Vietnam's Future Geoeconomic Outlook: Minding the Dragon's Underbelly

From U.S.-China tensions to shifting supply chains, a closer look at the key variables at play in Vietnam's geopolitical and geoeconomic future.

A new book provides insights into Vietnam’s geoeconomic and geopolitical future, along with broader regional and international implications as well as underlying dynamics and dilemmas.

WonkCount: 1,299 words (~6 minutes)

Vietnam's Future Geoeconomic Outlook: Minding the Dragon's Underbelly

Vietnam Prime Minister Pham Minh Chinh (second from left) at a World Economic Forum discussion in Davos earlier this month. (Source: Government of Vietnam)

Context

“We need to carry out three important strategic breakthroughs” focused on institutions, infrastructure and human capital, Vietnam’s Prime Minister Pham Minh Chinh told an audience last week at the World Economic Forum in Davos when asked what Vietnam needs to do to leverage sectors like the digital domain to power its economic gowth¹. Chinh’s remarks themselves are quite consistent with recent statements on the subject, including related government directives issued earlier this month². But more generally, they reflect the recognition by Vietnam’s leaders that much more work remains to be done to address lingering economic challenges, in addition to other priorities and geopolitical issues we have been noting on ASEAN Wonk such as managing ties with China and the United States and preserving its position in the South China Sea.

A new book, titled The Dragon’s Underbelly, sheds light on the key variables at play in Vietnam’s future geoeconomic and geopolitical outlook. The book, edited by professors Nhu Truong and Tuong Vu and published by the ISEAS-Yusof Ishak Institute think tank in Singapore, has 12 chapters and runs 366 pages. The chapters include global perspectives that tie structural dynamics to contemporary issues of interest, including China dependency, shifting global value chains (GVCs) and the growing internationalization of Vietnamese firms, with VinFast recently grabbing most of the headlines (see a snapshot of key chapters and select areas examined below)³.

Select Chapters and Areas Examined in The Dragon’s Underbelly

Source: The Dragon’s Underbelly; Table by ASEAN Wonk Team

Analysis

The volume presents a rich evaluation of Vietnam’s growth story to date, both on its own terms and relative to other countries in Asia and the world. Contrary to suggestions of a “miracle,” the chapters argue that Vietnam’s impressive growth rate of nearly 7 percent since reforms in the late 1980s — one of the world’s highest — is due to predictable factors, including the Vietnamese Communist Party’s (VCP’s) liberalization of repressed capacity and its attempted pursuit of market reforms and global integration without significant political reforms⁴. Vietnam’s growth story is also not without its limits. There are challenges in some areas, including labor force productivity, the competitiveness of the state-owned sector and the country’s relatively lower position in global value chains. Growth has also given rise to issues such as rising corruption, increasing external vulnerability to geopolitical shifts such as U.S.-China tensions as well as public discontent on an array of issues including the South China Sea⁵. Addressing these challenges is critical as Vietnam seeks to avoid the so-called “middle income trap” and climb the ladder of regional and global competitiveness (as of now, Vietnam is growing faster but still lags ASEAN countries like the Philippines, Thailand and Malaysia on other metrics like per capita GDP).

The book also also charts out some of the key variables in Vietnam’s future geoeconomic and geopolitical trajectory. Some recent books have offered a window into this⁶. The Dragon’s Underbelly adds value to existing work, with chapters offering insights into specific sectors and charting out potential scenarios and proposed reforms (see table below for a snapshot of key geoeconomic areas, risks and reform pathways, and the rest of the Analysis section and Implications section for deeper insights into future trajectories and wider regional and global implications).

Key Geoeconomic Areas, Risks and Future Reform Pathways for Vietnam