Vietnam

The Socialist Republic of Vietnam is one of the South-East Asian countries with the best economic and social growth prospects. Since 1986, when the reform process in favor of the market and the private sector, known as “Đổi Mới” (change), was launched by the Government, Vietnam has made great progress in its development path and has managed to bring 40 million of people above the poverty line and to reach the status of low-middle income country in 2010. In fact, between 2002 and 2022, annual GDP per capita increased 3.6 times, reaching 4,087 US dollars. No less significant are the results of human development – “Human Development Index” (HDI) which went from 0.463 in 1980 to 0.703 in 2021. The poverty rate decreased from 58.1% in 1992 to 4.8% in 2020, the literacy rate has grown from 84% in 1979 to 96% in 2019 and life expectancy has risen from 66 years in 1980 to 74 years in 2022.

The country has a population of 97.5 million inhabitants, 50% of whom are under the age of 30, therefore it is a young and numerous population that represents one of the largest workforces in South-East Asia. People of working age represent almost 70% of the total. Vietnam’s population will continue to grow steadily over the next five years and is expected to reach 100.4 million by 2024. Currently two-thirds of the country’s population lives in rural areas, although this percentage is steadily decreasing (in 2000 75% lived in rural areas). Vietnam’s population density varies by area, with most people concentrated in three areas: the Red River Delta, the Southeast Region, and the Mekong River Delta.

Vietnam has made foreign direct investment (FDI) a cornerstone of its economy, trying to make it the basis on which to base its growth and economic stability. Vietnamese exports are driven by FDI amounting to 73% of the total. Relative political and economic stability, along with legislative initiatives aimed at encouraging foreign investors, have allowed FDI to grow across a wide range of sectors and locations across the country.

According to the International Monetary Fund (IMF), the country’s economy grew by 2.6% in 2021, and is expected to reach 8% in 2022, confirming notable resilience to shocks, including the COVID-19 pandemic. In the coming years, GDP growth could remain at high levels, however there are numerous challenges that the country must face if it wants to achieve the status of an upper-middle income country by 2030 as declared in the Socio-economic Development Strategy (SEDS) 2021-2030. The extraordinary growth of the last thirty years has in fact been supported by the rapid accumulation of capital and the large supply of labor from rural areas. However, this growth model will become more difficult to sustain as the transition from an agricultural to an industrial economy is fully realized and the workforce grows more slowly. Furthermore, the growth in income that accompanied the increase in GDP will no longer allow the country to be competitive at an international level thanks to the low cost of labor. Growth must therefore be driven by advanced technologies and know-how and by greater economic efficiency to avoid the “middle income trap”.

Vietnam must also make further efforts to pursue reforms that support market forces and at the same time promote the social and environmental sustainability of its growth. Increasing productivity is an urgent priority, no less than strengthening social security systems and improving gender equality and female participation in employment.

The share of hydropower is now decreasing, making coal the main source of electricity. The commitment to achieve net zero emissions by 2050, consistently with the commitments made in Glasgow in 2021 with COP26, requires radical changes in the economic system. To reduce dependence on fossil fuels we need to stop new investments in traditional coal-fired power plants, support the energy transition towards renewable energy and accelerate the creation of a carbon market.

The large coastal extension, the geographical position, the topography and the different climates contribute to making Vietnam one of the most vulnerable countries to climate change, therefore the adoption of adequate mitigation and adaptation measures is essential. These measures are clearly identified in the Nationally Determined Contributions (NDCs). Furthermore, in December 2022 the Vietnamese Authorities and the G7 Donors announced a Just Energy Transition Partnership (JETP) for the decarbonisation of the country which was included in the most recent energy plan (Power Development Plan – PDP8). The PDP8 aims to satisfy Vietnam’s electricity demand in the coming decades by progressively increasing the weight of renewable energy and reducing the use of traditional coal-fired power plants to the point of zeroing out.