VIETNAM'S ECONOMIC MIRACLE

• THE INTRODUCTION:

If you are reading the article from your phone, there is a possibility that it was made in VIETNAM ,even the T-shirt or the shoes that you wear is probably made in Vietnam, the country whose name you know when poverty, famines, war and global polar conflict are mentioned. Despite this, Vietnam became one of the most important economies in Asia, a safe place that magnets global investments and the most important manufacturing in the world , even competing with the Chinese dragon and outperforming him in some things. From the poorest country in the world after the war to a fast growing economy in Asia. What is the story of Vietnam? How did the Vietnam renaissance happen? What did Vietnam and the other didn't? why are there international companies competing to be there? And why are there companies leaving China and going to Vietnam? 

• HISTORY  OF VIETNAM:

Vietnam is the land of greed and the undisputed spark of resistance from French colonialism in the 19th century, then Japanese colonialism, it ended with the WW2 to another French colonialism ended in 1954 ,then a civil war that will turn into great massacre between its northern and southern parts. Under the auspices of America and Soviet Union and the end of an American invasion to support its southern allies with a military force of more than half a million soldiers, the war will end with withdrawal of America defeated in 1974 ,the north will invade the south in 1975 and Vietnam will be united and the disaster unfolds.

•  POST-VIETNAM WAR:

The land for rice cultivation, the sector where 70% of the population worked, it didn't have anything to fill  its inhabitants estomaches , not to mention the destruction of bridges and roads during the war. In North Vietnam there was 6 industrials cities , but the American bombing completely destroyed them and the percentage of the population living below the poverty reached 70% .Above all, US sanctions will isolate the country that dared invade its neighbour Cambodia in 1978 and it will be worsened by the dispute with the Chinese Communist, the big neighbour who was never satisfied with the Communist Vietnam. 

And it causes the northerners to come to power ,who were allied with the Soviets ,so its is natural for the government to take the socialist system and follow planned economy ,under this system, the government determines the prices of the goods and services it produces and determines quantity of production as well. During that period, the country's worsened, and the national income depended 80% on agriculture ,and the inflation rate reached 700%.In short, these policies and sanctions have made Vietnam one of the poorest countries in the world.

But as usual the economies of Southeast Asian countries make a renaissance,  and the renaissance maker here is called: Nguyen Van Lin . This man took over the presidency of the Communist Party in 1986 and he preferred free market policies and believed that power does not come with a state monopoly, so he launched a set of economic reforms in the same year called DOI MOI .

• REFORMS  OF THE VIETNAMESE ECONOMY:
  

Doi moi is a Vietnamese word that means renewal, and historically it means Vietnam's transformation from socialism to market economy. Under these economic reforms, Vietnam opened the door to investors and reduced its control over the economy, in addition to encouraging the private sector to provide the facilities it would need.

 

The plan was ambitious ,but it will not have an effect if the bad relationship between Vietnam and Western countries continues, so they withdrew their forces from Cambodia in 1989,then US sanctions on Vietnam were lifted ,from the lifting of the travel ban in 1991 to the lifting of the trade embargo in 1994 ,and the siege of the Asian tiger was lifted and opened the way for it to have agreements and trade relations with all countries of the world , Vietnam joined the Association of Southeast Asian country (ASEAN), wich is a trading bloc that includes member countries of Southeast Asian countries, and in 2001 ,Hanoi signed a free trade the United State and in 2007, they joined the World Trade Organization and signed 16 reciprocal international trade agreements ,which contributed to the reduction of customs tariffs, these trade arguments helped Vietnam open up its economy more to investors and companies from all over the world due to the provisions of tax facilities and the easing of restriction and trade barriers.

 

This is good, but how will Vietnam attract foreign capital or encourage the private sector to participate if it does not have a well-developed infrastructure and large human capital? So ,Vietnam started with community infrastructure, wich includes potable water and sanitation, and therefore in 2004 they partnered with the World Bank for a period of 10years to develop infrastructure for 200 low-incomes areas. As part of the partnership with the Bank, water stations, sewage networks ,schools, clinics and power stations were built in these areas, in addition to the modernization and construction of more than 580Km of roads ,this infrastructure serves more then 7.5 million Vietnamese ,in the past ,14% of the population used the electricity as the main source of lighting, but now the electricity network covers 96% of the country .

 

Parallel to this, Vietnam directed its government spending to infrastructure for ports and airports. Vietnam today has 320 seaports ,44 of wich have a capacity of 500 million tons per year ,and not forgetting 22 airports, 15 of them are used for civil purposes. Despite all this, Vietnam still has a lot in infrastructure development, according to the Global Competitiveness Report issued by the World  Economic Forum in 2019 ranked Vietnam 77th in the world in terms of infrastructure quality. For human capital, in quantitative terms, the population of Vietnam is 97 million, with an average age of 32.5 years, wich is better than China, wich has an average age of 38.5 years, and the number Vietnamese of working age exceeds 56million people ,this is terms of numbers, but it is not everything.

 

In order for country to take the industrialization track, it is necessary to have human competencies and trained labour, and in order to achieve this, education must be taken care of, so in the year 2020 14.4% of the Vietnamese government spending went to the education budget, meaning the country spent 4% of the GDP on education and training. We are talking about 326 trillion Vietnamese dong, or 14.2 billion US dollar, this huge spending on education, the results of wich appeared at the International Program for Student Assessment, known by the acronym PISA, this program measures the abilities of 15-years-old students in reading, and mathematics and science, from among 72countries that compete with each other. Vietnamese students ranked  8th and outperformed competitors from the US, Germany, France and the UK....In short, Vietnam has respectable education that helps its economy and provides it with the human resources it needs .

 

And after possessing abundance ,efficiency and training, Vietnam has a cheap labour because the monthly wage for the worker there ranges between 107-156$, wich is cheaper than China, whose wages range from 333-193$.

Conclusions the Vietnamese offer the following investors and venture capitalist: Advanced infrastructure , trained  and cheap labor, production sites, R&D institutions, tax facilities, lifting of tariff barriers and trade agreements, all these advantages were taken advantage of by Vietnam in the best  way to attract foreign capital in its country to invest specifically, in the industrial sectors, especially labor-intensive industries. 

• PROSPERITY:

 Thanks to the economic reforms, Vietnam has attracted 10,000 foreign companies, including Samsung, Intel, Foxconn, Nike and Adidas and the list goes on, the number of companies increased because of what Vietnam offer and because of the recant trade war between China and the USA. For example, in 2010, the global company Intel chose Vietnam to house its largest factory ever, and the Taiwanese company joined it in November 2020 by transferring the manufacture of Apple products from China to Vietnam and later taking a license to build a factory in Vietnam at a cost of 270million dollars, meaning Apple's manufacturing operations are going to Vietnam along with Samsung, which owns 6 factories in Vietnam and is building a huge research and development center there that employs 3,000 Vietnamese engineers (Samsung), while Nike has 200 factories in Vietnam and Adidas has 76 factories there too.

 

And thanks to the presence of foreign companies, they helped Vietnam make it the third largest country in the world that attracts foreign investments after China and India and the per capita income in it jumped from 100$ in 1986 to about 4,000$ in 2007. A great economic boom that we can learn from the World Bank statistics confirms a very important thing, which is the rise and stability of Vietnamese economic growth at a rate of more than 5%annually since 2010, which is a large rate compared to the rest of the world, while the rate of extreme poverty decreased during 20years from about 65% to 11%only , while foreign direct investment now represents the equivalent 90% of the value of Vietnamese industries exports to the world, Vietnam has gotten better and improved a lot that its GDP is increasing at a rate to 7%annually and its industrial growth is up 13%, and its agricultural growth is approaching the 4% barrier, while the growth of the service sectors is about 6,9%.

  

Hats off  to a rising Vietnam, but there are  problems that may hinder its path .

•  THE PROBLEMS:

 

       Vietnam is not a perfect country and its problems are many, the most important and the first of wich is corruption  that ravages the country , and its impact was evident in2006 with the scandal of the famous Unit 18 projects, wich witnessed the embezzlement of millions of dollars by those responsible for it, and at that time led to the resignation of the Minister of Transport and led to many officials in prison, and if corruption was inside the country, there is something worse abroad, and we are talking here about China, the country that fought many historical wars with Vietnam and sees in it an economic opponent stealing the investments of international companies and a political opponent approaching USA, its arch-enemy, but despite the Chinese threat, the opportunity for Vietnamese growth remains, as it can exploit the Sino-American differences to its advantage to be the safest to invest in the region with the support of the American giant ,as i said earlier.

 

• CONCLUSION:  

The experience of Vietnam is certainly not perfect, and it has problems, but despite that ,the experience of all developing countries can benefit from it, especially as it is more amenable to imitation compared to the experiences of countries such as China and India, which have different conditions than the rest of the developing countries.