Vietnam runs a socialist market oriented economy for its 95 million citizens which is ranked 45th globally by nominal gross domestic product at $241.272 billion and 33rd globally as measured by purchasing power parity at $710.552 billion. Its nominal GDP per capita is $2,551 while its per capita income PPP is $7,513. Agriculture contributes 15.3 percent with Vietnam being one of the major producers and exporters of rice globally that is consumed in various countries including Nigeria while its industrial sector’s contribution is 33.3 percent and its services sector 51 percent.
From January to December 2018 Vietnam earned $244.72 billion from exports of finished goods such as garments, shoes, and smartphones according to the General Department of Vietnam Customs. In the same year its earnings from smartphones and associated hardware was over $50 billion as leading consumer electronics manufacturers such as Samsung and LG operate smartphone manufacturing plants which contribute significantly to its huge export earnings. The current inflation rate as at 2019 is 3.540 percent and population of Vietnamese in poverty is 8 percent with a labour force of 56 million and 75 percent of them employed.
Vietnam recorded GDP growth of 6.2 percent in 2016, 6.8 percent in 2017, 7.1 percent in 2018 and 6.6 percent in 2019, and is projected to remain robust at around 6.5 percent in 2020 and 2021. Its remarkable developmental strides over the past thirty years can be traced to economic and political reforms launched in 1986 under the Doi Moi.
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The guiding principle of Vietnam’s economic development strategy as stated during the 7th National Congress Central Committee is that ‘’Industrialization and Modernization is a process of fundamental and all rounded change of production, business, services and social and economic management from the predominant use of artisanal labour to a predominant use of labour power with technology, methods and ways of working that are advanced, modern and rely upon the development of industry and scientific technical progress to create high labour production and so from a theoretical and practical view industrialization and modernization are necessary historical process Vietnam must undergo in its redesign to an industrial economy’’
Vietnam has liberalized trade over the past 30 years establishing trade agreements with various partners to promote it as a major production hub in the world. In 1995, it joined the Association of SouthEast Asian Nations and in 2000 signed a free trade agreement with the US, becoming a member of the World Trade Organization in 2007. Since then, it has integrated itself into the world economy with bilateral agreements with other ASEAN countries, China, India, Japan,Korea, etc. Vietnam has been actively working with other partners on ratifying the Trans-Pacific Partnership to form CP TPP or TPP II after the withdrawal of the US which is aimed at promoting economic cooperation, regional connectivity and economic growth between member countries.
The World Bank estimates that the CP TPP will grow Vietnam’s GPP by 1.1 percent by 2020 and boost productivity. The overall impact of these efforts was a reduction in tariffs on imported and exported goods or services to and from Vietnam and an improved trade balance with a surplus of $2.8 billion during the first eight months of 2018 according to the General Department of Vietnam Customs. Recently on 30thJune 2019, Vietnam signed the Free Trade Agreement and Investment Protection Agreement with the European Union after 10 years of negotiations which makes it the fourth Asian country to have such an agreement after Japan, South Korea and Singapore.
In order to create an open market economy with reduction in the cost of doing business, the Law On Foreign Investment which was first passed in 1986 and allows foreign enterprises to do business in Vietnam has been revised regularly to provide an investor friendly business climate, reducing bureaucracy in order to accelerate foreign direct investment into the country which has attracted leading consumer electronics firms and European and American fashion brands to establish manufacturing outlets in the country.
Vietnam ranks 48th out of 157 countries globally on the Human Capital Index and second in the ASEAN region after Singapore. Its HCI is the highest amongst middle income countries globally and this explains why amidst the ongoing US China Trade War, and as a result of demand for higher wages in China by factory workers, there is a redesign in the global hardware supply chain that has seen Original Equipment Manufacturers move to where preparation by state investment in human capital development is fixing the frictions which the opportunities present.