Vietnam wants to be the next Asian tiger and it’s overhauling its
economy to make it happen
[August 13, 2025] By
ANIRUDDHA GHOSAL
HANOI, Vietnam (AP) — Beneath red banners and a gold bust of
revolutionary leader Ho Chi Minh in Hanoi's central party school,
Communist Party chief To Lam declared the arrival of “a new era of
development” late last year. The speech was more than symbolic— it
signaled the launch of what could be Vietnam’s most ambitious economic
overhaul in decades.
Vietnam aims to get rich by 2045 and become Asia’s next “tiger economy”
— a term used to describe the earlier ascent of countries like South
Korea and Taiwan.
The challenge ahead is steep: Reconciling growth with overdue reforms,
an aging population, climate risks and creaking institutions. There's
added pressure from President Donald Trump over Vietnam’s trade surplus
with the U.S., a reflection of its astounding economic trajectory.
In 1990, the average Vietnamese could afford about $1,200 worth of goods
and services a year, adjusted for local prices. Today, that figure has
risen by more than 13 times to $16,385.
Vietnam's transformation into a global manufacturing hub with shiny new
highways, high-rise skylines and a booming middle class has lifted
millions of its people from poverty, similar to China. But its low-cost,
export-led boom is slowing and it faces a growing obstacle to its
proposed reforms — expanding private industries, strengthening social
protections and investing in technology and green energy — from climate
change.
“It’s all hands on deck. . . . We can’t waste time anymore," said Mimi
Vu of the consultancy Raise Partners.
The export boom can’t carry Vietnam forever
Investment has soared, driven partly by U.S.-China trade tensions, and
the U.S. is now Vietnam's biggest export market. Once-quiet suburbs have
been replaced with industrial parks where trucks rumble through
sprawling logistics hubs that serve global brands.
Vietnam ran a $123.5 billion trade surplus with the U.S. trade in 2024,
angering Trump, who threatened a 46% U.S. import tax on Vietnamese
goods. The two sides appear to have settled on a 20% levy, and twice
that for goods suspected of being transshipped, or routed through
Vietnam to avoid U.S. trade restrictions.
During negotiations with the Trump administration, Vietnam's focus was
on its tariffs compared to those of its neighbors and competitors, said
Daniel Kritenbrink, a former U.S. ambassador to Vietnam. “As long as
they’re in the same zone, in the same ballpark, I think Vietnam can live
with that outcome," he said. But he added questions remain over how much
Chinese content in those exports might be too much and how such goods
will be taxed.
Vietnam was preparing to shift its economic policies even before Trump's
tariffs threatened its model of churning out low-cost exports for the
world, aware of what economists call the “middle-income trap,” when
economies tend to plateau without major reforms.
To move beyond that, South Korea bet on electronics, Taiwan on
semiconductors, and Singapore on finance, said Richard McClellan,
founder of the consultancy RMAC Advisory.
But Vietnam's economy today is more diverse and complex than those
countries were at the time and it can’t rely on just one winning sector
to drive long-term growth and stay competitive as wages rise and cheap
labor is no longer its main advantage.
It needs to make “multiple big bets,” McClellan said.
Vietnam's game plan
Following China's lead, Vietnam is counting on high-tech sectors like
computer chips, artificial intelligence and renewable energy, providing
strategic tax breaks and research support in cities like Hanoi, Ho Chi
Minh City, and Danang.
It's also investing heavily in infrastructure, including civilian
nuclear plants and a $67 billion North–South high-speed railway, that
will cut travel time from Hanoi to Ho Chi Minh City to eight hours.
Vietnam also aspires to become a global financial center. The government
plans two special financial centers, in bustling Ho Chi Minh City and in
the seaside resort city of Danang, with simplified rules to attract
foreign investors, tax breaks, support for financial tech startups, and
easier ways to settle business disputes.
[to top of second column] |
A bridge is seen under construction in Ho Chi Minh city, Vietnam,
May 3, 2025. (AP Photo/Hau Dinh)
 Underpinning all of this is
institutional reform. Ministries are being merged, low-level
bureaucracies have been eliminated and Vietnam's 63 provinces will
be consolidated into 34 to build regional centers with deeper talent
pools.
Private business to take the lead
Vietnam is counting on private businesses to lead its new economic
push — a seismic shift from the past.
In May, the Communist Party passed Resolution 68. It calls private
businesses the “most important force” in the economy, pledging to
break away from domination by state-owned and foreign companies.
So far, large multinationals have powered Vietnam's exports, using
imported materials and parts and low cost local labor. Local
companies are stuck at the low-end of supply chains, struggling to
access loans and markets that favored the 700-odd state-owned
giants, from colonial-era beer factories with arched windows to
unfashionable state-run shops that few customers bother to enter.
“The private sector remains heavily constrained," said Nguyen Khac
Giang of Singapore’s ISEAS–Yusof Ishak Institute.
Again emulating China, Vietnam wants “national champions” to drive
innovation and compete globally, not by picking winners, but by
letting markets decide. The policy includes easier loans for
companies investing in new technology, priority in government
contracts for those meeting innovation goals, and help for firms
looking to expand overseas. Even mega-projects like the North-South
High-Speed Rail, once reserved for state-run giants, are now open to
private bidding.
By 2030, Vietnam hopes to elevate at least 20 private firms to a
global scale. But Giang warned that there will be pushback from
conservatives in the Communist Party and from those who benefit from
state-owned firms.
A Closing Window from climate change
Even as political resistance threatens to stall reforms, climate
threats require urgent action.
After losing a major investor over flood risks, Bruno Jaspaert knew
something had to change. His firm, DEEP C Industrial Zones, houses
more than 150 factories across northern Vietnam. So it hired a
consultancy to redesign flood resilience plans.
Climate risk is becoming its own kind of market regulation, forcing
businesses to plan better, build smarter, and adapt faster. “If the
whole world will decide it’s a priority...it can go very fast,” said
Jaspaert.
When Typhoon Yagi hit last year, causing $1.6 billion in damage,
knocking 0.15% off Vietnam’s GDP and battering factories that
produce nearly half the country’s economic output, roads in DEEP C
industrial parks stayed dry.
Climate risks are no longer theoretical: If Vietnam doesn’t take
strong action to adapt to and reduce climate change, the country
could lose 12–14.5% of its GDP each year by 2050, and up to one
million people could fall into extreme poverty by 2030, according to
the World Bank.
Meanwhile, Vietnam is growing old before it gets rich.
The country’s “golden population” window — when working-age people
outnumber dependents — will close by 2039 and the labor force is
projected to peak just three years later. That could shrink
productivity and strain social services, especially since families —
and women in particular — are the default caregivers, said
Teerawichitchainan Bussarawan of the Centre for Family and
Population Research at the National University of Singapore.
Vietnam is racing to pre-empt the fallout by expanding access to
preventive healthcare so older adults remain healthier and more
independent. Gradually raising the retirement age and drawing more
women into the formal workforce would help offset labor gaps and
promote "healthy aging,” Bussarawan said.
All contents © copyright 2025 Associated Press. All rights reserved |
