Vietnam; The rising star of South-East Asia

As a child growing up in Vietnam, Truong Manh Quan was acutely aware that his hard-working parents were battling to make do on the equivalent of a few hundred dollars a month.

Such hardship inspired him to acquire the skills to create a business that could serve his family and country. As the founder and CEO of Beeketing, an internationally successful all-in-one online marketing platform for businesses, Truong can reflect on leaving high school and using his coding credentials, including creating a website for a British client.

“One thing led to another,” he says. “I soon had a team of four university friends making websites for clients from Western countries. Then I had a chance to visit San Francisco and the Silicon Valley area and I found that many people working in huge companies like Facebook and Google are Vietnamese [and] Chinese, just like us, but they make 10 times what the average software engineer makes in Vietnam. That’s how I realized we could make software and sell it into the US market.”

 Truong points out that Vietnam now has the most software engineers in South-East Asia, with many companies, including Samsung, Intel, and ride-hailing app Grab, using it as their manufacturing or engineering hub.

Rather than just being a technology outsourcing base for countries such as Japan, more Vietnamese businesses are capable of building great end-to-end products. With the help, also, of savvy Vietnamese ex-pats returning home, there is greater access to skills in areas such as marketing and product development. 

A Stunning turnaround

The reform policies launched in Vietnam in 1986 known as Doi Moi, translated literally as “restoration,” have brought profound changes to the country rescuing it from the failures of central planning and self-isolation adopted after the unification of the country in 1975. From a country on the brink of economic collapse, Vietnam has revived itself and is now on a path to economic prosperity, enjoying greater international status through participation in various regional and international institutions such as the Association of Southeast Asian Nations, the Asia-Pacific Economic Cooperation forum, the World Trade Organization, and the United Nations.

A closer look, however, reveals that Vietnam accomplished this from a low starting-point and during a period when it enjoyed the longest peace in its contemporary history. Evidence also shows that Vietnam made the most of its early advantages as a new adherent to globalization. Though these initial achievements have created the favorable impetus for further reforms, they are by no means an assurance of future success. That will depend on how bold Vietnam is in deepening and expanding its economic reforms and integration into the global economy and the responsibility it exercises as a member of the international community.

From isolation to prosperity

By the mid-1980s, the development model Vietnam had borrowed from the former Soviet Union and its East European allies had revealed numerous flaws and was proving outmoded. On the political and diplomatic front, tense relations with China, the heavy burden of Vietnam’s troop presence in Cambodia, and strict sanctions imposed on it by the US placed Vietnam in a difficult bind. On the one hand, the country was blocked from cultivating new relations with other countries; on the other, it had become ever more dependent on the Soviet Union for political support and economic and military assistance.

 The turning point came with a dramatic reduction in Soviet economic and military assistance after the mid-1980s and the economic hardship this caused. For the sake of the country’s survival, Vietnam’s leaders were forced to adopt economic and political reform or Doi Moi. In essence, Doi Moi in its early stages was focused mainly on the removal of self-imposed barriers to progress and the utilization of various market-oriented measures, including liberalization of the domestic market, encouragement of foreign direct investment, or FDI, and the private sector, and reduction in subsidies to state-owned enterprises (SOEs).

 These steps quickly brought positive results. From a country faced with perpetual food shortages, Vietnam in 1989 for the first time exported 1.4 million tons of rice. It has since remained a rice exporter. In 2008, it exported 4.7 million tons, becoming the world’s second-largest rice exporter after Thailand. Indeed, Vietnam’s exports were instrumental in stemming the threat of a severe international food crisis in early 2008.

 What impresses most, however, is the continuous high economic growth rate that Vietnam has recorded in the 20 years since the introduction of Doi Moi. Vietnam recorded an average annual economic growth of 6.5 percent over that period, one of the highest rates among developing countries. And with an annual per capita income of $1,000 in 2008, Vietnam was removed from the list of the world’s least developed countries. The high economic growth rate, in turn, helped reduce Vietnam’s poverty rate from 70 percent in the mid-1980s to 37 percent in 1998 and 19 percent in 2007.

Transforming Diplomatic and Economic Relations

On the diplomatic front, the end of the Cold War and the improvement in relations among major powers led to a unique situation: for the first time since independence, Vietnam did not and could not sustain a relationship of formal alliance with any of the major powers. This was initially a big concern for the Vietnamese leadership because previously the country had relied on a security alliance with at least one major power. As it turned out, this was not such a bad thing after all, because it opened up new opportunities to establish friendly relations with all major powers. The normalization of relations with China in 1991 and the establishment of diplomatic ties with the US in 1995 illustrated this. This also opened up opportunities for Vietnam to establish new diplomatic ties, deepen its relations with many other countries and join various regional and multilateral institutions.

 As a result of economic reform and opening, Vietnam’s foreign policy has also become more pragmatic, flexible, and less ideological. In the new thinking, national security and economic development goals have now become intertwined: security and domestic stability provide essential conditions for Vietnam to attract FDI, tourism and to devise long-term macroeconomic policies conducive to economic development. At the same time, high growth rates and sustainable economic development provide a solid foundation for Vietnam to meet its national defense needs.

 Under Doi Moi, Vietnam is firmly committed to being on friendly terms with all countries. This new approach is also in line with Vietnam’s high degree of economic openness and integration into the global economy. From 2000 to 2008, for example, Vietnam’s foreign trade grew at an average annual rate of 23 percent, or three times higher than its economic growth for the same period. The ratio of Vietnam’s total trade-to-GDP has also been widening — from 1:1 in 2000 to 1.17:1 in 2004 and 1.45:1 in 2008.

 These figures are indications of the increasing interdependence between Vietnam’s economic security and hence, national security and its relations with the outside world. They also indicate that Vietnam is becoming more exposed and vulnerable to external economic and financial fluctuations than ever before. Indeed, the impact of the current global crisis on Vietnam is much more severe than was the Asian financial crisis of 1997-1998. As the crisis drags on, Vietnam is expected to see moderate economic growth of 5.5 percent in 2009 compared to 6.5 percent in 2008 and 8.3 percent in 2007. In contrast, Vietnam was relatively immune from the 1997-1998 crisis, posting growth of 8.5 percent in 1998 at a time when many other East Asian economies were suffering badly.

However, it should be noted that the economic interdependence that Vietnam enjoys with its major economic partners is asymmetric due to the modest size of the Vietnamese economy. For example, while the total Vietnam-US trade volume accounted for 11 percent of Vietnam’s total trade

in 2007, it accounted for less than 0.5 percent for the US. The same can be said about Vietnam’s trade with China, with the comparable figures standing at 15 percent and 0.9 percent, respectively. In terms of regional and national groupings, APEC constitutes the single most important group for Vietnam, accounting for 34 percent of Vietnam’s exports and 72 percent of imports. The Group of 8 industrial nations, however, is the biggest market for Vietnam, accounting for 46 percent of exports. Since the markets of ASEAN+3, Europe (the EU, Eastern Europe, and Russia), North America (the US, Canada) and Australia and New Zealand account for more than 90 percent of Vietnam’s trade — a trend that will likely remain unchanged for at least five to 10 years — Vietnam will, therefore, devote more efforts to consolidating its relations with these national groupings.

The case of ASEAN needs further examination. Though ASEAN remains an important market for Vietnam’s exports, its economic importance for Vietnam has been in comparative decline. ASEAN’s share of Vietnam’s total trade now stands at 21 percent, compared to 25 percent just ten years ago. However, ASEAN is of much greater importance to Vietnam in terms of politics and security. ASEAN long ago proved itself to be the most successful regional grouping in the developing world even before Vietnam was admitted as a member. ASEAN is without a doubt the main force behind the formation of regionalism in Southeast and East Asia and is, therefore, being wooed by all major powers. As a member of ASEAN, Vietnam has been able to capitalize on the association’s reputation and networking opportunities.

 Vietnam’s international profile, as well as its cordial relations with the major powers, can be credited to its membership in ASEAN. The experiences that Vietnam has gained through participation in ASEAN have helped prepare it to play a greater role in East Asia and the world through its participation in ASEAN+3, the building of the East Asian Community, the Asia-Europe Meeting (ASEM), the Asia-Pacific Economic Cooperation forum, the World Trade Organization, and the UN.

Apart from trade, Vietnam is also heavily dependent on foreign direct investment and overseas development assistance. Combined FDI and ODA accounted for 13 percent of Vietnam’s GDP in 1999, 10.5 percent in 2007, and 9 percent in 2008. Six out of the top 10 investors in Vietnam are from East Asia, namely South Korea, Singapore, Taiwan, Japan, Hong Kong, and Malaysia. The emergence of the US as one of the largest investors in Vietnam is especially noteworthy. When Vietnam and the US normalized relations in 1995, US investment was almost non-existent. By 2005, the US was Vietnam’s seventh-largest investor, and in 2008 and the first half of 2009, it had climbed to No. 1.

In terms of ODA, Japan remains the largest donor, accounting for one-fifth of all ODA Vietnam receives. Unlike other ODA donors, whose assistance is of a smaller scale and focused mainly on poverty reduction, Japan’s ODA is an essential source for the development of Vietnam’s infrastructure, such as seaports, bridges, and highway systems.

Along with efforts to diversify its economic relations, Vietnam has been trying to diversify its exports. Just 10 years ago, crude oil, rice, and minerals contributed up to 45 percent of Vietnam’s total exports in value terms. They are still important but now account for less than 25 percent of exports. Other key exports now include fishery products, apparel, rubber, footwear, woody products, among others.

For geopolitical reasons, Vietnam’s foreign and security policies have been focused on relations with neighboring countries because of their direct impact on Vietnam’s security despite the fact that combined trade with Laos and Cambodia accounts for just 1.5 percent of Vietnam’s total trade.

 Among major countries, China and the US remain Vietnam’s most important partners in terms of economics, politics, and security. Having recognized their importance as well as their volatile relationship, Vietnam has been trying to maintain the closest possible ties with both. While relations with China have been conducted along with the guidelines of the so-called “four goods”  “good neighbors,” “good friends,” “good partners,” and “good comrades” relations with the US are entering their best phase since normalization. The underlying basis for Vietnam’s relations with both China and the US is:  to encourage them to enhance their political, economic, and even security interests in Vietnam; and to avoid taking sides and being caught in the crossfire between China and the US during the rough periods of their relationship.

 Though China and the US are both important, their patterns of economic relations with Vietnam contrast sharply in at least four ways. First, the Vietnamese and US economies are more complementary than competitive. Second, the US is the fastest-growing market for Vietnam’s exports while China is the largest source of imports. While Vietnam enjoyed a trade surplus of $8.3 billion with the US in 2007, it ran a deficit of $9 billion with China. Within seven years of the signing of the US-Vietnam Bilateral Trade Agreement in 2000, Vietnam’s exports to the US increased nearly 14 times. Third, the US is a major source of FDI and other forms of finance Vietnam badly needs. In addition, the US is also a major source of high technology that Vietnam’s manufacturing and service sectors need. Last but not least, the US is also the largest source of remittances sent home by Vietnamese Americans living in the US. In 2008, remittances were worth $8 billion, or one-tenth of Vietnam’s GDP.

Like Vietnam’s membership in ASEAN, good relations with China and the US constitute both the goals and means of Vietnam’s foreign policy. They have helped Vietnam to widen and deepen its relationships with a series of countries and institutions, such as Japan, India, Russia, Australia, the World Bank, and the UN. As diversification and multilateralization continue to deliver economic fruits for Vietnam, they will remain a guiding force in Vietnam’s foreign policy, although adjustments may be made in response to changes in the external environment and Vietnam’s new status in the international arena.

Coronavirus Success Is Built on Repression

Vietnam planned to have a year packed with activities as the chair of the Association of Southeast Asian Nations (ASEAN) for 2020 and a nonpermanent member of the United Nations Security Council (UNSC) for the 2020-2021 term. However, the COVID-19 pandemic has led to the cancellation or postponement of numerous events and summit meetings. While it is said that the outbreak has derailed Vietnam’s diplomatic ambitions, the door remains open for Hanoi to transfer its domestic success in fighting the disease into diplomatic achievements. As the world enters the fourth month of the pandemic, Vietnam boasts a remarkably low infection rate in a country of 95 million people, with only 268 confirmed cases (97 active and 171 recovered) with no deaths as of April 17. This statistic is even more impressive given the long shared border with China, where the virus originated. Let us review the timeline of Vietnam’s response to COVID-19 and discuss its political implications.

Timeline

Vietnam prepared for the outbreak before it recorded its first case. The Ministry of Health issued urgent dispatches on outbreak prevention to relevant government agencies on January 16 and to hospitals and clinics nationwide on January 21. Vietnam recorded its first cases on January 23 in Ho Chi Minh City, just two days before the Lunar New Year holidays. Two Chinese nationals from Wuhan arrived in Vietnam on January 13 and traveled throughout the country before being hospitalized on January 23. Shortly after, the Vietnamese government ramped up its response by organizing the National Steering Committee on Epidemic Prevention on January 30, the same day the World Health Organization (WHO) declared the outbreak to be a Public Health Emergency of International Concern. On February 1, when the country only recorded six confirmed cases, Vietnamese Prime Minister Nguyen Xuan Phuc signed a decision declaring a national epidemic of what was then known only as the novel

coronavirus (nCoV). On February 9, the Ministry of Health held a teleconference with the WHO and 700 hospitals at all levels nationwide to disseminate information on nCoV prevention and launched a website to disseminate information to the wider public. On February 11, the WHO officially named the novel coronavirus disease COVID-19. Aggressive preventive action enabled Vietnam to contain the outbreak, with only 16 cases, all recovered, by the end of February. For further context, the 16th patient was confirmed on February 13 and fully recovered on February 25, meaning that Vietnam went 22 days without any new cases. As a testament to this early success, the U.S. Center for Diseases Control (CDC) decided to take Vietnam off the list of countries with the risk of community spread of the virus.

That early success, however, was impeded by the discovery of patient 17. The patient traveled from Hanoi on February 15 to visit England, Italy, and France before returning to Hanoi on March 2 and failed to follow quarantine protocols. Patient 17 was hospitalized on March 6, and two days later, on March 8, Deputy Prime Minister and Minister of Health Vu Duc Dam declared that Vietnam had officially entered the second phase of the fight against COVID-19. Similar to the first phase, marked by the epidemic declaration, the Vietnamese government escalated its public health response to flatten the curve. On March 10, the Ministry of Health launched the health declaration mobile application NCOVI to help the public report their medical conditions and follow the contact tracing operation, just before the WHO declared a global pandemic on March 11. This second phase marked the transition from phase one, in which patients mostly originated from China to a period when many countries were potential sources of the virus.

The transition into the third phase was even faster. Following the detection of two new clusters with unclear origins in Bach Mai Hospital in Hanoi (patients zero there were patients 86 and 87) and Buddha Bar in HCM City (patient zero was patient 91 overall), the Vietnamese government suspended foreign entry on March 22, and all exceptions, including national returnees, are subjected to medical checks and mandatory 14-day quarantine. On March 23 the prime minister declared the third phase of the pandemic fight as the risk of community spread is high. When Bach Mai Hospital, one of the country’s top referral hospitals, became the largest and most complex hotbed of COVID-19 in Vietnam following a record of 10 cases linked to the hospital on March 28, on March 30, Prime Minister Phuc announced a nationwide pandemic during a meeting with the National Steering Committee for COVID-19 Prevention and Control. The following day on March 31, the prime minister issued a new directive that would place the nation under limited lockdown effective April 1. The directive enforced national isolation, banned gatherings, and encouraged staying home, closing borders, and implementing quarantine policy, among others. 

Explaining the Success

Vietnam’s model for containing the outbreak has been touted as a successful low-cost model. Whereas its neighbors, Taiwan and South Korea, could afford mass testing, Vietnam lacked the resources and instead opted for selective but proactive prevention. Aside from some common policy actions such as contact tracing, ramping up production of medical supplies, and installing checkpoints at airports, Vietnam found its success in proactiveness. Over the course of three months since the first case, Vietnam has not hesitated to restrict movements where needed, balancing overt caution with precision.

For example, the provincial authority was allowed to lock down villages and communes following advisory notices from the Ministry of Health. Since the first cases emerged, there were only five instances of large-scale lockdowns. The first was on February 13 when Vinh Phuc Province confirmed the 16th patient in Son Loi Commune, Binh Xuyen District. On the same day, local authorities locked down the commune of 10,000 people, which confirmed eight patients and established two field hospitals in Vinh Yen Town. The quarantine was lifted on March 4, after 20 days of no new cases. Second, following patient 17’s confirmation on March 6, on March 7 Hanoi locked down Bach Truc Street, where the patient resided along with 66 households and 189 people. The quarantine was lifted on March 20 after no new cases were reported after testing. The last three instances were all after the national limited lockdown directive. On April 2, Hung Yen locked down Chi Trung commune following the confirmation of patient 219. On April 7, Me Linh district of Hanoi locked down Ha Loi village following the confirmation of patient 243. On April 8, Ha Nam province also quarantined Ngo Khe 3 village and medical personnel related to patient 251. These instances of lockdowns contained the risks of community transmission by strictly enforcing checkpoints in and out of the localities and setting up local medical facilities for testing and treatment. 

Another example of aggressive prevention is the closure of schools. Vietnam recorded its first cases just two days before the Lunar New Year holidays, which fortunately had schools closed through February 1. Nonetheless, schools and government authorities extended the holiday season until February 10 on a case-by-case basis. On February 14, the Ministry of Health proposed schools to remain closed until the end of February, at which point schools had already closed nationwide. The decision to close schools nationwide, as a formality, came with the national isolation order on March 31, effective April 1. Consequently, Vietnamese students have not gone to school this spring semester, but schools are gradually adopting online teaching. 

Despite the aggressive nature of these responses, the underlying factor that enables the Vietnamese government’s success is the mobilization of nationalism. The government has framed the virus as a common foreign enemy and called on the unity of the population to defeat it, echoing the enduring history of a nation always threatened by foreign invaders. Since “day one,” the Communist Party of Vietnam (CPV) and the state have led the fight with the motto “fighting the epidemic is like fighting against the enemy.” Nonetheless, calls for nationalism are not without setbacks, as public sentiment was at one point villainizing Vietnamese students returning from abroad for carrying potential risks of transmission. Patient 17 was a notorious example that garnered public criticism, reflecting the effectiveness of the government in rallying the public but also the risk of overzealous nationalism.

In addition, the government has positioned itself as an effective source of leadership during the pandemic by providing information with transparency. The Ministry of Health took the initiative to launch a website and a mobile application not only to ease the medical process but also to disseminate accurate information quickly. The digital apparatus helped stem the spread of rumors and fake news, in addition to legal enforcement against people who spread inaccurate information or engage in profiteering. State media have also constantly covered the hotspots of the pandemic like China, Italy, Spain, and the United States to raise public awareness about the seriousness of COVID-19 and to demonstrate the essentiality of robust government intervention. 

By being transparent and proactive in communicating with the public, the government was able to gain and maintain public confidence. In a Dalia Research survey of 45 countries asking about public opinion of government responses to the pandemic, 62 percent of Vietnamese participants said that the government is doing the “right amount,” topping the survey’s average with a higher rate than other “model” countries such as Singapore and South Korea.

Translating Domestic Success Globally

As the COVID-19 outbreak continues and disrupts ASEAN economies, on February 20 the ASEAN Coordinating Council (ACC), along with ASEAN and Chinese foreign ministers, met in the ACC’s Special ASEAN-China Foreign Ministers Meeting on Coronavirus Disease in Laos to discuss the response to the outbreak. The ACC welcomed the timely and effective measures of member countries, healthcare cooperation, and ASEAN agencies to share information and experience in preventing, diagnosing, treating, and controlling the disease. Vietnamese Deputy Prime Minister and Minister of Foreign Affairs Pham Binh Minh proposed pursuing a balanced approach in fighting the epidemic and maintaining open economic policies while ensuring regular updates were made available to the public.

As the pandemic escalated in early March, the U.S.-ASEAN Summit and the 36th ASEAN Summit were postponed, but Vietnam could still find venues to export its domestic success. On March 31, Vietnam’s Deputy Foreign Minister Nguyen Quoc Dung chaired the first teleconference of the ASEAN Coordinating Council Working Group on Public Health Emergencies. The meeting was followed by a teleconference between senior officials of ASEAN and the United States, attended by U.S. Assistant Secretary of State for the Bureau of East Asian and Pacific Affairs David Stilwell, on April 1. Both meetings aimed to promote cooperation within the ASEAN Community and between ASEAN and the United States to deal with the COVID-19 pandemic by sharing information about the situation and implementation of measures taken in each country while affirming the commitment to strengthen cooperation. Following these meetings, Vietnam chaired the 25th ACC Meeting on April 9 and the Special ASEAN Plus Three (APT) Summit on April 14 in which ASEAN members and their dialogue partners China, Japan, and South Korea agreed in principle to set up a joint fund to combat the pandemic. 

Bilaterally, Vietnam has donated test kits and masks to many countries. Among them, Cambodia and Laos are its close friends, and the United States, the United Kingdom, and Spain are its comprehensive and strategic partners. In supporting others, Vietnam has demonstrated its commitment to traditional relations and strengthened relationships with important partners. 

Vietnam’s model is an example for countries and territories with limited resources and/or at the early stages of fighting COVID-19 with a low number of cases.

Challenge ahead

However, in order for Vietnam to fulfill its tasks in the new environment the country’s ruling elite need to address not only the economic but also other concerns of its people. Also, Vietnam’s success will depend on how it works with China, ASEAN and other concerned parties to find an acceptable and peaceful solution to the disputes in the South China Sea (or the Eastern Sea, as Vietnam calls it).

 The second challenge is how to restructure Vietnam’s economy so as to make it more efficient and adaptable to global economic and financial fluctuations. A related issue is how to take a more balanced approach to the sometimes-contradictory demands of high economic growth and sustainable economic development. To deal with this challenge requires Vietnam to engage in a series of coordinated efforts, including restructuring the financial and banking sectors, consolidating its economic power base, revamping its export sector, and promoting environment-friendly development, just to mention a few.

The third challenge is how to use Vietnam’s newfound economic strength to enhance the country’s international status and, in turn, use the country’s international profile to serve economic development and national security. Addressing these challenges requires Vietnam to further deepen its economic, political, and security ties with its important partners, especially China, the US, Russia, Japan, and India. It also requires Vietnam to take a pro-active approach in institutions like ASEAN, ASEAN+3, APEC, and the UN.

By Sanjida Xannat