Vietnam is becoming an Asian trade center
The Financial Times questioned whether Vietnam could overcome the middle-income trap and replied: Vietnam can completely escape the middle-income trap, although this is a big challenge. The Financial Times points out three factors that give Vietnam a great chance to make a breakthrough.
Firstly, its stable geographical and political position is a great advantage that helps Vietnam become an attractive destination for foreign investment. With a coastline of 3,300km, Vietnam is located along important trade routes in the East Sea, making it easy to connect with the global market. The Vietnamese government maintains balanced relations with major powers, creating a favorable environment for trade and investment.
Thanks to these advantages, Vietnam attracts foreign direct investment (FDI) at an impressive rate. Since 2015, FDI in Vietnam has always accounted for about 5% of GDP per year. South Korea, Singapore and Japan have accounted for the majority of investment in recent decades.
Vietnam is not only a transit point for goods but is also developing into an important production and industrial center. The proportion of Vietnam's export goods in the world has increased from 0.1% in 1996 to 1.7% in 2022 - surpassing many competitors in the region.
Global companies such as Apple, Intel, Samsung, Boeing and Coca-Cola all have large factories in Vietnam. Trade tensions further increase the trend of international enterprises shifting production to Vietnam to avoid supply chain risks.
Strong reformed government
Second, the foundation for Vietnam's rapid and sustainable economic growth is a strong reformed government. After difficult years of a centralized planned economy, Vietnam implemented the Doi Moi policy in the late 1980s, opening the door to foreign investment and applying a socialist-oriented market economy model.
This policy helps Vietnam transform from an agricultural economy to an industrial economy, boosting exports and attracting FDI.
But it is important that Vietnam does not stop at initial reforms. The Government continues to promote measures to upgrade the economy such as reforming state-owned enterprises to increase competitiveness; investing heavily in infrastructure and energy to support sustainable growth; reducing taxes and simplifying business regulations to encourage private investment.
According to the Economist Intelligence Unit, Vietnam is the country with the fastest improving business environment in the past two decades.
Recently, the Vietnamese Government is implementing a plan to streamline the apparatus, merge ministries, departments and branches to ensure a more streamlined, effective and efficient apparatus. TINH
The God of the Vietnamese
Third, according to the Financial Times, Vietnam's openness to market reform probably comes from the unique advantage of Vietnamese people having a strong entrepreneurial spirit.
According to Rainer Zitelmann, author of the book How Nations Escape Poverty (roughly translated "How do countries escape poverty"), Vietnamese people have a very positive view on business and getting rich. Compared to many other countries, they have a more sympathetic view of the rich, considering them creative, intelligent and hard-working.
There are three factors that prove the strong entrepreneurial spirit of Vietnamese people. One is that education is valued - Vietnam has a good education system, with a high rate of students achieving high results in international exams.
The second is the strong development of startups - Vietnam currently has 6 technology startups (startups worth over 1 billion USD), more than Spain or Italy.
Three are women playing an important role in the economy - Vietnam has a higher rate of women participating in the workforce than the average of developed countries.
Vietnam still has a lot of work to do. Infrastructure and human resources need to continue to be invested in. Institutional reform needs to be promoted. Geopolitical challenges and FDI dependence are also potential risks.
But as the World Bank once stated, countries that successfully overcome the middle-income trap all have three factors: discipline with group interests, investment in human resources and modernization of policies.
Vietnam is on the right track with a reformed government and a nation full of aspirations. If any country in Southeast Asia can escape the middle-income trap, it is Vietnam - the Financial Times concluded.
