by Jeff Cheung

The modern history of Vietnam is nothing short of volatility. Just as in many other countries in Southeast Asia, the lengthy periods of western colonization influenced waves of nationalism in the early 20th century. However, the story of Vietnam’s development does not stop at this narrative. The fall of France during World War II followed by the Japanese Occupation of Indochina only strengthened Viet nationalism and led to the rise of Viet Minh. Under the influence and support of the communist Soviet Union, the Viet Minh fought the First Indochina War against France to secure the sovereignty ruled by Viet. By the time the Vietnam War ended in 1975, the country of Vietnam had been at war for at least 30 years and had a lot to do in terms of rebuilding its economy. 

The Vietnam War was nothing short of detrimental to the country, it had brought enormous losses and huge casualties to Vietnam. As many as 3 million Viet soldiers and civilians were killed during the war. The use of chemical weapons and guerrilla warfare has not only made much of the agricultural lands inhabitable but also caused continuous physical damage to several generations of Vietnamese. Many children born after the war were found with congenital disabilities and life expectancy of the people was unusually shortened.  

It is important to note that the chaos and damage left from the war did not stop there, as soon after the communists who originated from the North began political prosecutions targeting South Vietnamese. Many of these civilians were forcefully sent to re-education camps where they were subjected to forced labour and physical torture. War and political conflicts are the principal factors that have significantly dragged the economic development of Vietnam as human and physical capital were adversely affected, leaving the country unable to rebuild efficiently.  

The question to be asked now is how Vietnam went from being one of the poorest in the world to becoming one of the wealthiest countries in Southeast Asia. Under the influence of the Soviet Union, Vietnam initially adopted a centrally planned economy and formulated five-year economic plans to boost economic growth and development. However, they were not aware that the Soviet model of a planned economy was prone to market failures and communication errors. The disastrous second five-year plan, which put a strong reliance on heavy industries and unrealistically high production goals, created a shortage of food and consumer goods. In addition, the shortage fuelled strong inflationary pressure that caused a living costs crisis and serious troubles among the peasants. 

Despite the country’s failure with its plans, luckily radical changes within the Vietnam Communist Party and the leadership led to a change in its economic policies. In 1986, Vietnam would adopt an open-door policy like China’s which sought to develop a socialist-oriented market economy. On one hand, the system would remove government provision of prices by allowing producers and consumers to act according to price signals, hence improving resource allocations. On the other hand, the government would retain limited control over the market which matched the country’s political agenda. The Viet government made sure that these fundamental changes were made slowly so that different stakeholders would have the time to react and that a degree of social harmony can be maintained. 

The Doi Moi (open door) policy was only the first step of Vietnam’s unique economic policy, as the government has since focused on the development of both human and physical capital. Their progress might not be the quickest of all but is certainly seeing some major development. By 2011, primary education enrolment had reached 97% and high school enrolment had come at a reasonable rate of 50% too ¹. Over the years, increase in education levels has gradually empowered changes and the country’s strong emphasis on education ensured that it possesses a sufficient level of human capital to attract even more foreign funds, providing a long-term solution to Vietnam’s poverty problem. Brands such as Nike and Samsung are more than willing to place large production lines in Vietnam and the country’s GDP per capita increased from only 235.7 in 1984 to 3756.6 in 2021, which is about a 1500% growth within 37 years ². Furthermore, with the outstanding development of inter-communication systems and stable provisions of internet services, Vietnam poses as one of the most competitive countries in the region and is capable of not only manufacturing but the provision of other tertiary services as well. 

Vietnam’s political structure also plays a significant role in the wider picture as it provided much-needed stability for economic development. As mentioned above, Vietnam is a socialist country that is ruled by the Communist Party of Vietnam. Although the country experienced horrible political prosecutions and policing failures that define the late 1970s to early 1980s, an authoritarian ruling allows a persistent policing direction and preserves social harmony. In comparison to the neighbouring countries that have taken different political approaches such as Myanmar, the political stability in Vietnam creates very favourable conditions for trade and foreign investment. The taste of economic fruit in turn builds the reputation of the ruling party, which enables it to introduce more sustainable policies to achieve economic growth and development. 

The substantial growth of the Vietnamese economy may be phenomenal but let us not forget that humanitarian problems remain prominent in Vietnam, with the human rights of many infringed. Economic growth also brings widening income inequalities, seen from the lack of access to necessities such as private education and healthcare services by peasants. The low-income groups in Vietnam heavily rely on agricultural production, which is vulnerable to weather. With weather becoming increasing unpredictable due to climate change, the situation of economic inequality will only get worse.  

The progress of Vietnam is a miracle in the way that it not only recovered from the scars and damages of war and political disorder, but the country also managed to develop into one of the fastest-growing countries in the world. While there are issues that the country is still facing economically and socially, it nonetheless sets an excellent model for other low-income countries. The country’s development shows that careful policy planning, a little bit of endurance and a slight bit of luck is what is required for states to succeed. 

¹ A spotlight on Vietnam’s transformation in Education. R MAssessment Blog. (2021, May 19). Retrieved February 1, 2023, from https://blog.rmresults.com/a-spotlight-on-vietnams-transformation-in-education  

² GDP per capita (current US$) – vietnam. Data. (n.d.). Retrieved February 4, 2023, from https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=VN  

The views expressed in this article are the author’s own, and may not reflect the opinions of The St Andrews Economist.