For example, electricity is cheaper in Vietnam than in the Philippines; however, Vietnam uses about three times as much power as the Philippines, with an economy about the same size.This is the result of regulated electricity prices keeping power artificially low, and this has become a problem. Specifically, in just the last few weeks, there has been broad public debate as to who should pay a VND 44 trillion (US$1.5 billion) loss the state power provider is currently carrying.
The debt, accumulated across 2023 and 2024, came about when input costs surged but retail electricity prices went unchanged — electricity was essentially sold at a loss.
Similarly, wages might be lower in Vietnam at US$313 a month in Q2 2025 compared to US$339 in the Philippines (2022); however, the Philippines has a robust labour union movement with myriad labour advocacy groups.
By contrast, Vietnam has just one trade labour union, which is in practice an extension of the government and often operates with a view toward finding a consensus between employees and employers rather than advocating for workers’ rights.
It’s not just these fundamental policy differences either.
Geographically speaking, Vietnam has found itself well placed to benefit from the great power rivalry between the United States and China, particularly in trade.
As US tariffs have gone up on Chinese goods, manufacturers have looked to shift parts of their production to other parts of Asia.
Right next door, Vietnam is logistically a natural choice, even if there is only limited value to be added in the country — there is evidence to suggest goods transhipped from China to avoid US tariffs have played a significant role in Vietnam’s FDI boom.
That’s not to negate the role of free trade agreements. Vietnam has some 17 free trade agreements, whereas the Philippines has just six.
This contrast, however, can be largely explained by way of civil society participation in decision-making, which is heavily restricted in Vietnam, with very little public opposition to government policy permitted.
Conversely, debate is much more open in the Philippines, with civil society groups cautious in their approach to free trade.
This also plays out in a much freer (relatively speaking) media environment. Vietnam comes in at 173 out of 180 on the Reporters Without Borders Press Freedom Index in 2025, and the Philippines at 116.
This particular point also explains the largely rosy picture of Vietnam’s export-led development, with state media exercising considerable sway and spending considerable sums of money, managing what makes it into the mainstream media.
Vietnam’s natural environment, for example, has paid a price that is often overlooked.
Air pollution, particularly in Hanoi, is among the worst in the world.
This is in large part due to environmental protection regulations that, on paper, have kept up with Vietnam’s rapid industrialisation, but practical implementation that has not.
Notably, after a chemical spill attributed to Taiwan’s Formosa in central Vietnam in 2016, the Vietnamese government freely admitted that at least a part of the problem was that too much emphasis had been put on investment and not enough on environmental protection.
And it’s not just protecting the environment that has come second, but financial stability too.
Private borrowing has become a key pillar of Vietnam’s economic development in recent years, but the efficiency with which it has been used is questionable.
Moreover, with private-debt-to-GDP of around 140 percent, there is not a lot of room to maintain its current momentum.
For comparison, the Philippines’ private-debt-to-GDP is only about 60 percent.
The development of Vietnam’s manufacturing and processing industry has also come at the expense of other sectors of the economy.
Mining, for example, has been on a steady decline in both real value terms and as a percentage of GDP over the last decade.
Likewise, private consumption as a percentage of GDP has fallen every year since 2015.
That is to say, Vietnam’s manufacturing-led economic development model has costs that are not reflected in GDP calculations or trade data.
That’s not, however, to undermine the model or suggest reforms in the Philippines’ approach to foreign investment don’t need to be addressed, but rather simply to point out that there is a lot more to it than what is visible at first glance.
