Vietnam’s most powerful figure, Communist Party General Secretary To Lam, has been re-elected to lead the party and the country for the next five years. Lam has promised dramatic changes, including a complete overhaul of the country’s administration, slashing bureaucracy, and putting the private sector on an equal footing with state-owned enterprises.
Lam took over the top job 18 months ago after the death of his predecessor, Nguyen Phu Trong, an old-style communist ideologue. As head of Vietnam’s main security agency, Lam had led a sweeping anti-corruption drive, but now he is focused on reform and growth.
Lam’s plans are the boldest Vietnam has seen in 40 years. He wants to double the number of private businesses by 2030 and turn Vietnam into an upper-income, knowledge- and technology-based economy by 2045. He aims to create 20 globally competitive private companies by 2030, following the South Korean model of state-supported conglomerates.
However, the challenge will be to create these “national champions” without simply replacing one form of rent-seeking with another, where politically-connected private firms enjoy the same advantages as the state-owned enterprises of the past. There are concerns that this could crowd out the small and medium-sized enterprises that generate the most employment and innovation.
Vietnam’s economy has seen remarkable growth over the past 30 years, transforming from an isolated, state-run economy into a manufacturing powerhouse. But the country remains heavily reliant on foreign investment, technology, and overseas markets. Like other Southeast Asian nations, Vietnam has struggled to move up the value chain and break out of the “middle-income trap.”
Lam acknowledges this challenge, noting that Vietnam may only be contributing labour costs and environmental pollution, while the real value addition comes from foreign companies. The largest manufacturer in Vietnam is South Korea’s Samsung, which relies heavily on imported components and technology.
The COVID-19 pandemic and the ongoing trade tensions with the US, Vietnam’s largest export market, further complicate the country’s economic ambitions. Trump’s tariffs have been a significant blow, testing Vietnam’s “bamboo diplomacy” of trying to be friends with all and enemies with none.
Ultimately, the success of Lam’s reforms will depend on his ability to create truly competitive private enterprises without simply empowering a new class of politically-connected conglomerates. The stakes are high, as Vietnam seeks to break free from the middle-income trap and establish itself as a global economic powerhouse.
