Vietnam Emerging As The Best Performing Economy In South East Asia
(MENAFN- The Arabian Post)
By Nitya Chakraborty from Hanoi
Vietnam, the Communist nation with nearly 10 crore population is presently the focus of the big investors of the world including the USA as the nation's leadership has made a miracle in building a highly skilled youth brigade along with the creation of an investment climate which can compete with the best of the ASEAN members. Vietnam's economic growth which is estimated at 6.1 per cent in 2024 is expected to go up to 6.5 per cent in 2025 and also remain at the same level or increase in 2026 2023, the GDP growth was only 5 per cent.
The World Bank in its latest report has highly appreciated the policies and the high tech moves of the Vietnam Government and the experts are projecting Vietnam as a most preferable destination for the new investors in South East Asia. What the World Bank points out is the resilience of the Vietnamese economy amidst the global challenges. The Vietnamese communist leadership is known for their pragmatism and political acumen to adapt to the changes based on the ground reality. That way, Vietnam successfully dealt with the challenges during the period of pandemic and came out of that phase taking new lessons for economic turnaround.
A special chapter of the World Bank report finds that development of capital markets would provide a vital source of long-term funding for Vietnam's economy and help the country achieve its goal of becoming a high-income nation by 2045. The report highlights key challenges, including underdevelopment of the institutional investor base and underutilization of the Vietnam Social Security fund (VSS). Vietnam policy makers had already identified the gaps earlier and now in the wake of the World Bank recommendations, they have taken the necessary corrective actions which have given a big boost to both investment market and the capital market in the beginning of 2025.
The new feature in the latest economic upturn in Vietnam economy is the dominant role being played by the capital markets in attracting foreign institutional flows. The present policies are designed to allow markets to reclassify Vietnam from frontier market status to emerging market status. This is helping in attracting more foreign investment. But once the emerging status is obtained, billions of dollars of global investment funds will flow into the capital markets
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Vietnam is introducing a bit of market economy in a calibrated manner but the Vietnamese policy makers have prudently tackled the transition from the earlier Soviet model of socialism by monitoring closely the behaviour of the domestic market players. As a result, the Vietnamese communist leadership could avoid the pitfalls which marked the transition of China to a socialist market economy. Chinese stock markets led to a number of billionaires in the initial period and the Chinese leadership had to intervene and curb some of the activities. In Vietnam, every effort was made to control any speculative activity by imposing rigorous control.
This writer visited Vietnam in 1994 as a part of the media team with the then Prime Minister P V Narasimha Rao. That was only 19 years after the defeat of the Americans in 1975 followed by the unification of Vietnam in 1976. Before the Vietnamese leadership began in right earnest the construction of the battered economy and the society, the Chinese attack took place in 1979 and this continued till an agreement was signed in 1991. That way in 1994, I saw a Vietnam which was just starting to rebuild the economy. The scars of the war were still there.
Now thirty years after 1994 visiting Vietnam including Hanoi and some other cities was a great experience. What was most noticeable was the feel good mood among the citizens. The entire economy is controlled by the young generation. In the streets, cafes, offices and hospitals, we see only the faces of confident, smiling and aspiring young people, especially women. The road side cafes on the pattern of Paris show confident faces sure of their future. The housing programmes are modest, hardly any palatial private residences are noted.
The experts point out that Vietnam is a remarkable development success story. Economic reforms since the launch of DoiMoi in 1986, coupled with beneficial global trends, have helped propel Vietnam from being one of the world's poorest nations to a middle-income economy in one generation. Real GDP per capita soared from less than US$700 in 1986 to almost US$4,500 in 2023 (in constant 2023 USD), a more than sixfold increase, and the share of the population living in poverty with less than US$3.65/day (in 2017 purchasing power parity) plummeted from 14.0 percent in 2010 to less than 4 percent in 2023.
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In 2024, India's per capita GDP is estimated at $ 2698 in nominal terms whereas Vietnam has recorded a per capita GDP of $ 4500 in 2023 nearly 80 per cent more than India. And that has been possible in the last four decades as against India's seven decades. The emphasis on the social indicators like health and education from the beginning has made Vietnam one of the strongest economies in the region. Presently 93 per cent of the population is covered by national health insurance scheme and the literacy rate is 98 per cent.
Vietnam has taken massive steps in building information technology infrastructure and in te last two/three years, Vietnam is competing even with India in the export market for software and IT products. This has been possible by deliberate planning by the Vietnamese authorities to create a new generation of IT techies. As a part of it, English is being taught as the second language in schools and one estimate says that 50 per cent of the youth know English.
Vietnam has gained traction due to its competitive labour costs, a growing pool of skilled workers, and government support for technology initiatives. This shift is concerning for Indian techies, who have long benefitted from a booming IT market globally, especially in the USA. The Vietnam government is giving big support for start ups. A lot of young Vietnamese youths working abroad are coming back to set up units in the country. There is big optimism in the industry in Vietnam. Unlike regional peers like Thailand, Malaysia, Vietnam is offering cost efficiencies in securing a skilled workforce, in software development sector. Foreign investors are very hopeful about bigger successes by the Vietnam IT sector in the coming years. (IPA Service )
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