics at 41.8%

- Main import sources were China (28%), SK (22%), Jap (8%) - 2024

- Main export sources were US (19%), China (16%), Jap (8%), SK (7%)

- Export as % of GDP: 26.4% in 90s to 92.7% in 2024

- Import as % of GDP: 36% in 90s to 79.15% in 2024

External debt position

- Rose from 29.8% GDP in 2008 to 32.7% in 2023 due to increased demand for capital as they industrialised

Distribution of income/wealth

- Gini coefficient forecast 0.35 in 2025, relatively low compared to China (forecast 0.37) and USA (forecast 0.42)

- Growing income and wealth gap

- Poverty rate fell from 58% to sub 4% (1993-2023)

Categories

Targets

Economic

- Avg real GDP growth rate of 6.7% over ‘21-25 vs 5.9% over ‘16-20

- GDP per capita of 4.8k by 2025, up from 2750 USD in 2020

- Avg labour productivity growth rate at 6.5% per year

- 45% urbanisation rate by 2025

- Sustainable development, macro stability and price stability → controllable inflation

- Improve infrastructure and regional connectivity - transport, energy, IT, housing, farming

Social

- Avg life expectancy to be 74.5yrs with 67yrs of healthy life

- Rate of trained labourers to be 70% in 2025

- UE rate in urban areas to fall to sub 4%

- Poverty rate declining 1-1.5% annually

10 doctors and 30 patient beds per 10,000 people

- 95% of population has health insurance

Notes

- Privatising: Ag was state owned before 1988 but land distribution to farmers began and state owned farms became household enterprises → state owns 3% of agriculture production now

- State support: development of irrigation systems and provisions for agriculture like machinery, insecticide and fertilisers → aims to support farmers in reducing greenhouse gas emissions

Positive effects

- Improved ag productivity → higher IC and trade (12% GDP and 33% employment in 2023) → surplus labour can be reallocated to manufacturing and services → FDI rise

- Major exporter of agricultural products like rice, coffee and pepper w/ ag trade surplus

- Aided with eco development and poverty reduction as ag incomes rose

Negative effects

- Small size of most farms limits economies of scale

- 9.1% children between 5-17yo are child laborers in rural areas who work in ag

- Reforms may be inadequate to combat climate change → can reduce future ag prod

Notes

- During early Doi Moi period, state owned enterprises (SOEs) maintained a monopoly on most of Vietnam’s industry and ag sectors, but most were unproductive due to low competition and innovation and high access to capital

- In 1989 there was about 12k SOEs, 3k in 2020 and only 195 in 2025

- SOE equitization - conversion of SOEs into private firms with shares

- In 2025, SOEs accounted for 0.02% of firms, 1.9% employees, 25% capital and 71% contribution to Viet gov revenues; 102% increase compared to previous year

Positive effects

- Lower state interference in business in the country

- Rapid development of Vietnam’s industrial sector as competition rose (3-fold growth)

- Attracted higher private and FDI into Vietnamese economy + reallocation of resources into productive areas of economy

Negative effects

- Although most have been equitized, SOEs that remain are still very large and act as inefficient monopolies

- Shareholders complain that equitized SOEs lack appropriate corporate governance protocols and still operate under instruction of the state

Notes

- Open door policy in 90s started a new phase of relations between Vietnam and the world, with their goals including: decreased protectionist policies, export processing zones to develop Vietnam’s industrial sector, decreased state controlled foreign trade and joining ASEAN FTA

- Investment policies include: Vietnam is now a member of 16 FTAs that allow greater investment and 36/67 bilateral agreements have investment provisions, raising FDIs

Positive effects

- Ratio of two way trade to GDP increased from 53% to 210% (1991 to 2019)

- Increased export of industrial goods and import of machinery spurred industrial production

- Foreign competitors forced private sector to work harder and received great results, creating jobs for 85% of labor force and accounting for 43% of GDP in 2010s

Negative effects

- Increased exposure to regional and international business cycles - reliant on economic conditions of East Asia and USA due to position in global supply chain

- Strong dependence on exports and imported inputs

- Slowing public investment due to anti-corruption campaigns, paralyzing activities

Notes

- Membership since 2007, access to WTO led to rapid expansion in trade and inflows of foreign investment, and eco growth averaging 6.9% from 1996 to 2022

- Allowed Vietnam to improve access to global markets through reduction of manufacturing protection

- Classified as a developing country in WTO and is one of 164 members

Positive effects

- Membership benefits as it gets special and differential treatment provisions because it's a developing country

- Surge of foreign investment and FDI

- More transparent and predictable administrative systems, aiding with lower corruption and friendlier business environments for domestic private sector

Dispute settlement issues

- Vietnam has been complainant thrice due to unreasonable anti-dumping policies for frozen shrimp in US twice in 2010 and 2012 and Indonesia imposing safeguard measures on imports of metals in 2015

- WTO has been criticized for difficulties faced by developing countries in bringing forward complaints as they don’t have enough human resources to support it

Bali Round Dec 2013 issues

- First successful WTO multilateral agreement and the deal benefited trade facilitation and agriculture/food security

ASEAN/RCEP

- Regional comprehensive economic partnership builds on ASEAN major export categories - expected to benefit Vietnam in IT, footwear, ag and comms

- Exports hit 108.5b USD in first 9 months of 2022, rising 16.4% from 2021

- RCEP accounted for 32% of global GDP in 2024 and 42% of global GDP growth from 2014-2024

UKVFTA

- Significantly reduced tariffs for exports of clothing fabric, footwear and seafood and strengthened trade relationship

- Computers and electronic products have seen 74% tariff reduction

- 100% tariffs removed from plastic products, bags, wallets and accessories (2021)

- UK imports from Vietnam were 5.3b euros at end of 2024

EVFTA

- Began in 2020 and is the highest standard of FTA that Vietnam has signed, covering many fields and having high liberalisation

- Eliminates 99% customs duties, forecast to raise GDP by 4.6% and exports to EU by 43% by 2025

- Benefits Viet industries that need to recover from covid (electronics, textiles, ag)

- EU imports from Vietnam reached 38.5b and exports were only 10.6b euros

Pros (EVFTA)

- Vietnam exports to EU grew by 16%/yr since EVFTA (worth 32b)

- FDI into Viet reached 4.5b USD, up 2.2% from 2023, creating jobs and eco growth

- Viet economy surged to 430b in 2023 with GDP per capita hitting 4.3k and FDI registering record 36.6b in 2024

CPTPP

- Lowers tariff barriers, giving Vietnam greater access to larger consumer markets like Japan, Canada and Australia

- CPTPP could increase Viet GDP by 1.3% by 2034

Pros (CPTPP)

- FTA enables Viet eco development to shift from low-tech manufacturing goods to complex high-tech goods like electronics that reel more profits

- Larger trade networks and cheaper imports of intermediate goods will boost IC

- Expected to give Vietnam an edge over other ASEAN members in terms of manufactured/processed goods, that make up majority of Viet exports to Europe

- Exports to other CPTPP members hit 41b USD in 2022

Cons (CPTPP)

- Increased exposure to global market volatility and downturns to IBC → covid

- Encourages foreign ownership and loss of control

- Exploitation of natural resources and environmental impacts (pollution haven hypothesis)

- FTAs can trigger aggressive competition from foreign rivals on local firms in agriculture sector especially (meat and dairy from EU, Aus, Canada)

Notes

- In first 3yrs of WTO membership, Viet got 114b in FDI as its a manufacturing hub

- FDI into Vietnam rose by 9.4% in 2024 (compared to 2023) to 25.35b for full year → foreign investors participated in 18/21 sectors with processing/manu leading at 20.2b

- Processing/manufacturing was 71.3% (3.09b), real estate was 23.5% (1.09b)

- Foreign investment has helped Viet maintain its eco growth averaging 6.9% from 2016 to 2019, making it the 3rd largest destination for FDI inflow in southeast Asia

Positive effects

- Higher employment, income and eco growth

- FDI more stable + infrastructure development (industrial parks, roads, rail, transport)

- Competitive labour costs due to FDI enabled textiles industry to rise (45b exp 2022)

- Vietnam can manufacture its own products like phones and cars → higher labour productivity

- Viet FDI flows have doubled from 8b avg 2008-2012 to 16b avg 2018-2022

Negative effects

- Foreign owned businesses accounted for 68% of Viet exports (‘19) compared to 44% (‘10)→ increased NPY debits as some profits are returned to foreign countries

- Two key areas where Viet business environment struggles is starting firms and paying taxes

Notes

- 18 Industrial Eco Zones are set by the govt to produce industrial G/S → complement business activities like production, export or tech and have incentives for firms that set up there (lower corporate tax)

- 620 set in 2024 with 300 in operation

- Samsung’s cumulative investment into Vietnam in 2024 = 22.4b USD, acting as its largest foreign investor → created 90k jobs

- In 2024, there were 6 manufacturing plants, 1 research/dev centre, 1 sales entity

- Intel and Samsung assemble ⅓ of smartphones in Vietnam

Positive effects

- Increase employment by millions + higher income level, QOL, living standards

- Focus on manufacturing increases educational requirements (e.g. Samsung requires educated Viet labour for tech and engineering) → improves labor standard

- EPZ helps Vietnam compete more effectively in the global market, facilitating production and export of high value goods + diversifying the export market

Negative effects

- Environmental impacts as zones cover 80.7k HA of which industrial land is 52k HA

- Income inequality is stable but growing disparity between rural and urban

- Majority of production in EPZ is still simple manufacturing instead of high-tech firms

Notes

- Vietnam levies a standard corporate income tax at 20%

- Eligible firms receive tax breaks - no corporate taxes for 4yrs and half the normal rate for next 9yrs (firms in socioeconomically disadvantaged areas)

- New high-tech companies entitled to corporate tax rate of 10% for 15yrs and applicable to enterprises providing edu, training, healthcare/sport services and more

Positive effects

- Encourage FDI, especially into key development areas → provides incentives

Notes

- Vietnam currently spends 6% GDP on infrastructure compared to 2% of other nations in SE Asia

- 2030 master plan for transport infra aims to construct 5000 km (up from 1290 km) of rail routes, expressways + completion of airport near Ho Chi Minh City

- Aims to also complete the Hanoi Highway to aid goods transport + improvement of road surfaces and connections to major ports

Positive effects

- Important changes as Viet ports have strained to keep pace with increasing manufacturing/export demand

- While IC improves due to lower cost of production, also improves domestic economy due to less transport, enviro and social costs in long term

- Higher infra spending than others makes Viet attractive for FDI in infrastructure

Negative effects

- 90% of the 6% spending comes from public budget → burdens debt/fiscal policy

- Needs 25-30b annually for infrastructure to ensure eco growth but only hits 15-18b, sourcing the rest from private investors

- Ranked 103rd in road quality, reducing Vietnam’s international competitiveness

Notes

- Anti corruption crackdown in 2023 led to removal of many political leaders and scrutiny in private sector in real estate and banking

- Although Viet is best known for fast-growing manufacturing, the richest in Viet made their money developing and speculating property

- All land is state-owned and getting access to it requires connections, increasing corruption as the economy grew

- Between 2007-2020, Viet rose 34 ranks (104th to 70th) in WB’s ease of doing business rankings

Positive effects

- Anti-corruption drive is part of Viet efforts to bolster FDI and business expansion

- Vietnam improved 10 points between 2013 to 2023 from 31 to 41 in the Transparency International’s Corruption Perceptions Index (TCPI)

- Viet could continue climbing global rankings, entering top 50 in WB’s ease of doing business rankings → more startups will attract funding

Negative effects

- Slower investment and lower eco growth in 2023 due to political instability → anti corruption campaign may increase it in short term, lowering eco growth/investment and delaying large projects

- Sectors like real estate and banking may experience slower growth due to regulations and lower investor confidence in short term

Poverty

- MDG1: Vietnam has made the most impressive progress on MDG1 on poverty reduction, from 58.1% in ‘93 to 14.5% in ‘08 → 75% reduction

- SDG1: A substantial reduction in national multidimensional poverty rate from 9.9% in ‘15 to under 7% in ‘17

Education

- MDG2: Net enrolment rate in ‘09 was 95.5%, completion rate was 88.2% and literacy rate of 15-24 yo was 97.1%

- OECD ranked Viet as 12th in Pisa tests in 2015, above US, UK and Aus, but about 37% 15 yos aren’t in school which must be addressed

- SDG4: Primary net enrolment rate of 99% and completion rate of 99.7% (2016-17)

Infant mortality/ health

- MDG4: already achieved targets for both under-5 mortality and infant mortality (rates being halved between 1990 to 2006) → 44.4/1000 lives to 14 between ‘90-’11

- SDG3: Decrease in under-5 mortality rate from 22.1% to 21.6% per 1000 lives from 2015 to 2017; health insurance coverage hit 86.4% in 2017

Clean water and hygiene

SDG6: Proportion of households having access to safe water reaching 93.4% in 2016

Enviro Sustainability

- MDG7: Vietnam has been making commendable progress on enviro sustainability but is unlikely to achieve MDG7 by 2015 due to climate change

- SDG15: Improvements in protection and management of enviro and natural resources and increase in forest cover to 41.5% by 2017

Worsening air pollution

- Viet avg air quality index ranked them 22/124 on scale of worst air quality in 2023 due to industrial emissions from rapid industrialisation

- IQAir ranked Vietnam as 2nd most polluted country in ASEAN in 2023 → Hanoi and Ho Chi Minh City among top 15 polluted cities in SE Asia due to transport/pop growth

- Health issues including lung, heart and respiratory disease – 10m Viet ppl affected by heavily polluted air

- Committed to hitting zero carbon emissions by 2050 at COP26

Deforestation

- In 2023, lost 129kha of natural forest or 131Mt of CO2 emissions → rising ag demand, population growth and poverty

- From 2001-21, Viet lost 32.6m hA of tree cover (20% decrease)

- Illegal logging due to higher timber demand from exporting to EU + agriculture

- 27k cases of deforestation recorded from 2011-2015

Water pollution, dust and waste control

- FDI into mining → pollution → 2015 enviro police found 6500 cases of enviro policy violations by mining firms

- 60-90% wastewater goes untreated into rivers (Lich River for Hanoi)

- Corruption, bureaucracy and attracting FDI has limited effectiveness of controls but EUVFTA focuses on better transparency and enviro conditions

Textile industry toxins

- Jan to July, US imported 9b Viet textiles, 5.5% increase from last year

- Viet was 6th largest textiles exporter competing with China, India, US and EU

- Number of employees in textiles market projected to hit 400k in 2025

- Report investigating Viet textile industry found Ho Chi Minh City discharged 6.7k tons of solid waste daily, of which 2k tons are industrial waste (lax enviro standards)

Climate change

- Affects industry and agriculture, and trade related transport and infra + tourism

- About ⅓ industrial parks are today at risk of flooding/tropical storms annually

- Viet ag sector accounts for 13.2% of exports and is vulnerable to climate change (rice crops could suffer yield loss of 5-23% by 2040)

- If sea level rises 100cm, 4% rail system, 9% highways and 12% roads affected

- Pledged to phase out coal power by 2040, deforestation by 2030 and reduce 30% methane emissions by 2030

Tech flows fueled by climate action

- Vietnam supplied the US with solar panels and modules worth 3.3b, equal to 45% al US imports, up from less than 30% last year when full-year viet exports to US were 4bil → growing sentiment for enviro prot and Viet benefits from trade of tech

Paris Climate agreement/Cop26

- Committed to cut emissions growth by 9% by 2030

- Coal is still key import to Viet and ⅓ of energy sources → focusing on increasing renewable from 12% to 30% energy source

- Solar projects aimed to increase with Viet having largest solar farm in SE Asia

- COP21 established target of net zero carbon emissions by 2050 and phase out coal power by 2040

- Other strategies involve using forests and increasing afforestation for carbon absorption, use construction materials for green development

Law on enviro protection tax 2010

- Vietnam introduced an enviro tax on petrol products, coal, plastic bags and some pesticides

- Due to increasing fuel prices/inflation in 2022, govt cut the enviro tax by 50%, reducing effectiveness on environment

Law on enviro protection 2024

- Introduction of concrete policies on an emissions trading system + considering a carbon tax for achieving net 0 by 2050

- Wider range of wastes and enviro harmful products/goods are subject to enviro prot taxes (50,000VND tax introduction on non biodegradable packaging material)

Sustainable fishing

- In 2009, overfishing, waste, pollution and dam construction were main issues affecting sustainability of fishing

- Law of Fisheries imposes restrictions like seasonal closures, size limits, prohibited species and more for sustainable fishing

- Viet exports to EU fell by 6.5% in 2018 and 11.5% in 2019 due to trade sanctions as there was high unregulated fishing which was illegal

- 5th worst offender for overfishing in 2019 → due to half of Vietnamese relying on fisheries for livelihood