At the start of the year, the quickly becoming infamous Decree 168, which increased some fines for traffic violations by as much as 20 times, came into effect in Vietnam. Running red lights, driving the wrong way down the street, and using a mobile phone while driving now command fines of up to VND 6 million (about US$240), or three quarters of Vietnam’s average monthly wage.
Indeed, this big jump has drawn the ire of motorists the length of the country who have decided to follow the rules rather than risk being fined. This has seen congestion choke Vietnam’s cities, according to at least one local news outlet (though notably most of their evidence is anecdotal and congestion usually spikes before Tet anyway).
Regardless, what has taken place on the streets of Vietnam in the past few weeks is very much analogous with what has taken place in Vietnam’s business environment over the last few years. In this line of thought, this article breaks down these changes and what Vietnam’s road user behaviour says about doing business in one of the world’s most rapidly developing nations.
Firstly, Vietnam’s streets are incredibly busy and there is always a lot going on.
On key arterials in the major cities at just about any time of day there is a sea of cars and motorbikes and bicycles as well as street food vendors, and lottery ticket sellers, and farmers hawking vegetables, not to mention a handful of confused tourists, all jostling for space trying to get where they want to go. It is haphazard and it can be overwhelming.
Likewise, Vietnam’s business and regulatory environment can be chaotic too. There are often a lot of things happening all at once–in just the last twelve months high-speed rail, nuclear power, and financial centre projects worth billions of dollars have all been announced that’s not to mention trade union law reforms, tax changes for cross-border e-commerce businesses, and direct power purchase agreement legislation, to name but of a few of the bigger changes in Vietnam’s regulatory environment.
In both cases, on both the streets and in business, it can be difficult to know where to look. As a result, traffic tends to move relatively slow much like most big projects.
Moreover, the barrage of split second decisions that need to be made among the chaos often means that there is not a lot of time left for forward thinking and this can often lead to critical mistakes–on the streets that translates to missed turns and traffic accidents, in business it translates to a lack of preparedness for major shocks.
Case in point, the real estate crisis that kicked-off in 2022. Though there were a lot of factors involved, at its heart it came about because real estate firms had become over-leveraged by financing old projects with funds entrusted to them for new projects in a cycle that went on for years. Of course, when COVID-uncertainty put the brakes on the supply of new buyers, many of Vietnam’s real estate developers were unable to access the capital they needed to keep moving their existing projects forward.
But that’s not to say that however many thousands of people using Vietnam’s streets every day, making thousands of split-second decisions, based on their own needs and interests, in the absence of rules, isn’t effective. Indeed, most people get where they want to go and at times it can look almost as though there is an invisible hand directing traffic.
That’s not to say, as is commonly observed, that ‘it just works’. On the contrary, though it may be relatively easy to get from one place to another, it’s not always done within a reasonable time frame and it often comes at a sizable cost.
Road deaths in Vietnam in 2024 topped 10,944 (about 30 people a day), according to data from the General Office of Statistics–the GSO. This may be an underestimation too, with the World Health Organisation’s most recent data on road deaths, which is from 2019, putting road deaths that year in Vietnam at 29,475. This saw Vietnam rank 22 out of 183 countries for deaths per 100,000 of population. As a point of reference, the GSO, in 2019, recorded just 7,624 road deaths.
All of that said, with Decree 168, change seems to be in the air. Specifically, a shift from a free-for-all to a more rules based system of traffic management.
And indeed this is what seems to be happening in the business world too.
Next generation free trade agreements, like the CPTPP and EVFTA, have established a rules based trading regime with dispute resolution mechanisms that can lead to non-compliant trade partners penalised through tariffs. This has reduced risk and made trade cheaper and by extension more attractive.
Likewise, Decree 168, through financial penalties should discourage risk-taking behaviour making streets safer and by extension travel cheaper (think less bike and car repairs, medical costs, and lost productivity due to traffic congestion).
That’s not to say there aren’t some losers. People that relied on driving on the pavement and running red lights will likely see their travel times extended or their hip pockets hit hard.
Likewise, businesses propped up by government support or through rent-seeking activities will likely struggle when the playing field is levelled and they are forced to compete on their merits with foreign firms.
And from the losers on the streets and in business there have been complaints all round–the abrupt change to playing by the rules after so long without can be frustrating. That said, the reality is that this is the way Vietnam is headed and those most likely to succeed are the ones that realise this sooner rather than later.
“Adapt or perish,” as H.G. Wells wrote many years ago, “Now as ever, is nature’s inexorable imperative.”