Eight Decades of Vietnam's Economy: From Poverty and War to the Aspiration for a New East Asian Miracle

In the eight decades since the Democratic Republic of Vietnam was founded in 1945, Vietnam's economy has undergone a turbulent journey, reflecting the interweaving of historical circumstances, policy choices, and international context.

People shopping during the National Day holiday on September 2 in Ho Chi Minh City - Photo: QUANG DINH

Step by step overcoming the crisis and persistently integrating, the country has gradually shaped a market economic model, effectively utilizing the wave of globalization as a wind force to lift the country's economic kite up.

Milestones on the development journey

To date, Vietnam has emerged as one of the most dynamic emerging economies in Asia, with a high growth rate for many consecutive decades. GDP per capita in 2025 has exceeded the threshold of 5,000 USD, marking an important milestone when the country reaches the group of upper-middle-income countries according to World Bank standards. This demonstrates the strength of the development vision, the perseverance in institutional innovation and the aspiration to rise of the whole nation.

The highlight of Vietnam’s 80-year economic development process is the constant transformation of the model. After 1954, the centralized planning mechanism in the North helped form a basic industrial foundation and mobilize resources for the resistance war. However, the inherent limitations of the subsidy mechanism became increasingly evident after the country’s reunification, causing the economy to fall into a state of stagnation and crisis.

It was this context that created the urgent need for the 1986 Doi Moi process to create a historic turning point, with a similar meaning to the reform process in many other transitional economies. From here, Vietnam began to create a socialist-oriented market economy model, acknowledging the coexistence of many economic sectors, while opening up to strongly integrate with the region and the world.

With an average growth rate of about 6.5% per year in the four decades after Doi Moi, Vietnam has emerged from the group of poorest countries in the world and become an “East Asian model” in poverty reduction. The poverty rate, which was nearly 60% in the early 1990s, fell below 10% in the 2010s and is now only about 4% according to the national poverty line.

Tens of millions of people have escaped poverty, material and spiritual life has improved, and the middle class has expanded.

Transforming the quality of economic growth

The driving force behind these remarkable advances is a series of unceasing reform policies, from “contracting” in agriculture and giving autonomy to households; opening up trade and attracting foreign investment; reforming state-owned enterprises and developing the private sector; to deep integration into regional and global trade agreements.

Each reform step both liberates domestic resources and effectively utilizes capital, technology and knowledge from abroad, creating a strong resonance to help Vietnam's economy make a breakthrough.

The strong rise of exports is a clear demonstration of the transformation of the growth model. From depending on traditional commodities such as rice, coffee and textiles, Vietnam has risen to become a global center for the production of electronics, phones and computers. In 2024, the group of electronics, phones, computers and components alone reached nearly 135 billion USD, accounting for 33.2% of total export turnover.

The strategy of opening up and attracting foreign investment has brought about remarkable results, helping Vietnam participate deeply in the global value chain. However, the dependence on the FDI sector also poses an urgent need to improve the endogenous capacity of domestic enterprises, develop supporting industries, promote innovation and diversify the export structure.

Vietnam's growth structure has improved significantly in quality. From depending on capital and cheap labor, total factor productivity (TFP) now contributes 45-50%, reflecting the effectiveness of institutional reform, infrastructure investment and economic restructuring towards industry and services.

The digital economy is emerging as a new growth driver, contributing 18.3% of GDP by 2024 at a rate of more than 20%/year, three times higher than the general growth rate. This breakthrough puts Vietnam on a competitive trajectory based on knowledge and technology, while posing challenges in digital infrastructure, cybersecurity and human resource quality.

People eagerly wait to watch the parade and march to celebrate the 80th anniversary of National Day, September 2 - Photo: QUYNH TRANG

The risk of the "middle income trap" and the pressure for reform

However, the picture of eight decades of development is not all bright. The risk of falling into the “middle-income trap” still exists when Vietnam’s labor productivity in 2024 will only reach about 9,200 USD, much lower than Malaysia or Thailand.

The room for growth in breadth by capital and cheap labor is increasingly narrowing as the working-age workforce has begun to decline since 2014 and the population is aging rapidly. Over-reliance on the FDI sector remains a fundamental weakness as this sector contributes to about 72% of export turnover in 2024, of which the phone and electronic equipment industry is mainly dominated by multinational corporations.

This raises an urgent need to improve the capacity of domestic enterprises, develop supporting industries and encourage endogenous innovation to minimize the risk of dependence.

Along with that, many development bottlenecks are still slow to be resolved. Although the socialist-oriented market economic institution has been formed, there are still many shortcomings in terms of transparency, synchronization and implementation capacity.

Infrastructure, especially transport and digital infrastructure, has not kept pace with economic growth, creating bottlenecks in regional connectivity and global integration. Although human resources are abundant, their quality, skills and creativity are limited, failing to meet the requirements of the digital economy and green transformation era.

At the same time, long-term challenges such as climate change, population aging and increasingly complex global geopolitical instability all create pressure for the growth model to be more flexible.

The requirement for Vietnam is not only to maintain a high growth rate, but more importantly to improve quality, ensure sustainability and improve national governance capacity, thereby increasing resilience and opening up the possibility of a breakthrough in the new period.

New vision for a strong, prosperous nation

Looking back over the past eighty years, Vietnam's economy has demonstrated the self-reliance and extraordinary transformation capacity of a nation that rose from the ruins of war and poverty.

Entering a new era, Vietnam is recognized as a dynamic emerging economy, while nurturing a great aspiration to become an “East Asian Miracle” in the 21st century with a target of “double-digit” growth.

The goal is to reach the group of high-income countries by the middle of this century, and at the same time write a new page in history, where Vietnam stands shoulder to shoulder with the most successful economies in Asia, affirming its position as a powerful, prosperous country and making worthy contributions to the development of the world.

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Do Thien Anh Tuan (Fulbright School of Public Policy and Management)

Source: https://tuoitre.vn/tam-thap-ky-kinh-te-viet-nam-tu-doi-ngheo-chien-tranh-den-khat-vong-phep-mau-dong-a-moi-20250831161954324.htm