In its latest "Asia Economics Quarterly" report, the Hong Kong Shanghai Banking Corporation (HSBC) said Vietnam posted the fastest growth in Asia in 2020 and will once again be among the star performers in the region in 2021.

On January 25, Global Times published an article titled “Vietnam, with surging GDP and stability, is a rising star in Southeast Asia”, praising Vietnam’s economic achievement despite of coronavirus pandemic.

“Vietnam is recognized as a role model for its pandemic control measures, and for achieving an economic growth of 2.91 percent in 2020. The economy has maintained growth for three decades, overcoming the Asian financial crisis and global financial crisis, stepping to becoming a middle-income country from an impoverished society”, the article said.

According to Global Time, Vietnam's rapid economic development has been driven by a range of factors. Vietnam's exports to the US surged 29.1 percent in 2019 and 24.5 percent in 2020. With exports valued at $76.4 billion in 2020, Vietnam has become the second largest source of imports of the US. The large trade surplus with the US has ensured Vietnam's overall trade surplus reached consecutive growth in five years, reaching a record high of $19.1 billion in 2020.

Geographically positioned between ASEAN and China, Vietnam depends on the market advantage of regional integration and enjoys the facilitating conditions of zero tariffs on raw materials among ASEAN member economies.

Vietnam's economic miracle also relies on reforms to promote a more modern business environment. Under the leadership of Communist Party of Vietnam (CPV), Vietnam enjoys political stability and social peace. The successful control against COVID-19 pandemic has won broad commendation. Vietnam unwaveringly opens its market and support free trade.

Vietnam has almost signed free trade agreements with all major economies in the world. In 2020, Vietnam signed Regional Comprehensive Economic Partnership (RCEP), approved European Union-Vietnam Free Trade Agreement (EVFTA) and UK-Vietnam trade agreement, further expanding its export market.

In order to better attract foreign investment, Vietnam has also revised the Investment Law and Law on Enterprises in 2020 to simplify the foreign investment admission process and improve business environment.

However, Vietnam's economic development also faces some challenges. In short term, the COVID-19 pandemic's impact on the world economy will linger, which means it's not time for the tourism industry to recover.

Affected by shrinking consumer demand in the US and Europe, the textile and footwear sector, which accounts for a quarter of Vietnam's exports, experienced negative growth in 2020 for the first time in 25 years. Vietnam's exports to EU experienced a decline, with the proportion shrinking from 15 percent in past years to 12.7 percent.

In the long run, Vietnam's development heavily relies on foreign investment and overseas market. Foreign companies in Vietnam take up 70 percent of Vietnam's foreign trade. Among this, Samsung takes 25 percent of Vietnam's total exports. Samsung's mobile phone sales fluctuation has caused economic instability in Vietnam. In 2017, the recall of Samsung's "Note 7" has pulled down the country's GDP growth rate, evoking Vietnam's reflection on its economic security.

To conclude, the article said “The 13th National Congress of the CPV will be held from January 25 to February 2, and new leaders will be elected and the next five years of economic policy will be mapped out. Vietnam is a rising star which is worth watching.”

Jennifer Tran