After decades of war, recovery, seclusion and economic stagnation, Vietnam has arisen as one of the hottest emerging markets in Asia. On the back of a booming manufacturing sector, a favorable geographic location, heavy investments in infrastructure and key trade pacts with several big economies, Vietnam has transitioned from being one of the poorest countries in the world to a highly sought destination for the world’s largest companies. Nevertheless, there are still challenges as the country rushes to fill its infrastructure gap.
The emerging market story
The modern Vietnam story starts roughly 30 years ago when the country first began opening up to foreign -investment. At this time, the country was the quintessential backwater, with a GDP in the ballpark of $6 billion, and was scarcely on the radar of the world economy. Now, after three decades of concerted economic reform, Vietnam has jumped to the forefront of Asia’s new guard of booming economies with a GDP that topped $223 billion last year and a growth rate hovering around 7 percent. According to MIT research, Vietnam became the 21st largest exporter in the world in 2016, with an $11 billion trade surplus – a complete about-face from 1995, when the country faced a $2.29 billion deficit. By 2017, trade as a percentage of Vietnam’s GDP was in the ballpark of 200 percent, which is the highest figure the World Bank has ever measured for a country with over 50 million people.
This economic success can partly be attributed to Vietnam’s participation in a variety of major international trade organizations and agreements. In 2007, Vietnam joined the World Trade Organization (WTO), it has been a member of ASEAN since 1995, and was one of the original signatories to the Trans-Pacific Partnership. In addition to being part of the ASEAN free trade area, it has established key trade pacts with China, Australia, New Zealand, Korea, India, Japan and the Russian-led Eurasian Economic Union, and a big free trade agreement with the European Union will soon come into effect.
In addition to integrating into the global economy in terms of trade, Vietnam is liberalizing its domestic policies in regards to business ownership and investment, now allowing foreign firms to have 100 percent ownership of a company in Vietnam.