After the death of Communist Party leader Nguyen Phu Trong, power relations in the socialist country are shifting. Vietnam aims to become an economic powerhouse. But what does it want politically?
Somewhere between socialism and a market economy: Where is Vietnam heading?
Kham / Reuters
Vietnam could become an economic powerhouse by 2045. To understand this, it helps to take a look at South Korea. In the 1960s and 1970s, Japanese companies invested heavily there, which led to an import boom on the peninsula and earned South Korea the status of an East Asian «tiger.» It was the beginning of an unprecedented surge of industrialization, and the country is today highly developed.
South Korea has today become a key investor elsewhere in Asia, especially in Vietnam. This could translate into a repeat of what happened in Korea half a century ago, transforming an emerging country.
Among the 10 members of the Association of Southeast Asian Nations, Vietnam has shown the most spectacular development since the 1990s. In 1990, the country’s gross domestic product per capita was still around $100. Today it exceeds $4,300.
Vietnam has thus surpassed the GDP of the Philippines, which is roughly the same size in terms of population. Toward the end of the decade, it will probably also overtake the economically and politically more unstable Thailand. One reason for its success: With a population of over 100 million people, Vietnam has favorable demographics and a good size.
History: Rapprochement after the war
Since South Korea established diplomatic relations with Vietnam around 30 years ago, the two countries have collectively realized joint projects worth around $80 billion. These have been concentrated both in the north and south – that is, around Hanoi and Ho Chi Minh City (formerly Saigon). Both economic centers have played a critical role in shaping the metamorphosis from a formerly war-ravaged agricultural country to an industrial nation. Seoul is expected to invest a further $20 billion in projects in Vietnam by 2030.
Giants such as Samsung, LG and Hyundai; steel and shipbuilding companies; and construction firms are all driving Vietnam’s industrialization. The production of high-quality electronic products such as microprocessors, smartphones and televisions in Vietnam is evidence that technology companies have faith in the country’s future. These are sectors that entail high levels of added value. Unlike textile and shoe manufacturing facilities, which are at the lower end of the value chain, they cannot simply be relocated to another country overnight.
The leading position of South Korea’s investors in Vietnam is remarkable from a historical perspective. South Korean troops fought alongside the Americans for years during the Vietnam War. It gave the neighboring country the unpleasant reputation of being a puppet of the United States. There was a correspondingly long period of frozen relations between Hanoi and Seoul after the end of the war.
That changed in 1992, the year the two countries established diplomatic relations – three years before a U.S. embassy was opened in Hanoi. In the course of this rapprochement, Vietnamese demands for compensation and reparations receded into the background. Later, the government in Hanoi even demonstratively renounced offers of such payments from Seoul.
The development of this relationship between the two countries is a prime example of the flexibility and pragmatism of Vietnamese foreign policy. Today, there is a catchy term for this that dates back to the time of Ho Chi Minh, and which has since become a foreign policy maxim in Hanoi: «bamboo diplomacy.» The phrase offers the image of a nation with deep roots and a firm trunk, but with branches able to bend as needed.
Economy: Seeking global recognition
Vietnam has also moved closer to the United States, its main former wartime enemy. The U.S. has today become the country’s most important trading partner after China. In terms of direct investment, however, America is not even in the top 10. This has to do with Vietnam’s status as a nonmarket economy.
This term, dating from the Soviet era, describes a centrally controlled economy with a correspondingly low degree of liberalization. The U.S. government justifies its decision to classify Vietnam as a nonmarket economy by saying that the state still interferes too much in the economy.
However, the Americans are also focused on protecting certain sectors in their own industry. The U.S. has therefore repeatedly imposed anti-dumping duties on Vietnamese products, alleging unfair production and trade practices.
At the beginning of August, the United States reconfirmed its classification of Vietnam as a nonmarket economy. Hanoi was disappointed by this, with policymakers pointing to the country’s economic reforms and the fight against corruption.
South Korea, Japan, Australia, Canada and the United Kingdom have all now classified the country as a market economy. A free trade and investment protection agreement has been in place with the EU since 2019, eliminating almost all customs duties. Talks with the European Free Trade Association are at an advanced stage. The four EFTA countries intend to recognize Vietnam as a market economy by the time this framework is concluded at the latest. As these trends have unfolded, the United States has remained on the sidelines.
International relations: Interesting for the US
The persistently negative decision from Washington on this issue has thus been both controversial and sensitive. This is true politically as well as economically: By so doing, the U.S. is to a certain extent classifying Vietnam in the same category as Russia, Belarus, China and North Korea.
Hanoi has also been surprised by the U.S. decision because the two countries established a strategic partnership last year on the occasion of President Joe Biden’s visit. This was intended to add a new dimension to the states’ bilateral relations.
For the United States, the motives behind that strategic relationship are clear. Given the increasing tensions with China, the U.S. government is trying to create a stronger counterweight to the growing diplomatic influence of the People’s Republic in Southeast Asia. Vietnam is close to China in terms of party politics, ideology, culture and geography. In the spirit of bamboo diplomacy, however, it wants to pursue an independent foreign and economic policy. This is what makes the country so interesting for the United States.
The economic rejection by the U.S. is additionally a cause for concern in Vietnam because Hanoi has already established strategic partnerships of this kind with Japan, South Korea and Australia. These three countries are clearly on the side of the United States. However, Vietnam has no interest in being assigned to a particular camp such as the anti-China or anti-Russia bloc. Rather, its focus is on confirming the country’s own independence, and on earning recognition for its own policy of opening up to the world.
Nguyen Phu Trong, general secretary of the Communist Party, died in July. A two-day state funeral followed.
Linh Pham / Getty
Domestic policy: The Communist Party remains strong
What happens now? The question is a particularly urgent one at the moment. Vietnam’s longtime party leader, Nguyen Phu Trong, died in July at the age of 80. Power relations in Hanoi are now shifting. It is therefore currently unclear how far Vietnam’s economic and political reforms will go in the coming years. It appears certain that 67-year-old To Lam will succeed Trong as party leader. This promises one thing above all: the Communist Party will retain its monopoly on power.
Like the late Trong, the former minister of public security is considered a hard-liner. He had already taken over the party presidency and the position of Politburo chair from Trong on an interim basis, and has served as president since May 2024. Lam’s rule remains in its early stages, but the extent of power he already holds due to his large number of offices certainly evokes comparison with political structures in Beijing.
Ideology: Commitment to socialism
Vietnam is not China. The country is smaller, insists on its independence and has no shortage of territorial disputes with China. Vietnam’s population fears its big neighbor to the north. Yet there are parallels. Power is centered in the party, national unity is propagated as the chief aim and socialism remains the goal of the government in the Socialist Republic of Vietnam, as the country is officially called. Economic growth is important for the government in order to develop the country and enhance prosperity. However, this ultimately remains a secondary goal, subsidiary to the political dogmas.
Investment from the West is welcome in Vietnam. When Apple CEO Tim Cook visited the country in April, leaders rolled out the red carpet for him. But this does not mean that Vietnam wants to move closer to the West, its liberal social ideas or the U.S. alliances in East Asia.
In this regard, Vietnam’s President Lam recently described his vision regarding the country’s position in the ongoing competition between political systems and great powers. The world, he wrote, is currently undergoing a period of era-defining changes. «From now until 2030 is the crucial period for establishing a new world order,» he added. This does not necessarily sound like greater freedom, more individual rights or a market economy. It sounds more like an echo of the rhetoric from Beijing and Moscow. Hanoi maintains close relations with both capitals.
To Lam is now president and general secretary of the Communist Party. Where will he steer Vietnam?
Luong Thai Linh / EPA
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Publish date : 2024-08-15 01:52:00
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