Vietnam Economic Policy
Vietnam’s rapid economic development is due to various factors such as the country’s favorable geographical location and its human capital. One of the great advantages is the cheap labor. Most observers agree that Vietnam must pursue a new economic policy in order to solve fundamental problems such as the lack of competitiveness of many state-run companies, corruption, inadequate infrastructure and bureaucratic obstacles. Many of the state-owned companies benefit from generous loans, but do not concentrate on their core business, but “poach” with little expertise in other areas. This has led to more and more problems in Vietnam in recent years.
In 2012, nine former managers of Vinashin, a state-owned shipbuilding company, were sentenced to imprisonment, some of them long, for embezzling public funds. In fact, this ruling obscures structural problems that have plagued the Vietnamese economy for several years. In September 2012, Duong Chi Dung, the fugitive former director of Vinashin, was arrested in an unnamed Southeast Asian country and deported to Vietnam.
Against the background of the crisis surrounding the shipbuilding group Vinashin, the pressure on the Vietnamese government to accelerate the privatization of state-owned companies had increased. In addition, Duong Chi Dung, the former director of Vinalines, the largest state-owned shipping company, was arrested in May 2012 for mismanagement. In December 2013 he was sentenced to death; the judgment was confirmed in an appeal in May 2014.
The sale of the state-owned brewery SABECO in December 2018 is part of an overarching program of the new Vietnamese government under Nguyen Xuan Phuc to advance the privatization of state-owned companies.
In August 2012, Nguyen Duc Kien, co-founder of one of Vietnam’s largest banks and one of the richest men in the country, was arrested. Nguyen Duc Kien was sentenced to 30 years in prison and a large fine in June 2014.
In October 2014, Ha Van Tham, director of the private Ocean Bank and one of the richest Vietnamese businessmen, was arrested for fraud. In a major trial, he was sentenced to life imprisonment in 2017. Nguyen Xuan Son, the former director of PetroVietnam, a state-owned oil company, was sentenced to death for mismanagement and embezzlement in the same process.
According to militarynous, the Vietnamese leadership is expected to take new initiatives to solve the structural economic problems. In fact, the Vietnamese government made efforts in 2015 to promote the privatization of state-owned companies. On the other hand, the leading role of the state sector in the economy is also enshrined in the new constitution of November 2013.
The granting of massive loans to state-owned companies, which then turned out to be “bad loans” in the case of Vinashin, for example, is also the reason for the deep debt crisis in which the Vietnamese economy finds itself. One of the consequences of the high national debt is that there are not enough government funds to finance the necessary infrastructure projects such as the construction of the metro in Ho Chi Minh City.
In October 2015, Vietnam signed the Trans-Pacific Partnership Agreement (TPP) with 11 other countries. Vietnam hopes that this free trade agreement, which is due to come into force in 2017 or 2018, will primarily provide easier access to foreign markets. It remains to be seen whether the free trade agreement will actually be the desired panacea and get the Vietnamese economy going again – there are also cautionary voices that point to the lack of competitiveness of many small and medium-sized companies in Vietnam.
The Vietnamese People’s Army (VVA) is also active in the economy – it belongs to Viettel, one of the largest telecommunications companies. This involvement of the VVA in the economy is being discussed more and more in Vietnam.
Vietnam’s fundamental problem of how to “tame capitalism” in a corruption-ridden system remains. The economic development of Vietnam has been very successful overall in recent years, but the Vietnamese government’s economic policy is not yet able to base this development on fixed rules and laws.
After the USA withdrew from the TPP free trade agreement, which was already ready to be signed, the ten remaining states agreed at the APEC summit in Da Nang in November 2017 to uphold “the spirit of the agreement” and to want to implement the partnership without the USA.
Vietnam plans to set up three more special economic zones. It is controversial whether these actually provide the country with economic advantages.
At the end of June 2019, Vietnam and the EU signed a free trade agreement that is associated with considerable economic benefits for Vietnam.
The privatization of state-owned companies has continued in recent years – overall, the Vietnamese state seems to be withdrawing more and more from the economy.
National development efforts
Considerable progress has been made in the fight against poverty in recent years. The poverty rate fell from 58% in 1993 to 13.5% (World Bank, 2014). However, the distribution of poverty in Vietnam is very uneven – certain regions such as the Central Highlands are still more affected by poverty than average. The poverty rate among ethnic minorities has also decreased in recent years, but overall they still make up the largest proportion of the poor in the Vietnamese population.
In 2002, the Vietnamese government adopted a new socio-economic development strategy, the Comprehensive Poverty Reduction and Growth Strategy, which is based on poverty-oriented growth.
In its poverty reduction strategy, Vietnam has based itself on the Millennium Development Goals (MDGs). In the implementation of the MDGs, the country has achieved great success.
Vietnam has now to implement the Sustainable Development Goals (SDGs) committed.