Fifty years ago this month, the citizens of Ho Chi Minh City were watching the skies as US military helicopters evacuated the last of their personnel. Conversely, this month, in 2025, the citizens of Ho Chi Minh City looking skyward are unlikely to see US helicopters and instead more likely to see the VN Pay logo made up of tens of hundreds of drones. An advertisement for a banking and finance app to be sure, this is also largely emblematic of just how far Vietnam’s economic ideology has shifted in the last 50 years.
Indeed, inequality had thrived under French colonial rule before the Second World War and had driven the uprising that eventually pushed the French out. In this context, it made sense that the newly liberated Vietnamese would turn their backs on the exploitative capitalism of the French and pursue a more equal (at least in theory) Marxist approach to development.
And it is this that saw the US put troops on the ground in Vietnam, which led to a protracted battle over, in simple terms, how resources would be allocated in the newly liberated country. On the one side, communism whereby resources would be allocated by the state. On the other side, capitalism whereby resources would be allocated by the free market.
Of course, communism would go on to win the war, with a newly united Vietnam moving quickly to a centrally planned economy, dismantling most of its private sector, collectivising its agricultural sector, regulating most prices, and nationalising its industry.
This new way of doing business, however, came at a cost. Southern Vietnam, which had been a business-focused, regional economic hub, saw its economic growth slow to a trickle.
Moreover, the United States, though no longer maintaining an official presence in the country, was still able to exert influence, extending a trade embargo first applied to northern Vietnam to encompass Southern Vietnam too. This prevented Vietnam from accessing global markets and financing, without which economic development was a challenge.
As such, by 1985, its economy was worth just US$19 billion or US$319 per capita, according to the International Monetary Fund (from which all economic data herein is sourced unless otherwise specified), with 75 percent of Vietnam’s population living in poverty.
It was in this context, coupled with inflation that was running at about 450 percent, that in 1986, key decision-makers accepted that some private enterprise might be a good thing and legislated the Doi Moi (Renovation) reforms.
This legislation would allow for private enterprise, foreign investment, and some free-floating prices. Moreover, Vietnam was able to realise productivity gains in agriculture by de-collectivising farms and allowing profits to be earned from surplus produce.
This saw Vietnam’s fortunes start to turn around, and in 1994 the economy received its next big jolt when the US trade embargo was lifted and diplomatic ties between the two countries were fully restored. This opened the door for US aid and investment and expanded trade opportunities.
A year after that, Vietnam officially joined ASEAN, not only paving the way for greater regional economic integration but also signalling to the rest of the world that Vietnam was open for business.
This, in large part, fuelled the growth that saw Vietnam skate through the Asian Financial Crisis (AFC) largely unscathed. That is to say, Vietnam’s GDP continued to grow in 1998 whereas the economies of the Philippines, Indonesia, Thailand, Malaysia, and Singapore all recorded contractions.
Of course, this was also in large part because Vietnam was starting from a very low base–In 1998, Vietnam’s GDP had reached just US$448 per capita, with around half of its population still living below the poverty line.
(On a side note, this would mean that there is a good chance any Vietnamese over the age of 26 today would have some experience with poverty. This might help to explain the speed at which savings increase and spending falls under uncertain economic conditions.)
That’s not to say it escaped the AFC unscathed. The event shook investor confidence in Asia more broadly, particularly in banking, and it would take some time to recover.
Nevertheless, onward and upward, over the next seven years, Vietnam’s GDP per capita would almost double, reaching US$873 per capita in 2005. This was also the year that Vietnam would pass the 2005 Law on Investment, which would pave the way for ascension to the World Trade Organisation (WTO).
This new law would streamline foreign direct investment and provide equal treatment under the law for foreign firms in a number of key industries. It was also accompanied by legal reforms in banking, taxation, and corporate governance.
And so it was, this newly reformed economy ascended to the WTO in 2007, becoming a fully fledged member of the world’s key economic community.
This would trigger a surge in investment with firms like Intel (2007) and Samsung (2008) opening offices in the country, precursors to significant production facilities, that would provide hundreds and thousands of jobs and significantly boost Vietnam’s export revenues.
But this was, of course, happening against the backdrop of the emerging Global Financial Crisis (GFC). Whereas the limited size of Vietnam’s economy had largely insulated it against the AFC, by 2008 it was almost four times bigger through foreign investment and exports, which had also made it increasingly exposed to the ups and downs of foreign markets. As a result, for the first time in almost a decade, Vietnam saw GDP growth fall below 6 percent.
More significantly, however, was that inflation jumped. From an average of roughly 5 percent a year over the preceding decade, that average jumped to 13 percent between 2008 and 2012. This was also accompanied by a spike in bad debts.
In response, Vietnam introduced two key policies: the first, to control the amount of money in the economy by limiting what banks could lend through credit growth limits; and the second, establishing the state-owned Vietnam Asset Management Company (VAMC) to manage banking sector bad debts. Practically speaking, the latter meant that banks could get bad debts off their books by transferring them to the VAMC and subsequently lend more. If the VAMC, however, was unable to recover those debts, they were supposed to be returned to the banks five years later.
And lend more they did.
From 2012 to 2022, Vietnam’s private debt went from 76 percent of GDP to 126 percent. This fueled some significant GDP growth numbers, with Vietnam averaging about 6.8 percent from 2013 to 2019. It was, however, most definitely not private credit alone.
FDI, and the export growth that came with it, also played a crucial role. A role significantly expanded under Donald Trump’s first term as President of the United States, on account of the President’s disdain for Chinese imports and trade policy aimed at cutting them back.
This was credited with a significant shift in FDI supply chains from China to Vietnam. It did not, however, go unnoticed by the Trump administration, with trade officials raising concerns that Vietnam was being used as a transhipment hub, with its exports susceptible to origin fraud.
This, however, seemed to somewhat fall by the wayside when, in 2020, the Vietnamese economy, along with just about every economy all over the world, was hit by COVID-19 border closures and lockdowns.
At this point, Vietnam’s economy was about two and a half times bigger than it was during the GFC, and it was far more exposed to global markets than it had ever been before.
That said, in the early days of the pandemic, Vietnam managed to keep its manufacturing industry mostly open with spot-lockdowns, regular testing, and a three-on-site policy (eat, sleep, and work being the three). This saw Vietnam record growth of 2.9 percent in 2020, whereas every other ASEAN state, with the exception of Brunei Darussalam, recorded significant GDP contractions.
In 2021, however, when the Delta wave managed to get a foothold in Vietnam, the situation became markedly more problematic, with ships clogging ports and outbreaks shutting down factories left, right, and centre. As a result, Vietnam recorded GDP growth of just 2.6 percent below the regional average (excluding Myanmar) of 3.3 percent.
But of course, this economic downturn seemed only temporary, with growth in 2022 bouncing back and hitting 8.5 percent.
The initial economic optimism entering 2023, however, quickly went south when Russia invaded Ukraine. This led to a jump in fuel prices and subsequently inflation in key export markets. Comparatively, Vietnam was able to keep its own inflation under wraps through credit growth limits and price regulation, however, this led to fuel and power shortages, a stark reminder that its command economy origins had far from been fully done away with.
Moreover, credit growth limits hit the economy hard in October of that year, with capital markets thrown into turmoil on the back of the arrests of two high-profile real estate tycoons, Truong My Lan and Trinh Van Quyet, for bond fraud and stock market manipulation, among other things.
This saw the real estate industry, well over leveraged to begin with, scramble to borrow from banks for cash flow, but with credit growth limits almost reached, lending was tight. As a result, workers went unpaid, bad debts began to rise, and in 2023, Vietnam’s economy grew by just 5.1 percent.
Again, this looked to be temporary, and in 2024, with prices starting to normalise in the US and the world economy beginning to settle, Vietnam’s economic engine began to fire up again.
This brief reprieve, however, was to be short-lived.
Earlier this month, just weeks away from the 50th anniversary of Vietnam’s reunification, in his second term as the President of the United States, Donald Trump announced import tariffs on just about every country in the world, with Vietnam one of the hardest hit.
Notably, these have been paused for 90 days, but it’s far from clear what might happen when that clock runs out. Vietnam, significantly more integrated in the global economy with its own economy far more skewed toward market principles than it was 50 years ago, could be headed for a serious setback.
But of course, the future in the current economic climate is anything but clear.
What is clear is that the VN Pay logo in the sky is about more than just selling a banking app; it is a symbol of an economy significantly shifted from the ideological underpinnings it embraced 50 years earlier. An economy that has seen GDP per capita grow from US$319 in 1985 to more than US$4,540 in 2024, and a poverty rate that has fallen from 75 percent to just under 3 percent over the same period.