With Vietnam’s “Streamlining Revolution” well underway, foreign economists have highlighted challenges Vietnam will face as it aims for prolonged economic growth.
The American Dilemma
Donald Trump’s re-election to the presidency of the United States has caused chaos for the world economy, particularly in Vietnam. Trump’s hazardous tariff regime threatens to place massive strain on Vietnam’s export-focused economy, particularly on direct US-Vietnam trade.
Negotiations are ongoing as part of the 90-day “ceasefire”, but if the proposed tariffs of 46% stand, the damage to Vietnam’s economy could be catastrophic.
Despite the looming threat, the Vietnamese government has deftly proved its ability to satisfy Trump and his allies: a SpaceX contract, Boeing aircraft purchases and a Vietnamese Trump resort were among some of the negotiation tactics.
Aside from the direct damage to the Vietnamese economy, Trump’s needless trade war threatens to destabilize the complicated Vietnam-China relation. In recent years, the two nations have successfully collaborated, providing manufacturing jobs and sustained economic development on both sides of the border.
Trump’s hyper-aggressive stance on trade with China has extended to economic cooperation with Vietnam, with the United States threatening to impose heavy tariffs on cooperatively-produced goods. According to experts, the Vietnamese government must navigate this situation aptly to avoid disastrous consequences.
The “Streamlining Revolution”
Foreign economists have praised the government’s streamlining initiative as a “second Doi Moi”. As Vietnam’s economy forges onwards, these reforms are a welcome modernization initiative in a context where some international investors have faced difficulty integrating into the Vietnamese economy.
Experts praised General Secretary To Lam’s “Burning Furnace” anti-corruption initiative, highlighting its impact in the banking, administrative and security sectors. They emphasised however that the government’s hardline stance towards corruption must be maintained should Vietnam wish to join the ranks of the leaders of the global economy.
The streamlining of the Vietnamese government’s bureaucratic apparatus was particularly popular among economists, with administrative bloat being a long-held pain point for international investors. Experts warn however that the sheer scale of the reforms may create tensions between agencies and officials.
The Demographic Challenge
Another source of concern amongst international experts is Vietnam’s aging population. With an estimated 30% of the population estimated to be 50 or older by 2050, Vietnam’s historically young population is going through a major demographic transition.
As birthrates have fallen, Vietnam runs a real risk of economic slowdown. This can be avoided with suitable economic management policies, such as turning towards advanced technologies like AI, green energy and microprocessors.
This in turn, would require Vietnam to transition from a manufacturing powerhouse into a hub for innovation and credit flow. According to some experts, economic liberalization is the path forward, while others favour a more centralized and directed approach. It lies in the hands of the government to future-proof Vietnam’s economy for the digital age to come.