Over the past two decades, Vietnam’s development can be described as a binary dance: two steps forward, one step backward. When a president and two deputy prime ministers lost their jobs at the same time in January 2023, but 2022 economic growth still hit 8 percent, many foreign investors believed it was just a political hiccup – a step backward, but the country was still moving forward.
Yet when four other Politburo members were forced to resign in the first half of 2024, and a $12 billion banking fraud case was revealed, international observers couldn’t help but question: When will this backward step end? Is Vietnam still moving forward when its neighboring countries are jumping ahead relatively faster?
No country, besides India, has benefited more from the post-pandemic race to de-risk from China than Vietnam. Foreign investment is entering the country at record levels. In 2022 a record was set with $22 billion in pledged investment. $36 billion was pledged in 2023, and in the first six months of 2024 already over $15 billion was pledged, a 13 percent year-on-year increase from 2023.
What is more impressive is that nearly $8 billion went into over 1,200 new projects, a 27.5 percent year-on-year increase. Government statistics suggest that some $10.8 billion in foreign investment was disbursed in the first half of 2024.
Foreign investment is critically important to Vietnam’s growth. In all, the country has over 40,000 projects worth over $481 billion. More importantly, foreign investment accounts for some 70 percent of its total exports. Indeed, Samsung alone accounts for nearly 20 percent of total export value. In the first half of 2024, exports of mobile phones, computers, and other electronic components reached a record high of $60 billion, according to government data. The financial company Nomura predicts Vietnamese exports will more than double from $353 billion in 2023 to $751 billion in 2030.
The topline numbers are very attractive, but they are not inevitable. Semiconductor manufacturers Intel and AT&S recently chose not to expand their operations, and LG Chem walked away. Ørsted, one of the world’s largest offshore wind producers, quit the country in mid-2023, obliquely citing corruption.
Given all that, it’s important to look deeply at the ongoing anti-corruption campaign. Vietnam bills itself as a more open and less authoritarian model than China. But like China, one of its key selling points to the international business community is political stability.
Vietnam has been anything but stable in the past 20 months.
Since December 2022, seven of the 18 members (39 percent) of the elite Communist Party of Vietnam (CPV) Politburo have been forced to resign. While some of those figures are party apparatchiks, whose departure would not be missed, several were well-known technocrats and interlocutors with the business community, including Deputy Prime Minister Pham Binh Minh and President Nguyen Xuan Phuc. Another president and the head of the National Assembly, which is in charge of drafting laws and implementing legislation, were also forced out.
In July 2024, General Secretary Nguyen Phu Trong passed away, leading to concern about an intensification of political infighting.
What does this unprecedented churn in the senior leadership mean for Vietnam and its economic prospects? And what should we expect in the coming a year and a half ahead of the quinquennial 14th National Party Congress in early 2026?