Keys to Progress "2-6": Vietnam, a shining and promising star in the global economy

Mohamed Ibrahim El-Desouky
Wednesday 28 Feb 2024

Vietnam's economic rise did not happen overnight but was a good and comprehensive result of the bold economic reforms it adopted.

 

There is a saying among global economic experts that "to become a good economist, you have to go to Vietnam." But why? Because Vietnam quietly and smoothly transitioned from being one of the poorest economies in our world -- at one point, inflation in Vietnam reached 770 percent -- to one of the fastest-growing economies at a rate of 6.5 percent over the past ten years. 

According to the World Bank, Vietnam's economy is expected to grow 7.2 percent, the highest in East and Southeast Asia, including China.

The Vietnamese economy is not only growing but also thriving and recovering steadily. Thanks to its prosperity, it has created an internal shift that amounts to a "miracle." It suffices to know that it has lifted millions out of poverty and deprivation by reducing the poverty rate from 70 percent to 2.1 percent in 2020 (Vietnam's population is about 100 million).

The average income of the citizen in Vietnam increased ten times: from $300 in the 1980s to $2800 in the 2020s.

Vietnam has transformed from a country torn apart by internal wars and conflicts, living on limited agricultural production and international aid and grants, to a place strongly attracting foreign investment ($28.5 billion in 2023).

Vietnam's GDP reached $1.43 trillion, an increase of 7.6 percent compared to 2022. Major international companies compete to establish production lines there, taking advantage of the attractive benefits and incentives the government offers, especially for those working in e-commerce.

Hanoi has benefited from the influx of major global companies, which brought foreign capital and enabled the country to employ thousands of citizens. Furthermore, these companies transferred expertise and technology and increased the efficiency and skills of the workforce. 

Consequently, Vietnamese skilled workers have become more qualified and their wages higher, which enabled Vietnam to compete in the regional and international labour market. Vietnam now competes with its neighbours, especially China, and has succeeded in drawing many heavyweights and resonant companies operating in Chinese cities to move to Vietnam. 

These companies were drawn to Vietnam by the lower production cost in the country compared to China. Recently, Foxconn, a company specializing in electronics and contracting with global technology companies, including Apple, decided to invest $300 million to build a new factory in Vietnam. Google also announced its intention to transfer half of its Pixel phone production to Vietnam.

This maximizes the economic gains for the Vietnamese authorities, who are open to the outside world and have managed to decipher the code of progress. Everyone now looks at Vietnam with respect and appreciation, given its successful economic policies and the flexibility of its decision-making process. Hanoi plans to attract $150 billion in foreign direct investment within five years.

Vietnam's economy transformed from a highly centralized closed economy, where the state completely controls every aspect of the economy, to applying the rules of free market economies to stimulate growth rates. Vietnam has cooperated with the World Bank and other international institutions to finance infrastructure projects to achieve sustainable development by linking cities to rural areas to attract foreign investors.

Most state-owned companies have been privatized, and the banking, telecommunications, and transportation sectors have been developed, which has provided a more conducive and stable working environment.

Vietnam has signed regional and international trade agreements that reduced tariffs and other barriers to trade and investment and supported its chances and position within global supply chains. 

Manufacturing accounts for 33.3 percent of the country's economy, while services account for 51.3 percent and agriculture for 15.3 percent.

Foreign direct investment brought advanced technologies that enhanced Vietnam's production capabilities, quality level, and efficiency. Gradually, manufacturing units spread throughout the country, and the exports of manufactured goods to foreign markets increased considerably. Unemployment in Vietnam currently stands at 2.1 percent.

Korean technological giant Samsung's investments in Vietnam demonstrate the country's enormous success in attracting foreign investment. Initially, Samsung invested $670 million in 2008, and after ten years, the Korean company quickly increased its Vietnamese investment to $17 billion.

Vietnam generated $58 billion in profits from Samsung, which has become the largest investor in the country. Samsung owns 14 factories that produce half of the world's smartphones, tablets, and televisions. It employs 220,000 people, and company officials believe that the future of investment in Vietnam is reassuring and encourages them to pump more money into the country.

Electronics and machinery have become the backbone of Vietnamese exports, alongside textiles, clothing, and footwear for famous global brands. Vietnam is also considered one of the primary sources of coffee, rice, pepper, and seafood.

Vietnam aspires to maximize its economic and technological achievements. In 2021, the 13th National Congress of the ruling Communist Party set a goal for Vietnam to become a developed country and raise the average citizen's income to $18,000 by 2045.

To achieve this promising and ambitious goal, Vietnam has to maintain an economic growth rate of no less than 7 percent over the next 25 years. This, however, is not an easy task, considering the new developments and crises that negatively affect local and global economies, leading to slowdowns and contractions.

 And yet, Vietnam has the means to achieve such steady growth after such impressive progress. All it needs is to continue its pioneering and exciting journey towards becoming a promising star in the global economy.

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