August 2025
by Anh Tho Andres
In 2012, I started my PhD research on the restructuring of Vietnamese state-owned enterprises, which necessitated a big tour on governance and transition economies theories. Replying to the question of whether the privatisation process was a success or not. I concluded in my thesis, presented in early 2019, that trust was the key to addressing such a question.
I started my new project on Vietnamese Studies (In Vietnamese, Vietnam Hoc) with a focus on the question: Are there true Vietnamese values? By returning to my cultural roots and completing the first two volumes of the Vietnam Ethics Series, I began writing my third book on my journey to inner harmony, entitled "Coming Home".
One of the questions that kept coming back to my mind is about where is the destiny of Vietnamese people heading in all this turmoil happening in the region: First, the US-China Trade war and the fate of Taiwan in this; Then, what is happening in the EU-US-Russia relations that reminds me of the Cold War period, where Vietnamese was drawned into the 30 year war; and now, the new US pivot strategy to Southeast Asia, which once more involves Vietnam in the midst of the trade war and the deglobalistion trend.
In this context, my reflections have been focusing on the consequences of all that has been happening since the Doi Moi was started in 1986, marking a shift in Vietnamese politics ever since.
Here is a short overview, assisted by AI, on the topic.
The World Bank’s 2020 reports, particularly Vibrant Vietnam: Forging the Foundation of a High-Income Economy and related documents, provide insights into Vietnam’s open policy environment, focusing on economic reforms, trade openness, and institutional progress. Below is an assessment of Vietnam’s open policy based on these reports, emphasising trade, investment, and economic governance, with a critical examination of the findings.
Overview of Vietnam’s Open Policy
Vietnam’s open policy, rooted in the Doi Moi reforms of 1986, has transitioned the country from a centrally planned economy to a market-oriented one, making it one of the most open economies in terms of trade and foreign direct investment (FDI). By 2020, Vietnam was recognised as a lower-middle-income country with significant progress in poverty reduction and economic growth, driven by trade liberalisation, FDI-led manufacturing, and export-oriented policies. The World Bank highlights Vietnam’s integration into global markets as a key driver of its development success, noting that its GDP growth of 2.9% in 2020, despite the COVID-19 pandemic, was one of the highest globally.
Key Aspects of Open Policy in 2020
- Trade Openness
- Achievements: Vietnam has excelled in trade openness, becoming one of the most open economies globally. The World Bank notes that Vietnam’s trade-to-GDP ratio is among the highest, driven by participation in free trade agreements (FTAs) like the EU-Vietnam FTA and the UK-Vietnam FTA (effective 2021). Exports, particularly in electronics and manufacturing, remained robust in 2020, supported by strong FDI inflows.
- Evidence: The Vibrant Vietnam report emphasises that Vietnam’s export-led growth model, backed by FDI, has boosted living standards and productivity. The country’s ability to maintain export performance during the COVID-19 crisis reflects the resilience of its trade policies.
- Critical View: While trade openness has driven growth, it has also increased reliance on external markets, exposing Vietnam to global shocks. The report does not fully address vulnerabilities like supply chain disruptions or over-dependence on specific sectors (e.g., electronics).
- Foreign Investment and Business Environment
- Achievements: Vietnam’s open policy has attracted significant FDI, particularly in manufacturing, due to low labour costs, stable policies, and FTAs. The World Bank’s Doing Business 2020 report ranked Vietnam 70th out of 190 economies, reflecting improvements in economic governance and infrastructure. Reforms in 2020, such as removing foreign ownership limits in the electronic payments sector, enhanced regulatory certainty for investors.
- Challenges: Despite progress, the World Bank notes persistent issues, including complex tax regulations, retroactive legal changes, and preferential treatment for state-owned enterprises (SOEs). The Vibrant Vietnam report suggests that Vietnam’s business environment needs further transparency and competition to support dynamic firms.
- Critical View: The World Bank’s optimism about FDI inflows may overlook uneven benefits, as rural areas and small enterprises often see limited gains. Additionally, foreign investors’ complaints about bureaucratic hurdles and corruption (noted in the Doing Business report) suggest that openness is not uniformly effective.
- Institutional Reforms and Governance
- Achievements: Vietnam has implemented reforms to support its open policy, including e-government platforms and single-window services to streamline administrative processes. The Vibrant Vietnam report praises Vietnam’s progress in social inclusion and poverty reduction, which complements economic openness by ensuring broader societal benefits.
- Challenges: The World Bank emphasises that Vietnam’s institutions have not evolved as quickly as its economy, limiting the effectiveness of open policies. The Vibrant Vietnam report highlights uneven implementation of development priorities, with gaps in infrastructure, green growth, and digital transformation. It recommends five institutional reforms to enhance policy coordination and implementation capacity.
- Critical View: The World Bank’s focus on institutional weaknesses may understate the role of political constraints, such as restricted freedom of association and corruption (Vietnam ranked 104th in Transparency International’s 2020 Corruption Perceptions Index). These factors could undermine the sustainability of open policies.
- Productivity and Economic Transition
- Achievements: The Vibrant Vietnam report underscores that Vietnam’s open policy has facilitated structural transformation from agriculture to manufacturing, boosting productivity. However, to achieve high-income status by 2045, Vietnam must shift to a productivity-driven model, emphasising innovation, skills, and efficient infrastructure.
- Challenges: The report notes that traditional growth drivers (e.g., low-cost labour) are weakening, and labour productivity remains low due to high informality and limited high-skilled jobs. The World Bank suggests policies to modernise agriculture, improve education, and enhance digital infrastructure to sustain openness.
- Critical View: The World Bank’s productivity focus assumes a smooth transition to a high-income economy, but structural issues like informal labour (40–79% of the workforce) and educational disparities may pose significant barriers. The report’s recommendations may be overly optimistic without addressing these entrenched challenges.
Impact of COVID-19 on Open Policy
The World Bank’s 2020 monitoring surveys (Monitoring COVID-19 Impacts on Households and Firms in Vietnam) highlight that Vietnam’s open policies faced challenges during the pandemic but remained resilient. Low infection rates and decisive containment measures allowed Vietnam to maintain export performance and economic stability. However, the pandemic exposed vulnerabilities, such as job losses in the informal sector and limited social protection coverage, which affected the inclusivity of open policies. The World Bank recommends strengthening safety nets and supporting small firms to enhance resilience.
Critical Assessment
Vietnam’s open policy in 2020, as assessed by the World Bank, is a success story of trade liberalisation and FDI-driven growth, transforming the country into a dynamic emerging economy. However, the World Bank’s narrative may overemphasise achievements while downplaying systemic issues:
- Strengths: Vietnam’s integration into global markets, robust export growth, and FDI inflows demonstrate the effectiveness of its open policy. Institutional reforms and governance improvements have supported this trajectory.
- Weaknesses: Bureaucratic inefficiencies, corruption, and uneven institutional capacity limit the benefits of openness. The reliance on low-cost labor and external markets poses risks to long-term sustainability.
- Gaps in Analysis: The World Bank’s reports do not deeply explore political constraints or the social costs of rapid liberalization, such as regional disparities or environmental degradation. The assumption that institutional reforms alone can address these issues may be overly simplistic.
Recommendations from the World Bank
The Vibrant Vietnam report proposes the following to strengthen Vietnam’s open policy:
- Foster dynamic firms through competition and transparent regulations.
- Improve infrastructure efficiency and sustainability.
- Enhance skills through higher education and vocational training.
- Promote green growth and digital transformation.
- Strengthen institutional capacity for policy implementation.
Conclusion
In 2020, Vietnam’s open policy was a cornerstone of its economic resilience and growth, as detailed in World Bank reports. The country’s trade openness and FDI attractiveness positioned it as a regional leader, but challenges in governance, productivity, and inclusivity remain. While the World Bank’s assessment is largely positive, a critical perspective suggests that deeper structural and political reforms are needed to ensure sustainable and equitable growth. For a comprehensive understanding, stakeholders should complement World Bank findings with local perspectives and data on social and environmental impacts.
(Source: Diverse sources compiled).
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