Vietnam has witnessed a transition to new leadership with new President Nguyen Xuan Phuc, Prime Minister Pham Minh Chinh and Chairman of National Assembly Vuong Dinh Hue taking charge. The third time re-elected general secretary Nguyen Phu Trong made it clear that there will be structural reforms and the anti-corruption drive would continue. This is meant to cleanse party of corrupt cadres and provide corruption free environment in the country. The Covid-19 and the recovery from the economic setback that was brought about by this pandemic, is now incrementally reversed. Mr. Trong has highlighted in his opening speech that pro business reforms is critical for the economy to take a giant leap as a liberal economy but with specific Vietnamese characteristics.
Vietnam is now a signatory to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) also known as Trans Pacific Partnership-11, as well as Regional Comprehensive Economic Partnership (RCEP). It has been seen that the improved relations between US and Vietnam as well as the ratification of the Vietnam- EU Free Trade Agreement in August 2020 has opened new avenues for promoting trade and investment with these economies. Vietnam has already made impressive growth last year when it reached near about 3 per cent of economic growth despite economic setbacks because of the Corona pandemic. Within the senior party leadership, it is acknowledged that high growth rates and better living standards would be instrumental in better economic management as well as integrating Vietnam into the global supply chains. At times, even global financial institutions such as World Bank and International Monetary Fund has expressed belief that Vietnam is continuing towards a more open and competitive economy, and is increasingly diversifying its economic relationship with various countries across the world.
It is expected that Vietnam will adhere to its 2016-2020 economic reforms blueprint outlining favourable conditions for the private sector to grow which includes structural and institutional support for private sector, as an important engine of the Vietnam’s economy. As per the IMF reports, in the year 2021, Vietnam is expected to grow at the rate of nearly 7 per cent and the per capita income is expected grow more than $ 3750 in the next couple of years. It is expected that with Joe Biden coming to power in US, the country might reconsider its withdrawal from Trans Pacific Partnership and might re-join so as to work out on trade and investment possibilities with the other 11 nations which have made structural adjustments to trade and investment so as to accommodate the stringent trade norms and the tax procedures required for the TPP.
The new Prime Minister Pham Minh Chinh remarked in his first speech that he would protect the country’s sovereignty and independence while at the same time maintain the anti-corruption drive to cleanse the economy and provide better avenues for growth and investment. The new prime minister has gained experience in different capacities starting with public security and thereafter becoming deputy minister in 2010.
The priority for the new leadership will be focused more on economy as Vietnam is seen as a middle-income country which has developed as a small and medium enterprises economy, and has been working on its disinvestment policy, and also implementing the various multilateral and bilateral agreements that it had signed in the last two years. The bilateral agreements that Vietnam has signed include Vietnam Eurasian Economic Union FTA, and Vietnam- UK and North Ireland FTA. Efforts have been made at all levels for liberalising Vietnamese economy and improving its trade with countries such as US and the EU as the benefits of larger volume of trade would trickle down to the different sectors of the economy. The new leadership is focusing on proficiency of English among its entrepreneurs and also easing the foreign direct investment procedures in different provinces.
In the first quarter of this year the Vietnam economy grew at 4.5 percent with the increasing trade with the US. Also, Vietnam’s new leadership has made a commitment to build a technical ecosystem which would provide both capital and skilled labour which is a prerequisite for such a network to thrive.
One of the World Bank reports acknowledges the fact that Vietnam has transitioned from a centrally planned to a market economy which has led to the liberation of Vietnam as the lower middle-income country. It has also facilitated Vietnam’s recognition as the most dynamic emerging countries in Southeast Asia region. As per the data evaluated by the World Bank between the year 2002 to 2018, the GDP has increased by 2.7-fold while at the same time the per capita income was reported in 2019 to be US $ 2700. The World Bank has lauded Vietnam’s initiative of alleviating poverty from 70 per cent to less than 6 per cent during this period. Vietnam’s economy grew by 3 per cent in 2020 and is said to grow 7 per cent despite adverse impact of COVID-19 pandemic. The increase in economic growth has been facilitated by export-oriented manufacturing and resurgent domestic demand. Given the fact that Vietnam’s has a sizeable number of young populations with the life expectancy of 76 years, this population is going to fill the gap between the rich and the poor. It is expected that the middle-class which is growing in the country will account for 26 per cent of the population by 2026.
With the increased urbanisation and the strong economic fundamentals, the new leadership is preparing for addressing the challenges such as waste management and supporting green technologies so as to address pollution challenges. In another report which was released by IMF focusing on Vietnam’s economy it stated that Vietnam has taken decisive steps to limit both the impact on health, and the economic fallout of the COVID-19 pandemic. Addressing the fact that successful containment along with structured policy support has helped to limit the economic repercussion and also reduce the stimulus package for the industry in the year 2020. It also states that it is going to emerge as one of the major centres of high-tech exports of electronics. It acknowledges that the country has graduated from agriculture-based economy to a modern economy which has boosted living standards due to strong foreign investment and sufficient current account surpluses.
The new leadership led by the Party General Secretary, Prime Minister along with the Finance minister has found strong fundamentals to boost economic growth and improve productivity. It is speculated that the macroeconomic policies will be supporting the active labour market and provide job training as well as structural social safety net to address socio-economic issues. The economic reforms (Doi Moi) initiated after 1986 would be completing three half decades, and therefore plans are afoot to provide better avenues for growth and active participation of private sector in the building Vietnam as a robust economy of East Asia.
