TAIPEI, TAIWAN - Vietnam's top leaders have resolved to become at least a middle-income country over the next five years, an about-face from abject poverty in the 1980s, by attracting more foreign investment in manufacturing.
The Communist Party's Central Committee wrapped up a plenary session October 8 held to chart macroeconomic goals, and a deputy planning minister said separately that Vietnamese people should earn around $5,000 per year on average by 2025, up from $2,750 now.
Vietnam would reach that milestone — middle income or higher in World Bank terms — by extending 10-year-old economic reforms that now attract foreign investors to the country that's seen as a manufacturing peer to world factory powerhouse China.
Their investment creates jobs and raises incomes among Vietnam's 97 million people. Vietnam is now lower middle-income.
The government is likely to stimulate new wealth by improving infrastructure and offering incentives to investors for production of high-value electronics. Prized investors today include Intel and Samsung Electronics.
"What they did 10 years ago and of course since then is already delivering, so I don't want to say they don't need to do anything else, but they're very much on track because of the policies already in place," said Rajiv Biswas, senior regional economist with IHS Markit, a London-based analysis firm, in Singapore.
"That's a key message … their goal is to become an upper middle-income country," he added.
Wars, embargoes and waning support from the former Soviet Union left most Vietnamese people in poverty in the 1980s. The government's opening, launched in 1986, started to bring investment.
Sky Nguyen, 24, a former self-employed guide for foreign tourists in Ho Chi Minh City, got a job working as a real estate sales manager and expects it to pay. He's selling parcels in a 900-hectare coastal resort complex where investors from Singapore and the Netherlands have already made commitments.
"Real estate for the entire Vietnam isn't going down," Nguyen said. "It's getting up a little bit, slowly."
Nguyen quit tourism after Vietnam closed its borders in March to stop imported COVID-19 cases, leaving hotels and guides with little business. The resort investors are banking on an eventual tourism rebound.
Business shutdowns due to the pandemic have cost jobs worldwide and lowered consumer demand, a hit to Vietnam's factories that make garments, shoes and furniture for export.
The economy will grow at just 2% this year, according to an official target, down from 6% or more every year since 2012. The Planning and Investment Ministry, however, has set a 2021 growth target of 6% to 6.5%.
Documents from the party plenum and other political meetings this month don't offer a detailed roadmap to 2025, but analysts believe they focus on post-pandemic recovery in 2021 followed by steps to raise wealth by luring foreign-invested factories that make high-value goods such as smartphones.
Vietnam has kept its coronavirus infection rate at a relatively low total of 1,148 cases.
"They are confident that they are going to have a positive growth rate," said Frederick Burke, Ho Chi Minh City-based partner with the law firm Baker McKenzie. "They've got the coronavirus more or less under control, but the next stage is the challenging one."
Government officials will build more roads and airports to keep investment coming, Biswas said.
By 2025, Vietnam is expected to finish its North-South Expressway, which will stretch from Hanoi in the north to the country's southernmost Can Tho province, and the first phase of a new international airport that would take pressure off the one in urban Ho Chi Minh City, domestic news website VnExpress International reports. Manufacturers need quality infrastructure to ship in raw materials and ship out goods for export.
Nearly 3,900 foreign investment projects were licensed last year with total registered capital of $362.5 billion, higher than Vietnam's $260 billion GDP.
To bring in more, the government will try to cut bureaucracy and local-level corruption, said Jack Nguyen, a partner at the business advisory firm Mazars in Ho Chi Minh City. Foreign chambers of commerce in Vietnam have urged the state to cut red tape, he said.
"When you get to the lower-level officials there's always going to be some sort of bureaucracy [and] petty corruption, but overall I think there's a general desire from top government officials down just to try to make business for foreign investors as easy as possible," he said.