The industry puppet: a Vietnamese story

Emma Leu

According to VNexpresss, “Vietnam aims to become a developed country by 2050. GDP growth of 6.5-7.5% a year is expected to bring per capita GDP to $27,000-32,000 by 2050, at which point the urbanisation rate should reach 70-75%.” 

Is Vietnam bound to become a high-income economy as the article proposes? Or is this piece of propaganda released by the VCP (Vietnamese Communist Party)?

Vietnam’s fast-growing economy is undeniable. The country has gained its reputation in recent decades as one of the fastest-growing economies in the world maintaining its rebound positive growth rate of 6% post-pandemic. 

A testimony to this is on August 23rd when I had the opportunity to fly down to Saigon (Ho Chi Minh) to attend VietFish, a gathering of some of the biggest firms related to the production of seafood and aquaculture in Asia and Europe. According to ‘ThuysanVietnam’ (a seafood news outlet), the convention intended to help establish Vietnam as the “home of seafood”. The grandeur of this exhibition commemorated the nation’s success as a major exporter of frozen seafood. 

When touring the convention I observed large foreign firms presented, with many from China, Japan and Korea as well as India and Europe; the list demonstrated connectivity all around the world and is set to continue growing rapidly. In a conversation between the CEO of Viet Truong Seafood, Ngo Minh Phuong and a spokesman for the largest Polish import and distribution firm, the company negotiated shifting their supply chain of white clams from Spain towards Vietnam due to price competitiveness. 

He claimed that “Vietnam is where everyone is turning to”. 

Thanks to the country's vital geographic location as a means to access China and other East Asian countries, low skilled labour costs and ready young workforce, it has garnered a lot of foreign direct investment from major TNCs, the most notorious example being Samsung with an injection that makes up 9 per cent of Vietnam's total export turnover. 

To accommodate the rapidly growing economies in northern Vietnam with the influx of FDI, government investment has poured into vital geographic locations: Quảng Ninh, Hai Phong and Bac Ninh, in order to satisfy the need for better transportation and connectivity between regional hotspots. 

Within 5 years these provinces have infiltrated those with the top 5 most expensive living standards in Vietnam. 

Despite the growth in infrastructure and economic activity, for the average Vietnamese person, the quality of life remains almost unchanged, mainly because the provinces have been tailored for manufacturing and industry rather than being provinces ‘for the people’. Other provinces of Vietnam- such as Dien Bien and Sapa which are mainly large mountainous regions- left isolated from the investment, are virtually untouched. Instead, many lower-income Vietnamese people are used as fuel for the country’s high labour demand. 

What's the reason for this? 

Despite seeing an entire generation being lifted out of poverty, inequality is one of the highest in the world and in certain provinces like Dien Bien, poverty makes up 35% of the population. Large companies are able to exploit impoverished populations, pay them low wages and take the majority of the profits back to their base of operations in a different country, e.g. Korea with Samsung. Meanwhile, these young workers, who are sourced from low socio-economic regions, leave their homes and travel to industrial provinces such as Hai Phong for factory work, where the average worker will stay permanently in some sort of sleeping arrangement the company organises. Eventually, they may make enough money to start a family or open a small shop but ultimately their economic activity is contributing towards Hai Phong’s economy rather than those poorer provinces they came from. 

The other day my cousin asked me on a car ride back from Sapa, “Do they teach you [in England] about inequality in India?” as if it was a foreign concept and I laughed at her unbelievably as we just drove through thousands of poorly built shacks for homes tethering on the cliff side. 

This reflects the mentality of many Vietnamese people. In a survey conducted by the Japanese think tank HILL ASEAN, it was found that 96 per cent of them believe that they are middle class. In reality, only some 30 per cent of Vietnamese people make this bracket. Perhaps this perception only highlights the sinister reality of regional inequality. 

The larger issue is the country’s overreliance on foreign investment. The constant investment fosters a high demand for Vietnam’s labour force and land mass. Almost a third of the country is employed in agriculture and manufacturing, and 40 per cent of the land mass is used for agriculture. This 40 per cent is especially significant when considering how two-thirds of Vietnam is mountainous, therefore the vital lowlands are being allocated to farming which instead could be used to build better infrastructure. 

It’s evident that not enough is being done by the government to support the country’s long-run growth. Government expenditure put into research and development is at a shocking 0.5%. 

We can begin to see the beginning of long-term consequences through the automobile company, Vinfast. Vinfast, founded by the affluent Vin group, failed to thrive internationally despite being the largest firm in Vietnam. A major reason for this is that there’s nothing special about the vehicles. Many of the parts, (notably the engine) are brought from Germany rather than manufactured within Vietnam making it highly uncompetitive against more renowned competitors such as Ford or Jaguar. Even the wealthy earners in Vietnam will opt to buy a Ford over a Vinfast electric car. Efforts by the government to support the firm include policies to encourage ‘less pollution’ and banning all non-electric vehicles in large cities to promote the usage of Vinfast electric cars. This is just an obvious bandaid over a much deeper structural issue and it has received mass amounts of backlash from car owners the day the statement was issued. 

Ultimately, it is unlikely that Vietnam will have an average GDP of 30,000 within 30 years given the current trajectory. It is impossible to gauge the annual GDP per capita for a Vietnamese person due to the regional variations. According to multiple sources the annual GDP per capita falls between $2000-$4000 with others even claiming $600-$1000 per year. After some personal questioning, I found that in Haiphong it can be as high as $1000 per month to $600 for a middle-income earner whereas in Ho Chi Minh, $350-$700. Both these examples, however, come from the most expensive provinces to live in. This makes GDP per capita mostly an unreliable indicator of living standards but is still relevant in showing the far-fetched dream of becoming a high-income nation within 30 years. 

More focus should be put into the country’s research and development, infrastructure and relief aid to poorer provinces to fully maximise the country’s productive potential. In relation to the original question, the VNexpress article is likely an optimistic piece of propaganda.