By Frank Bennett Rowder
Vietnam’s Communist Party General Secretary Nguyen Phu Trong, a leader of the old guard, may be changing his tune regarding his long-standing position on the country’s command economy where supply and prices are regulated by the government, rather than market forces. Government planners also decide which goods and services are produced and how they are distributed.
His decision to take a more cautious approach occurred during a meeting of the party’s Congress held in Hanoi at the beginning of the year and is very much in line with the desire of retiring Prime Minister Nguyen Tan Dong who has wanted the sale of state-owned companies and pushed for Vietnam’s membership in the Trans-Pacific Partnership , which requires country’s to open its economy.
Vietnam’s economy, which grew to approximately seven percent last year, is expected to have a repeat performance in 2016. One of the big reasons for the accelerated growth is the fact that the country is becoming a hub for smartphones made by such companies as Samsung and LG. In addition, China’s companies continue to expand in Vietnam because of its ample workforce and lower wages. Sixty percent of the population is under the age of 35, another incentive for foreign companies to make investments
Last year, foreign investments amounted to $14 billion.
Vietnam is also seeking foreign investments to upgrade its infrastructure. High on its list are the fields of construction, manufacturing and transportation.
While all this points to a brighter future, the country has experienced some growing pains. Since the last 1980s, Vietnam’s Socialist market economy has fluctuated ,reaching over 20 percent in 2011. In 2015, its government devalued the dong three times, one of those resulting from China’s economy taking a nosedive.
Vietnam is prone to credit-fueled bubbles and poor loans remain a drag for future growth. Plunging oil prices have resulted in problems and although its crude exports generate close to 10 percent in revenues, it is not enough to reduce the country’s financial deficit. Investments by Samsung , Singha brewery, as well as Japan’s Nippon Airways buying into Vietnam Airlines signals a new beginning for a country that is showing signs of becoming another Asian tiger.
Rowder is an expert on foreign affairs and a former member of the Chicago Journalists Association board of directors.