Since the end of the Vietnam war in 1975, Vietnam has experienced a plethora of economic changes. They are considered by some to be one of the most successfully developed countries in South East Asia. The country itself has experienced an incredible amount of growth in recent years. This growth has largely been contributed to economic reforms within the country that have opened the economy to foreign investors.
Before we get too far into the economy of Vietnam, I would first like to define some words that will come up. Here are some important terms to know:
- Foreign investment: capital flows from one country to another, granting the foreign investors extensive ownership stakes in domestic companies and assets. In other words, the investment in domestic companies in a different country by a foreign entity.
- Globalization: the growth in international exchange of goods, services, and capital, and the increasing levels of integration that characterize economic activity
- Trade: the activity of buying and selling, or exchanging, goods and/or services between people or countries
- Trade Liberalization: the removal or reduction of restrictions or barriers on the free exchange of goods between nations
- Human Capital: the economic value of a worker’s experience and skills. Human capital includes assets like education, training, intelligence, skills, health, and other things employers value such as loyalty and punctuality
- Physical Capital: tangible, human-made goods that assist in the process of creating a product or service
As mentioned before, Vietnam is seen as one of the success stories of South East Asia. It was the fastest growing economy in Asia last year (2022) with a growth of 8% due to the exponential growth of globalization and trade. This growth has been attributed to three different factors. First, the increase in policies within Vietnam that promote trade liberalization. Second, domestic reforms that have helped trade liberalization. Finally, this growth has been connected to increased public investment in human and physical capital.
Another interesting thing about Vietnam is the role that trade has played in its economy. In Vietnam, trade has accounted for about 190% of Vietnam’s GDP (gross domestic product) as opposed to 70% in 2007. This economic growth has also impacted living conditions within Vietnam. As there has been an increase in jobs in recent year, poverty in Vietnam has dropped from 16.8% in 2010, to 5% in 2020. Finally, one part of Vietnam’s trade that has helped its growth has been the focus on exports. Vietnam itself has also joined/become a member of multiple trade agreements over the years. It has joined:
- 150th member of WTO
- Has a BTA (Bilateral Trade Agreement) with US
- Part of ASEAN (Association of South East Asian Nations)
- Also part of AFTA (ASEAN Free Trade Area)
- Comprehensive and Progressive Agreement for Trans-Pacific (CPTPP)
- Indo-Pacific Economic Framework for Prosperity (IPEF)
To read more:
https://www.weforum.org/agenda/2018/10/vietnam-is-the-most-globalized-populous-country-in-modern-history/
https://www.wider.unu.edu/sites/default/files/wp2011-020.pdf
https://www.trade.gov/country-commercial-guides/vietnam-trade-agreements
For definitions:
https://www.investopedia.com/terms/f/foreign-investment.asp
https://guides.loc.gov/globalization/definition
https://dictionary.cambridge.org/us/dictionary/english/trade
https://www.investopedia.com/terms/t/trade-liberalization.asp#:~:text=What%20Is%20Trade%20Liberalization%3F,as%20licensing%20rules%20and%20quotas
https://www.investopedia.com/terms/h/humancapital.asp
https://www.investopedia.com/terms/p/physical-capital.asp
