Vietnam’s Bold Gamble: Can To Lam’s ‘National Rise’ Deliver?
Vietnam is embarking on a period of ambitious economic reform under the leadership of Communist Party General Secretary To Lam. His vision, dubbed a “national rise,” aims to propel the country from a manufacturing hub to a high-income, knowledge-based economy. But can this bold strategy overcome deep-seated challenges and navigate a turbulent global landscape?
The Shift in Power and Policy
To Lam’s consolidation of power is unprecedented in recent Vietnamese history. His swift rise and the early conclusion of the recent Party Congress signal a strong hand at the helm. This has translated into a dramatic policy shift, moving away from the anti-corruption focus of his predecessor, Nguyen Phu Trong, towards aggressive economic growth targets. Resolution 68, passed in May 2023, is the cornerstone of this new direction, prioritizing the private sector as the “most important driving force” of the economy – a subtle but significant change in socialist Vietnam.
The ‘Crane’ and ‘Goose’ Strategy: A New Economic Model
Lam’s strategy centers on fostering “leading cranes” – large, globally competitive private companies – mirroring the South Korean chaebol model. Companies like Vingroup, a sprawling conglomerate involved in everything from real estate to electric vehicles, are intended to spearhead this transformation. However, this approach isn’t without its critics. The concern is that these favored companies could become politically connected rent-seekers, stifling innovation and disadvantaging smaller businesses – the “geese” in this economic formation. As Nguyen Khac Giang of the ISEAS – Yusof Ishak Institute notes, the risk lies in simply replacing one form of inefficiency with another.
Getty ImagesThe State-Owned Enterprise Question
Despite the emphasis on the private sector, state-owned enterprises (SOEs) remain a significant force, controlling 29% of Vietnam’s GDP. While Resolution 68 initially appeared to level the playing field, a subsequent resolution (Resolution 79) reaffirmed the importance of SOEs, suggesting internal resistance to fully embracing private sector dominance. This duality creates uncertainty and could hinder the overall reform process. The preferential treatment historically afforded to SOEs – access to land, funding, and licenses – continues to pose a challenge to private sector competitiveness.
External Headwinds: Trade and Geopolitics
Vietnam’s economic success has been heavily reliant on global trade, particularly with the United States. However, increasing protectionist measures and geopolitical tensions, especially with a potential return of Donald Trump to the White House, pose significant risks. Trump’s tariffs could disrupt Vietnam’s export-led manufacturing model. Vietnam’s “bamboo diplomacy” – a strategy of maintaining neutrality and good relations with all major powers – will be severely tested in a more volatile international environment. The country’s vulnerability to external shocks highlights the need for greater economic diversification and resilience.
Can Vietnam Break the ‘Middle Income Trap’?
Vietnam’s ambition to escape the “middle income trap” – the point where economic growth stagnates – is admirable, but challenging. No other large Southeast Asian nation has successfully achieved this transition. While companies like FPT, a technology firm winning international contracts, offer a glimpse of potential, they are dwarfed by conglomerates like Vingroup, whose success remains largely confined to the domestic market. The key will be fostering genuine innovation, attracting high-quality foreign investment, and creating a level playing field for all businesses, not just politically connected ones.
The Future Outlook: Cautious Optimism
To Lam’s vision for a “national rise” is ambitious and potentially transformative. However, its success hinges on navigating complex internal and external challenges. The balance between state control and private enterprise, the impact of geopolitical shifts, and the ability to foster genuine innovation will be crucial determinants of Vietnam’s future economic trajectory. The coming years will be a critical test of whether Vietnam can truly break free from its historical constraints and achieve its aspirations of becoming a high-income, knowledge-based economy.
Frequently Asked Questions
- What is Resolution 68? Resolution 68, passed in May 2023, prioritizes the private sector as the primary engine of Vietnam’s economic growth.
- What are ‘leading cranes’ and ‘leading geese’? These terms refer to To Lam’s strategy of supporting large, globally competitive private companies (“cranes”) while also fostering the growth of smaller businesses (“geese”).
- What is the ‘middle income trap’? This refers to a situation where a country’s economic growth stagnates after reaching a certain level of income, preventing it from becoming a high-income nation.
- How vulnerable is Vietnam to US trade policy? Vietnam is highly reliant on exports to the US, making it vulnerable to changes in US trade policy, such as tariffs.
Pro Tip: Keep an eye on Vietnam’s investment in education and skills development. A highly skilled workforce will be essential for driving innovation and achieving long-term economic growth.
What are your thoughts on Vietnam’s economic future? Share your insights in the comments below!
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