Vietnam: Looking Towards Foreign Investment



With the sales of shares in state-owned enterprises and open doors for foreign investors, Vietnam has turned to capitalism. Are the days of communism past? BY ATE HOEKSTRA

The light is weak, the simple, wooden chairs have floral pillows, and the walls are decorated with propaganda posters from the time that communism was still all pervasive in Vietnam. But instead of the place being filled with Marxists, Hanoi’s Cong Café is especially popular among young people who feel little connection with Vietnam’s state ideology. Linh, 20, is here to have drinks with a friend. “I don’t know anything about politics,” she says somewhat shyly. “Only that it’s something we better stay silent about.”

Just like its big neighbour China, Vietnam has been ruled by a Communist Party for decades. In daily life, however, not much of communism is noticed. The streets of Hanoi are filled with fashion-conscious teens on fast scooters, trendy coffee shops are the new standard, and the mausoleum of revolutionary leader Ho Chi Minh has turned into a tourist attraction. Meanwhile the one-party state has embraced a liberal economic policy, making it attractive for a growing number of foreign companies to invest in Vietnam’s expanding economy.

“If you look at my country, you can see that it has actually become pretty capitalist,” says Chau, a Vietnamese lifestyle blogger who has travelled to countries all over the world. “I think the only remaining difference between Vietnam and other countries is that Vietnam is being ruled by just one party. You can say that I live in a communist country, but I don’t feel it’s like that.”

Chau’s thoughts are confirmed by Vietnam’s economic policy. With huge success, the one-party state started implementing liberal economic reforms in 1986, transiting Vietnam from one of the world’s poorest countries in the 1980s to a lower middle income country less than 30 years later. According to the World Bank, the proportion of people living in poverty dropped from almost 60 percent in the 1990s to less than 3 percent today. Since 2000 the economy has grown 5 to 8 percent annually, and another 6 percent growth is expected this year.

Vietnam expert Carl Thayer, a professor of politics at the University of New South Wales, says that although the ruling Communist Party of Vietnam still uses certain principles from Lenin, it has come a long way along the path of capitalism. “What is still communist, is that the state owns a lot of land and [there are] a number of important state-owned enterprises,” he says. “But in economic terms Vietnam has no such thing as communism anymore. In contrast to 30 years ago, you don’t need the Communist Party to get ahead in life. The private sector has grown so big that you can easily find a job without state connections.”

Now that Vietnam has successfully survived the global economic crisis, Thayer believes that the country will implement more economic freedoms in the next five years. A major party congress is expected to take place early in 2016, which could mark a starting point for new reforms. “It will be a battleground between those who want strong reforms and those who oppose the fast pace,” he says. “With all the state-owned enterprises there’s a lot at stake, so there will be tension. But there’s already a pro-active economic integration. Right now there’s a massive trade imbalance with China; to solve that Vietnam needs to develop access to new markets.”


One of the biggest challenges for Vietnam is the (part) privatisation of state-owned enterprises (SOEs). The Vietnamese government once owned about 12,000 SOEs. Although that number has been reduced to about 1,300 in 2013, SOEs still account for about a third of Vietnam’s GDP. These vary from mobile phone company Mobifone to the country’s main flight carrier, Vietnam Airlines, and from the oil and gas company PetroVietnam to the largest power company, EVN.

In 2014 prime minister Nguyen Tan Dung launched a plan to privatise SOEs, promising that shares in 500 of them would be sold by the end of 2015. Last year, however, the plan fell short, with shares only being sold in 143 of the targeted 200 SOEs. Although economic experts suggest that Initial Public Offerings could boost economic growth, many fear the 500 figure is too optimistic.

Another policy has been opening the door to foreign investors. Increasingly, European and Asian companies are penetrating Vietnam’s emerging market. Foreign direct investment is estimated to reach $4.95 billion in the first four months of this year. “Investing in Vietnam has become a lot easier in the last couple of years,” says Tran Tu Quy, a lawyer at Global Business Service in Ho Chi Minh City. “If you want a licence to start a business, you can now get it in two or three months, maybe four.”

In the last two to three years Global Business Service has mainly assisted European companies wanting to invest in Vietnam. Slowly the trend is turning towards Asian investors, according to Tran. “We especially see a growing interest from India and Japan,” he says. “Many of them already have a business in Singapore, which makes it easy to come to Vietnam and find new opportunities here.”

In the streets of Hanoi most people seem to agree with the capitalist approach of the Communist Party. Sitting in one of Hanoi’s fashionable coffee shops, IT-student Truong Minh doesn’t hide his ambitions. “I don’t care about politics. I just want to make a lot of money, just like the people in Europe and the US,” he says.

Freelance architect Nguyen Nam agrees with him. “I think we have a lot of freedom now, more than China, Malaysia and some European countries. The communists are long gone,” he says. “I think you can only find them in North Korea.”