Being branded as one of the few bright spots in Asia where economic growth has accelerated beyond 6% in recent years, the nominally Communist nation is advancing closer towards its former arch enemy, America, and this will help the country become a competitor to China
Vietnam has come a long way in the last four decades. And over the next few years, a less hobbled society added by a slew of massive foreign direct investment will probably reshape the destiny of Asia’s “Other Tiger”. With the advent of the Trans-Pacific Partnership (TPP), Vietnam’s clout in international trade is expected to change. The fledgling economy of the country, sleeping in the garb of the devastations of the war till recently, is now in the middle of a big revolution — huge capital flow is the trademark of the new beginning. The nominally Communist nation is advancing closer towards its former arch enemy, America, and this will help the country become a competitor to China. Obviously with an appealing market for foreign investment and trade with massive economic growth, it is today registering the fastest growth in Asia. Vietnam has displayed to the world that tried and tested models of development can work wonders. It symbolises a counter to techno-pessimism. Like China, Vietnam is clear-minded and knows what direction it must take to grab the opportunities thrown open by the global economy.
So far, the signs of development are positive. However, with end of the first quarter of 2016, Vietnam had aimed for a GDP growth of 6.7 per cent, but this period showed only 5.46 per cent economic growth. The massive climate change gave a disastrous blow to the economy of the country which mostly relies on agricultural sector. Can Van Luc, an economist with the Bank for Investment and Development of Vietnam, rightly argues that the drought and the intrusion of sea water into the agricultural land has hurt major farmlands in the Mekong Delta region. As the Mekong Delta is the highest rice producing area, the country suffered losses in the beginning of the year. Though the agricultural output has declined, the industrial production, retail sales of goods and services grew as expected, and even more compared to the last year. But it seems it is too early to predict the growth of Vietnam’s economy which normally moves upward only at the end of the year.
Vietnam’s economy witnessed a major leap after the country’s growth fell to as low as 5.25 per cent in 2012. The nation has largely benefited from a slow, but steady rise in investment from foreign investors who are trying to cash in on the benefits of most of the free trade agreements, including the TPP. Being a middle income group nation in the 12-nation TPP, Vietnam stands out because TPP together accounts for more than 40 per cent of global output. Sensing the mega impact of the TPP on Vietnam, Hanoi-based World Bank economist Sandeep Mahajan predicted in October last year, “The question is how much benefit they can derive from the TPP; it is not whether they can derive benefit. We have estimates which would show that cumulatively by 2030 it would add about eight per cent to Vietnam’s GDP.”
Why Vietnam will factor in so much in comparison to other Asian countries like China? It is because of the rising costs of labour and other services that will force many of the foreign brands to move to Vietnam. Among the key industries to gain from the TPP membership include Vietnam’s textiles and garments and global supply chain operators like telecommunications which are making fast strides as it is closer to China. But Vietnam’s agricultural sector will face strong competition from major commodity exporting countries like that of Australia for sure. Apart from other areas of growth, Vietnam’s exports have been doing exceptionally well. Its market is driven more by foreign manufacturers than the local ones for a number of reasons. Many international labour law experts say that Vietnam offers a set of excellent set of labour laws unlike even some other democratic nations like that of India in Asia. Beyond this, it has a very less heavily regulated business environment wherein the multi-national corporations do not have to encounter bureaucratic hassles quite often. It is sad that despite having widely prevalent democratic systems starting from the grass-roots to Parliament, today India is crippled by the remnants of an overwhelmingly colonial bureaucratic set up. Therefore, unlike China and India, Vietnam offers an excellent opportunity to the foreign investors for a free environment where the ease of doing business is the rule of the day.
Being branded as one of the few bright spots in Asia where economic growth has accelerated beyond six per cent in recent years, Vietnam will definitely pose a potential threat to the Middle Kingdom sooner or later. China may come up with numerous problems starting from terrorism in Xinjiang, unrest in Hong Kong, problem with Tibet, a growing middle class who aspires for more freedom than money, brewing internal political fights arising from various layers of the elite and finally its ever greater expansionist tendency in the most controversial zone of South China Sea. These may help Vietnam in the coming years. China’s ambitions have no limit, but Vietnam is a country that has limited enemies unlike the former and it has no hidden agenda.
Vietnam’s stable political environment contributes positively for the growth of the nation. Though there are contests for the top job i.e. Secretary General of the Communist Party, it is not so complicated that it may destabilise the national political environment. Vietnam is ruled by the Communist Party and it is the most powerful organ of the country. Today, Nguyen Phu Trong, who is the Secretary General of the Communist Party, virtually controls all affairs of the State. Indeed he secured a second term in the 12th party Congress this year where there was a tough battle for the top job between him and then Prime Minister Nguyen Tan Dung, but the latter failed. Though branded as maverick and charismatic by many, Dung’s own legacy invited his downfall. He was known widely as a great reformer, but in reality he is not so. Undoubtedly, he built up a powerful patronage network throughout his rule. His reforms have helped well-placed persons and foreign investors for sure. He was projected as only one leader in Vietnam, who espoused for more open and democratic Vietnam, but to be precise, the critics always dismissed such expectations from him. Dung was succeeded by a less charismatic Nguyen Xuan Phuc as the Prime Minister in April 2016. Phuc is known as a team player and a technocrat, ready to adhere to the party line. It is critical for any Vietnamese leader to respect and work as per the setting standards of the Communist Party as it is the DNA of this eastern-most country of the Indo-China peninsula. Whatsoever it may be, barring political differences within the party, the country is forging ahead and it will rise above the horrors of the war. Vietnam has set its sights on becoming a developed nation by 2020. Let’s wait and watch how the communist country will wade through the troubles coming from both within and outside while competing with the neighbouring giant China
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