Vietnam

Overview
Vietnam is a country in Southeast Asia. Vietnam is bordered by China in the north, Laos to the
northwest, Cambodia to the southwest
Vietnam is one of the fastest growing economy with the growth rate of 6.8%. The country is a
member of APEC, ASEAN and the WTO.
Vietnam is governed by an authoritarian, single party regime, which is led by the Vietnamese
Communist Party. This regime governed the North Vietnam from 1946. After reunification I
1976, the regime extended its rule over the entire country.
Before 1986, Vietnam followed centrally planned economic model of Soviet Union. In 1986, the
VCP initiated the Doi Moi economic reform program. In doing so, the party conceded to the
failure of the centrally planned economy and paved the way for a market economy to develop.
Political systems
Democracy
There are no democratic institutions in Vietnam. All formal political or socio-political
institutions are linked to the party
Election to the People’s Congress at county, municipal, provincial and national levels are not
freely competitive. All candidates who desire to stand for election at any level are first vetted
by VCP through an organisation called Vietnam Fatherland Front. This organization is also the
umbrella for all mass organizations of the party-state.
The government has imposed restrictions on freedom of speech, freedom of the press, freedom
of assembly, and freedom of association. Many human rights activists are arrested or abused by
police.
Rule of law
There is no separation of powers in Vietnam, the legislature, the executive and the judiciary are
combined into the party-state system. The VCP formulates the strategic policies, while the
government, comprising the executive agencies and the National Assembly, is responsible for
implementation. The party and government organizations are intertwined at every level of
administration.
The judiciary is also influenced by VCP. Judges have limited tenure and are selected through
political processes. The party also directs politically sensitive judgments.
Corrupt officials make up a big proportion of judicial and administrative office and it is hard for
the public to trust legal system.
Economic systems
Organization of the market
Informal sector
In Vietnam, the informal sector has a critical role in the economy. The informal sector accounts
for about 20% of GDP and includes about 8.4 million informal household businesses. Two thirds
of total workforce were involved in informal sector. Manufacturing and construction make up
the largest informal industry with 43% of total employment in the informal sector, followed by
trade (31%) and services (26%).
SOES
SOEs in Vietnam enjoy a monopoly in the telecommunications, aviation, electricity, energy and
petroleum sectors. However, due to the inefficiency of SOEs, the government is boosting SOE
privatisation through public auction, direct negotiation and underwriting.
As of January 1, 2017, the number of operating SOE in Vietnam was more than 2,700, down
18.3% compared to 2012.
Private sector
The role of private sector has steadily grown. The number of private enterprises dominated the
market with 500,000 enterprises, up 52.2% over 2012 and saw an annual growth of 8.7%.
It is generally estimated that the private sector accounts for between 50%-60% of GDP.
Foreign direct investment sector
Privatization of state-owned enterprises has opened new doors for foreign investors. The has
also worked hard to attract more investment through initiatives such as reducing enterprise tax
and removing investment restrictions. For example, 100% foreign-owned companies are free to
set up in Vietnam and many multinationals now have offices in Vietnam.
As of 2017, the foreign direct investment sector posted 14,600 enterprises, up 54.2% compared
to 2012 and a 9.2% annual growth in the number of enterprises.
Price regulation
Price control has largely been abolished during the reform process since 1986, but the state still
determines the price or price limit for several goods and services, including petrol, gas, and
electricity.
Property rights
Property rights and the regulation of property acquisition are formally defined by law, but are
not yet sufficiently protected from intervention by the state. Major disputes and protests have
emerged in relation to land rights. Private property rights are not strongly respected, and
resolution of disputes can take years. Infringements of intellectual property rights are common.
Banking system
The central bank, the State Bank of Vietnam (SBV), is the main financial regulatory agency. The
SBV is not an independent body, it operates under government oversight. four largest
commercial banks (SOCB’s) Vietcombank, BIDV, Vietinbank and Agribank are also state-owned.
Vietnam’s banks suffer from low public confidence, corruption, regulatory and managerial
weakness, high levels of non-performing loans (NPL), and the absence of international auditing.
Conclusion
Although Vietnam accomplishes some economic achievements by removing restrictions and
decreasing the involvement of government into economic activities, there are still many
challenges that the country has to face such as corruption, high public debt, a lack of
transparency, the decreasing legitimacy of the VCP and the deteriorating condition of the
country’s physical infrastructure.