The miracle of Hanoi How did the Vietnamese economy rise from zero?

"To be a good doctor; to be a doctor during any war; to be a good economist; to be an economist in Vietnam" 

In last February 2019, there was no louder talk than the summit that brought together former US President "Donald Trump" and North Korean leader "Kim Jong Un" in Vietnam, one of the rare summits between the two very hostile countries, although most of the lights were shed On the political results of the summit, part of those lights went into attempts to understand and anticipate the soft “diplomatic coup” (1) that Vietnam has been leading regionally and globally for years, a coup in which it seeks to paint a new image different from that previously known as one of the poorest countries in Southeast Asia, An image that began to fade since the beginning of the current millennium; When the Vietnamese economy began to take its way up - in what some called the "Vietnamese miracle" - to compete (2) in its growth rates, the great neighbor and the rising power in the world now; China.

The diplomatic summit gave Vietnam much of what it had sought for several years. Despite the millions of dollars that Vietnam had cost since Trump and Kim entered its lands until they left, Hanoi, the capital, seemed completely satisfied with the results it received. Washington has been growing with it since its abolition of military sanctions imposed on it in 2014, and it is not an end to the strong impact of the news of Kim Jong’s private visit to the largest Samsung factory in Vietnam, a factory that markets a short summary of the entire economic growth story of Vietnam.

The summit between US President Donald Trump and North Korean leader Kim Jong Un in Vietnam (Reuters)The summit between former US President Donald Trump and North Korean leader Kim Jong Un in Vietnam (Reuters)

The investments of the South Korean electronics giant "Samsung" in Vietnam began in 2008 with a capital equivalent to 670 million dollars (3), and in just ten years, and by 2018, the cumulative value of the company's investments in Vietnam reached 17 billion dollars (4), which made it the largest investor there , and most importantly, that these investments returned the Vietnamese national income directly and indirectly by 58 billion dollars in the same year as well. Despite all these huge numbers, the importance that Samsung represents to Vietnam goes beyond being one of the pillars of its rising economy; As an example of the path taken by Hanoi from being one of the poorest countries in the world - after the American invasion - to being on the way to becoming one of the most important economies of Asia and perhaps the world, if it continues to achieve more growth in the coming years. 

Bennett Murray, editor of the Foreign Policy magazine and head of the German news agency office in Hanoi, said that Vietnam was the main beneficiary (5) of the Kim-Trump summit, at a time when it is believed that North Korea will not take an easy path to abandon its nuclear program, This is what actually happened with the summit reaching a dead end. It did not make much difference to Vietnam, which considered it a means to an end that it had been seeking for more than thirty years: to return as an active element in the international community, and to be able to meet the rising Chinese challenge in South Asia and the world. , and most importantly; That the credibility that Vietnam gained from hosting a successful world summit, organization and security, would be a new impetus for its growing economy, which is already seen now as an upcoming and continuing miracle of the American wartime. 

Economics engineer war

Economic growth in Vietnam is often dated to the beginning of the country's sixth parliament session in December 1986 (6), but attempts at economic reform had already begun more than ten years before this date, with the withdrawal of US forces from Vietnam in 1974 - after the 1973 Paris Agreement -, which was followed one year (1975) by the invasion of the Republic of North Vietnam to the "democratic" Republic of South Vietnam, as it was called at the time, and the subsequent unification of the two parts of Vietnam again under the name of the "Socialist Republic of Vietnam" with its capital "Hanoi" in the north.

Rice cultivation in Vietnam

The Vietnamese economy in that period depended on the cultivation and export of rice (7) as a major source of income, and employed more than 70% of the Vietnamese workforce, but the war had cost a lot, including rice production, which was not enough to feed the population; At the time of production, it reached 300 kilograms per person per year. By the eighties, the economic crisis had reached its climax, especially with the trade and then military embargo imposed by Washington on Vietnam after the latter's invasion of Cambodia in 1978(8) and its elimination of the "Khmer Rouge" rule led by the pro-Chinese "Pol Pot".

Vietnam was isolated internally before US sanctions isolated it internationally, and the ruling Communist Party's unilateral policies were the biggest reason for its isolation; The beginning of a political isolation reinforced by the party's tendency to the Soviet communist experience at the expense of the communist Chinese, who share a historical hatred with Hanoi that continues today, and then an economic isolation that was increased by the policies of Le Duan calling for rejecting everything related to trade liberalization and the establishment of a free market economy there. 

Doan, who led the Communist Party in the third session of Parliament in 1960 until his death in 1986, is one of the most important leaders of the Communist Party who influenced the politics and economy of Vietnam during that volatile period of its history, not only because he was the architect of the war that ended with an American exit. humiliated” by his country, as well as the battle of “Tawhid” only one year later; but also for being an economic theorist who gave theoretical great attention to economic growth and improvement of the living conditions of the Vietnamese; With a long-term central plan that puts in mind the development of the agricultural, economic and technical aspects, next to fulfilling the military issue of protecting the Asian country from any possible upcoming war in a period when the Vietnamese war machine did not stop working.

But Duane's endless support for the centralization of government, which places all political and economic decisions in the hands of the ruling party; Aborted his economic experience without let a lot of the chances of success . By the mid - eighties was the Vietnamese economy is facing one of the most epochs strained, with inflation rates rose to exceed an unprecedented rate of 770%, the inflation rate did not find with the few international aid depended on the economy The Vietnamese during that period of the American embargo, and he also did not find with him the attempts of "Hanoi" to avoid this embargo to reach a solution to the crisis. 

This deteriorating situation continued until "Nguyen Van Lin" came to the presidency of the Communist Party in 1986, and his arrival meant a complete radical transformation in Vietnamese economic policies, especially after he launched the map of renewal policies known internationally as "Doi Moi", which is the package that began With it Vietnam's economic experience in brightness. 

Doi Moi Renaissance

The ambitious plan of development brought by "Van Lin" and endorsed by the Communist Parliament was not the only reason for the economic boom that Vietnam witnessed in the second half of the last eighties. The court he led from taking office until 1991, and with it, "Van Lin" was considered the most influential Vietnamese figure at the time, and the cornerstone in the transformation of the local economy from centralization to a market economy.

Maidan - At the Sixth National Congress of the Communist Party held in Hanoi 1986, Nguyen Van Lin was elected Secretary of the Party Central Committee (social networking sites)At the Sixth National Congress of the Communist Party held in Hanoi 1986, Nguyen Van Lin was elected Secretary of the Party Central Committee (social networking sites)

Lin began his plan by reforming the laws on the ownership of agricultural land(9). For the first time, the communist government granted freedom to the Vietnamese to use and cultivate their lands according to their desires, while retaining the right of the state to recover the land if its owners abandoned it or stopped cultivating it, and with it the government granted the right Each family owns 3 hectares (= approximately 7 acres) (10) within a huge process of distributing agricultural land to farmers, a process that was considered a fundamental shift in the policy and ideology of the Communist Party, which recognizes only state ownership of everything on its land. 

There have been numerous reforms of agricultural lands laws after that, several times and over separate years, and one of the most prominent of them is the complete end of work in what was known as “collective farms” in 1990, a system followed by the Vietnamese communist governments in cultivating their lands to ensure more taxes, and depends on the withdrawal of ownership Individual farms and the placement of farmers in collective farms owned by the state, where those individual farms did not generate more than 10% as taxes for the state, while the percentage of taxes collected from collective farms sometimes reached 40%, and this system was completely changed with the existing economic renewal process By 1989, Vietnam had become the world's third largest exporter of rice.

Undefined

The amendments to the agricultural laws coincided with those related to foreign capital investments, but these amendments did not succeed in bypassing the US embargo except with the decision of Vietnam to withdraw from Cambodia in 1989, which was followed by one year with the start of a new phase of US-Vietnamese relations that ended with the lifting of the ban on travel to Vietnam in 1991. followed by the lifting of the trade embargo - and the continuation of the military embargo - in 1994, a step that then paved the way for not only a long process of restoring Washington-Hanoi relations; Rather, it was to re-recognition of Vietnam within the ranks of the international community, and opened the door wide for the Vietnamese economy to rebuild itself. 

Hanoi took advantage of the opportunity available to it to re-establish itself within the global trading community, helped by the rise in the value of foreign capital investments to the equivalent of 10% of GDP in 1994, in addition to the emergence of more than 17,000 private companies (11) after the establishment of laws recognizing the role of The private sector in the Vietnamese economy in 1992, as, along with foreign investment, the way to economic reconstruction.

Although Vietnam's accession to the Association of Southeast Asian Nations (ASEAN) in 1995 was an important step in the international community's welcome of it, the beginning of the new millennium had a special taste for the Vietnamese economy and a major step on the path towards comprehensive growth. Hanoi founded it in 2001 by signing a reciprocal trade agreement with its old enemy and most important new friend: Washington.square picture 

Yesterday's Enemies Today's Friends

The administration of "Bill Clinton" announced the return of relations between Washington and Hanoi to normal in 1995, but the signing of the reciprocal trade agreement between the two countries - which paved the way for the latter's accession to the World Trade Organization "WTO" in 2007 - laid a new foundation stone in the relationship of the two countries. Both sides’ strained relations with Beijing have helped form a space of mutual agreement that will pave the way in 2016 for the Barack Obama administration to lift the US military embargo on arms trade with Vietnam. 

Returning to its accession to the World Trade Organization, this international openness led the Vietnamese regime to sign 16 mutual international trade agreements (12) that effectively contributed to reducing customs tariffs on exports and imports, in addition to lower average wages - which is a foreign investment advantage rather than domestic - and abundance Over the years, Hanoi became a magnet for foreign direct investment, which now represents the equivalent of 90% of the value of Vietnamese exports to the world.

Undefined

It was not excluded after that that Vietnam would seek a comprehensive internal development process for its infrastructure(13), with the help of the World Bank and several international institutions, and under the supervision of a chief from the Ministry of Transport and some effective government departments, and Project Management Unit 18 of the Ministry of Transport came Vietnam is at the head of these departments, as it is one of the richest Vietnamese government offices with a budget of more than two billion dollars from state funds, donor countries and the World Bank, and is responsible for supervising the construction of dozens of transport and transportation infrastructure projects such as highways, bridges and bridges.

These projects were mainly aimed at building an infrastructure network of highways capable of linking the cities of Vietnam with its countryside. Areas that had not yet had a real opportunity to keep pace with the wheel of economic growth.

Undefined

The efforts of the Vietnamese government met with the desired echo, and by 2010 major international companies such as Samsung, Intel and others had begun to make their way to the Vietnamese market and establish their bases there, but that turning point was not a direct result of the government’s pursuit of development only, but also contributed to it and paradoxically economic growth The rising neighbour, "China", a growth that began to rise in Beijing's position year after year, and with it the cost of the presence of international companies on Chinese soil, and then their profits constantly decreased, and instead of entering into fruitless negotiations with the Chinese government in order to reach flexible settlements that are unlikely to occur, it began These companies are shifting to other less expensive markets, and then Vietnam was the new best and most suitable alternative to the world of startups in the Asian market. 

Chinese room elephants

It can be imagined the size of the growth that the Vietnamese economy has reached, following the boom caused by international companies there after 2010; Knowing that one in ten mobile phones produced around the world is manufactured in Vietnam (14). World Bank statistics confirm not only the high rate of Vietnamese economic growth since the said year, but also its stability at a rate of more than 5% annually so far, which is a relatively fast growth rate compared to the countries of the world, while that rate exceeded 6% after 2016 in a boom that enabled Hanoi is out of competition with China's economic growth rates, which makes it now among the middle-income countries with relative stability.

Corruption at home and China abroad have long been constraints to Vietnam's economic growth

However, this renaissance is not without various problems that the Asian country faces on its way to achieving more comprehensive and stable economic growth, or in other words, that renaissance is not without the presence of several elephants in the Vietnamese Economic Chamber, beginning with the fact that the ruling Communist Party still enjoys the primacy of one party. Without opposition, it ensured that the party was not alone in all legislative and legal economic and investment policies, passing through human rights problems that still constitute one of the biggest dilemmas of Vietnam's relations with the international community, and not ending with corruption, which is considered the biggest elephant there, and whose impact was evident in 2006 with the famous scandal associated with the unity projects. 18 And the embezzlement of millions of dollars by those in charge of it, which eventually led to the resignation of the Minister of Transport at the time (15), along with provisions Several fines and imprisonment affected a large group of officials and those in charge of the unit in a case whose impact is still resounding inside the Vietnamese until today. 

Corruption at home and China abroad have been on the list of obstacles to Vietnamese economic growth for a long time, and while the government seeks to address the first problem internally with escalating measures year after year, it has not yet succeeded in eliminating a large proportion of it, while taking other measures to resist the red regime. On the northern border and along its coasts, Beijing is now threatening Hanoi and other Asian capitals, not to mention Washington, with its continued expansion in the South China Sea.

Undefined

Former US Senator William Fulbright sees in his book “The Arrogance of Power” published in 1967; that "in Washington's favour, Vietnamese communism remains the potential, and perhaps the only, bulwark against Chinese domination" (16), a bulwark stemming from "the two thousand years of Vietnamese distrust of all things Chinese". This argument remains very important for Vietnamese-American relations, as well as Vietnamese policies affecting economic growth, and is corroborated by an opinion poll conducted by the Pew Institute (17) in April 2014, in which it reviews the way in which Asian countries see each other, and in When the Vietnamese see - according to the survey - that the United States was a potential threat by 30%, they see China as a potential threat by more than 70%.

Vietnam and China have witnessed several wars in which both countries have faced each other directly or indirectly, and because the current global geopolitical map makes Beijing Washington’s first opponent, this situation makes Hanoi the biggest winner from the prevailing tension between them, however, the Vietnamese regime puts itself In a cautious and hypersensitive position, with a battle that may harm him more than it benefits him if Washington decides to abandon Vietnam for its own benefit, or decides - at least - not to interfere in any conflict that may occur in the future between Hanoi and Beijing, which is a possibility. 

On the other hand, with regard to the Vietnamese economy, calls are being made for the design of a newer and more modern version of the renaissance "Doi Moi" policies, and at a time when some believe that the current stage is the last growth that the Vietnamese economy may reach before the curve begins in Walking down, the Vietnamese economy still has some trump cards that can supply it with many factors of development, such as the ability of the local public sphere to absorb more international investments, as well as what may result from reducing government and private corruption rates alike, which are papers if the regime succeeds in exploiting them for the benefit of the Vietnamese economy. General growth instead of succumbing to pressure lobbies and internal hegemony groups may establish a second Vietnamese renaissance that may turn the small Asian country into a major pivotal player in the global economy.