Last updated June 7th, 2018.


Vietnam is one of the few communist countries left in the world. But its economy has been more capitalist for the past few decades.

The Vietnamese government realized a state controlled economy would not be effective in riding the ASEAN region’s wave of growth.

So they took steps to ensure a smooth transfer of control from the state into the hands of private business owners. It hasn’t been easy.

A brief history of the Vietnamese economy would cover the nation’s extremely high growth. Like many former communist countries, it slowly lost momentum and ultimately failed to meet planned, sustainable growth.

In 2013, the country had a nominal GDP per capita of US$1,902. This is a far cry from a Goldman Sachs made in a report. The 2005 report specified that the Vietnam economy would be the 35th largest economy in the world with a per capita GDP of $4,357 by 2020.


The Most Capitalist, Communist Country on Earth

Today, Vietnam is fully integrated into the global economy. Practically all its companies are now small and medium-sized startups.

A leading rice exporter and one of the best places for investment in ASEAN, Vietnam has an economy which relies on the large amount of FDI they receive.

With recent economic instability, foreign and local business owners now hope for a more focused approach by the Communist Party. They want the state controlled economy to be on par with global standards.

The Vietnam economy lost some hype over the years, but it’s not gone. Vietnam has a lot of potential – especially since state owned enterprises (SOEs) still dominate much of its economy.

Many analysts believe privatization of SOEs will lead to the type of sustainable growth that has eluded the Vietnam economy so far.


Major Obstacle to Growth in the Vietnam Economy

Vietnam has something they must deal with while the global economy is in shambles. It’s an unnecessary problem, but still the main obstacle of growth right now.

State owned enterprises still dominate much of the Vietnam economy. These types of businesses are often far less efficient than private firms.

This behavior is a bit like China’s with the leaders of Vietnam not wanting to relinquish their control over commerce. There’s proof saying private companies boast greater profitability yet the leaders don’t care.

The rest of the world notices this, and international players have tried to help change the role Vietnam’s government plays.

A U.S. led trade agreement, the Trans Pacific Partnership (TPP), requires less government involvement in the domestic economy.

One direct benefit of inclusion in the 12 countries for TPP is the expectation from foreign investors that the Vietnamese market will be more predictable. This would in turn lead to higher FDI for the whole country.

With greater FDI and reforms to its domestic market, Vietnam is hoping for sustained growth of between 6.5% and 7% during the next few years.


Skip the Next Western Recession

Learn the best places to invest - and where to avoid - by downloading our free Investment Cheat Sheet.

About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's an international stock trader and property investor based in Southeast Asia. Reid manages the world's first frontier market real estate fund and has been featured in publications such as Forbes, Property Report, South China Morning Post, and Seeking Alpha. You can learn more about him here.

You Might Also Like

Share This