Worldbox Country Risk Climate – March 2025
Vietnam
Summary
NEW – Technology is an increasingly important driver of economic success, and we are now including a separate Technology sector in our quarterly country risk reports and integrating the core into our overall score.
| Overall Risk Score 29/40 (Stable)
Political risk: Stable 7/10 Economic risk: Stable 8/10 Commercial risk: Stable 7/10 Technology risk: Stable 7/10 The risk assessment of a country is made up of four components, being Political, Economic, Commercial and Technological. Each component is scored out of 10 with 1 being the highest risk and 10 the lowest. |
ESG Risk: 6/10 (Stable)*
*Environmental, social and governance (ESG) issues are becoming increasingly important to companies, investors and consumers in Southeast Asia. That is why we are now preparing a separate ESG score and section with our quarterly country risk reports. We explain how each country rates, looking at the E, S and G individually, and outline recent developments. |
Political Risk – Stable at 7
Vietnam is a one-party state ruled by the Communist Party of Vietnam (CPV). The CPV provides strategic direction and decides all major policy issues, which the government then implements. The four most important positions in the country are CPV General Secretary (the most powerful position in Vietnam), State President, Prime Minister and National Assembly Chair.
General Party Secretary Nguyen Phu Trong was the most powerful man in the country until he passed away in July 2024. He had been re-elected to the position of general secretary of the Communist Party in January 2021, at the age of 76, for a rare third five-year term. After taking office in 2011, Trong built up a strong power base in the Communist Party.
In October 2024, General Luong Cuong became the country’s new president, making the military general the fourth official to fill the largely ceremonial role in 18 months. Cuong, 67, replaced To Lam, who had remained president even after he was formally appointed as the general secretary of the ruling Communist Party in August.
In December, To Lam announced a sweeping set of proposals to streamline the government, legislature and ruling-party apparatus. At the government level, five of 21 ministries will be eliminated through mergers and closures. The reforms aim to improve national government efficiency by eliminating layers of cumbersome bureaucracy, helping drive the country onto a higher economic plane.
A welter of overlapping functions and authorities currently impede decision-making and create inconsistencies in policies and policy implementation between the CPV and state agencies. According to The Diplomat:
“The previous institutional framework was seen as a ‘bottleneck’ that hinders further economic development. When compared to other Asian economic ‘tigers’ like South Korea, Singapore, Taiwan, and Malaysia – or even China, the giant northern country with many similarities in political regime and shared communist ideology – Vietnam is considered to have developed more slowly within the same timeframe.”
Worldbox Business Intelligence believes the reforms could indeed have a dramatic impact on the country’s appeal to foreign investors and could thus have the desired effect of significantly raising Vietnam’s long-term growth potential.
Economic Risk – Stable at 8
Vietnam’s shift from a centrally planned to a market economy has transformed the country from one of the poorest in the world into one of its most dynamic. Between 2002 and 2022, GDP per capita increased 3.6 times, reaching almost US$3700, according to the World Bank. It adds that poverty rates (US$3.65/day, 2017 PPP) declined from 14% in 2010 to 3.8% in 2020.
The country’s economic model has been built on attracting foreign investment to drive the transformation from agriculture to a modern economy based on manufacturing. Strong foreign investment and current-account surpluses have strengthened the external position.
Vietnam has benefited significantly from the shift of production out of China due to geopolitical tensions. In addition, Vietnam offers lower manufacturing wage costs relative to coastal Chinese provinces, where manufacturing wages have risen rapidly over the past decade. The country’s relatively large, well-educated and disciplined labour force is another attraction.
However, the new Trump administration in the US may not prove as beneficial to Vietnam as Trump’s first government. The incoming administration has signalled that it wants to close the loophole by which Beijing moved production out of China into countries such as Vietnam, from which Chinese goods were then exported to the US. Since Trump placed tariffs on Chinese goods in 2018, Vietnam has expanded by around 8% a year, buoyed by a gusher of foreign investment and booming exports to America.
According to the Wall Street Journal, Vietnam is a trade target of the new administration in other ways, too. The president, the newspaper reports, has floated the idea of levying tariffs on all imports into the US, and has talked about forcing countries to close their trade gaps with the nation. Vietnam exports to the US nine times as much as it imports from the country, placing it fourth behind China, Mexico and the European Union for the US’s biggest bilateral trade deficits.
More positively, the Wall Street Journal cited some analysts as saying that the Trump administration is likely to focus on China, so allowing Vietnam to fly under the radar, ultimately driving more foreign investment into the country.
Vietnam may be able to mitigate the impact by striking a deal with the US, especially if it agrees to increase imports of American goods or ease market access for US businesses.
Commercial Risk – Stable at 7
Businesses operating in Vietnam face some significant challenges, according to the US State Department’s 2024 Investment Climate report. These include widespread corruption, the entrenched position of state-owned enterprises (SOEs) in certain sectors, regulatory uncertainty in key sectors, a weak and opaque legal regime, poor enforcement of intellectual property rights, a shortage of skilled labour, restrictive labour practices, and slow government decision-making processes.
The report adds that due to a high reliance on inputs from China, Vietnamese manufacturing is vulnerable to forced-labour risks in supply chains, though the government and industry are actively working to address these concerns.
Corruption is a significant challenge. However, progress does seem to be being made. Vietnam ranked in 83rd place out of 180 countries in Transparency International’s 2023 Corruption Perceptions Index, up from joint 104th in 2021.
The country ranks as the 59th freest in the 2024 Index of Economic Freedom from the Heritage Foundation. Its rating has increased by one point from last year, and Vietnam is ranked 11th out of 39 countries in the Asia-Pacific region.
The lack of adequate infrastructure provides significant challenges to operating in Vietnam. The country is making a huge investment in infrastructure: approximately 6% of GDP, compared with an ASEAN average of 2.3%, highlighting its commitment to growth. However, a significant gap remains between the current infrastructure and the requirements for sustained economic development.
NEW
Technology Risk – Stable at 7
The Global Innovation Index (GII), from the World Intellectual Property Organization, is an important index used by countries and multinational companies to assess innovation ecosystems and aid in policymaking and investment decisions.
Vietnam ranked 44th out of 133 countries in the 2024 GII – moving up from 62nd place in 2020. It ranked 10th among the 17 economies in South East Asia, East Asia, and Oceania.
Government policies
The government has implemented a “National Strategy for the Development of Digital Economy and Digital Society by 2025”, which aims to accelerate the adoption of digital technologies across various sectors. Vietnam is also committed to a “green” transition, with the government seeking to transform the economy by applying circular economic principles and exploiting digital technologies to reduce environmental impacts. Many businesses in the country have begun the process of data digitization and standardization of their operations. However, many small and medium-sized enterprises lack the funds to invest in clean technologies and digital infrastructure.
The government is keen to attract foreign investors in semiconductor manufacturing, artificial intelligence (AI) and green energy, as it seeks to take the next step in economic development away from low-added-value manufacturing. A shortage of skilled labour and concerns about stable power supply have stymied the authorities’ attempts to attract high-tech investment. Hanoi is reportedly considering offering special deals on land leases, corporate taxes, and import and export duties to attract high-tech investments from the likes of Apple. The government is also reportedly considering partnering with universities and multinationals to upgrade its labour force and facilitate licensing and registration.
Infrastructure
Vietnam’s 4G mobile network currently covers 99% of the population. The government aims to ensure that every city, province, industrial facility and household nationwide can access fibre-optic internet by 2030, with a goal for all internet users to benefit from speeds of at least 1 Gbps. At least two new international submarine cable routes are due to be launched, and the authorities want to achieve 99% coverage of the 5G broadband network by the end of 2025. Each citizen will have access to one Internet of Things connection and will have a digital identity, with over 70% of adults expected to possess a digital or electronic signature by 2030. Vietnam is investing heavily in data centres that meet international standards and is focusing on attracting domestic and international investments in digital infrastructure.
Education and skilled staff
The number of students studying STEM subjects has increased in recent years but remains low compared with some countries in the region and with Europe – particularly in the proportion of female students. For example, in 2021, the latest year for which figures are available, around 28% of university students studied STEM subjects, compared with 46% in Singapore, 50% in Malaysia, 35% in South Korea, 36% in Finland, and 39% in Germany.
March Bulletin
Political Risk – Stable at 7
To Lam took over the role of general secretary of the CPV, the most powerful position in Vietnam, in August 2024. He is regarded as a pragmatist who is genuinely committed to raising Vietnam’s economic growth rate.
Fulcrum, published by the well-respected ISEAS–Yusof Ishak Institute in Singapore, reports that To Lam has positioned himself as a champion of technology-led “high-quality” growth and an ardent supporter of private businesses.
It adds that in his first meeting as chair of the Central Steering Anti-Corruption Committee, he emphasised that “the fight against corruption must not hinder economic growth”. While publicly committing to continue anti-graft efforts, there is a growing sense, adds Fulcrum, that the new leadership may prioritize economic goals over ideological purity. The slight recovery of Vietnam’s property market, previously a major anti-corruption target, suggests the business community is relieved by this signal.
While Vietnam may see a significant amount of economic liberalization under To Lam, there is unlikely to be any change in the political climate. During his rule, Trong, a close friend of To Lam, continued to tighten Vietnam’s control over human rights and freedom of speech.
Economic Risk – Stable at 8
Adverse external and domestic shocks led to a sharp slowdown in early 2023, but economic growth is gaining momentum thanks to a strong rebound in exports and expansionary fiscal and monetary policies, the IMF reported in September 2024. However, it warned that risks remain elevated, in part because of a weak real-estate sector and leveraged corporates.
The Vietnam’s General Statistics Office (GSO) states that the actual GDP growth rate for 2024 was 7.09, supported by continued strong external demand, resilient foreign direct investment, and accommodative policies. The government has set a goal for GDP growth of 6.5% to 7% in 2025, and is determined to achieve a double-digit growth rate in the long term.
Inflation remains relatively contained, with consumer prices increasing by 3.6% in 2024 from a year earlier. The central bank targets an inflation rate of 4.0% to 4.5%. Higher food prices, mainly reflecting supply issues, have contributed to the increase in prices. However, booming domestic demand is also an issue: retail sales accelerated by 9.3% on an annual basis in 2024.
Commercial Risk – Stable at 7
The IMF’s September 2024 Article IV consultation warned that non-performing loans (NPLs) have been rising, with some banks being especially vulnerable due to exposure to the real-estate sector. Total NPLs, including restructured loans and those held by Vietnam Asset Management Company (a fund-management company), reached 7.9% of total loans in March 2024.
Corporates, especially in the real-estate sector, remain vulnerable given their high leverage and interconnectedness, according to the IMF. Among listed firms, the share of corporate debt accounted for by firms with interest coverage ratios below 1 has increased significantly in recent years. Indeed, Vietnam has seen the largest increase among peer countries. The risks are amplified by weaknesses in debt-restructuring processes and shortcomings in insolvency procedures, added the IMF.
The IMF praised the government’s handling of the collapse of Saigon Commercial Bank (SCB), the country’s fifth-biggest lender, which had taken out loans and cash amounting to a total of US$44 billion through a web of shell companies over more than 10 years. The central bank injected significant liquidity as it took over SCB, leading interbank rates close to zero. In December, the Vietnamese property tycoon Truong My Lan, who controlled SCB and, according to the BBC, “masterminded the world’s biggest bank fraud”, lost an appeal against the death sentence. The BBC added that she could still avoid execution if she returns US$9 billion, three-quarters of the US$12 billion she embezzled.
Technology Risk – Stable at 7
In December, in a significant step forward in the country’s plans to turn itself into a regional tech hub, Vietnam signed an agreement with the US chipmaker Nvidia to establish an AI research and development centre. The agreement will involve the expansion of an AI data centre owned by the Vietnamese military-owned Viettel Group, which already uses Nvidia technology.
Environmental, Social and Governance (ESG) – Stable at 6
The United Nations’ Sustainable Development Goals (SDGs) are recognised as a beneficial framework for responsible investment. The Sustainable Development Report from Cambridge University Press assesses the progress of all UN Member States on the SDGs. It provides a useful means of ranking Southeast Asian countries on their ESG progress.
Vietnam is ranked 54 out of 166 in the 2024 report, with a score of 73.3.
Environment – According to the Intergovernmental Panel on Climate change, Vietnam is one of several countries most vulnerable to climate change. With 3260 km of coastline, 2860 rivers and 4000 islands, Vietnam is dangerously exposed to flooding, typhoons, tsunamis and tropical storms. In September 2024, a super typhoon known as Yagi killed more than 250 people and caused damage estimated at over US$3 billion.
Attempting to combat climate change, the Vietnamese Government has released plans to reach a net-zero emissions target by 2050. It hopes to increase the country’s renewable energy usage by 67.5%, and has pledged to build no new coal-fired power stations post-2030. The English-language newspaper Viêt Nam News claims “Coal and gas thermal powers reach 42.7 per cent of energy provided, while turbines are 11.2 per cent and hydroelectric 27.4 per cent”, as of February 2023.
Social – In June 2024, the US State Department removed Vietnam from a human-trafficking watch list, citing “overall increased efforts” on trafficking, including the submission of an antitrafficking law to the legislature for review, a rise in prosecutions and an increase in the number of victims assisted.
In terms of worker’ rights, Vietnam adopted an amended Labour Code in January 2021. This aims to align labour rules with international standards set out by the International Labour Organization.
Governance – Corporate governance is a relatively new concept in Vietnam. The government has taken important measures to improve its ownership and corporate governance frameworks for state-owned enterprises (SOEs), according to an OECD report published in 2022. SOEs account for one-third of GDP and dominate many sectors, such as energy, transport, telecommunications and finance. In 2019, the country’s SEC launched the Vietnam Corporate Governance Code of Best Practices for the private sector. This draws upon the G20/OECD Principles of Corporate Governance and the 2017 ASEAN Corporate Governance Scorecard, as well as the most recent corporate governance codes of countries around the world.
March Bulletin
Environmental, Social and Governance (ESG) – Stable at 6
The Vietnam Institute of Directors’ seventh Annual Forum, held in Ho Chi Minh City in December, focused on corporate governance as a strategy to attract investment. The forum highlighted the critical role of corporate governance in driving sustainable development and meeting the growing expectations of global investors. Despite progress, Vietnam’s corporate governance standards remain among the lowest in ASEAN, ranking below the regional average on the ASEAN Corporate Governance Scorecard.
Latest economic data
f – forecasts
* State Bank of Vietnam
** Statista
*** Worldbox Intelligence
Source: International Monetary Fund, except where stated
Useful Links
https://www.transparency.org/en
https://www.imf.org/en/Countries/VNM
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