The sleeping Asian Tiger

August 7, 2018

The sleeping Asian Tiger

Alexander van Wijnen
August 7, 2018

The sleeping Asian Tiger

Alexander van Wijnen
August 7, 2018
The sleeping Asian Tiger
Alexander van Wijnen
Maya Turolla
August 7, 2018
Ho Chi Minh City, Vietnam. Photo courtesy of Peter Nguyen. © Unsplash.

While we still think of it as the battleground of the American war, Vietnam has been free from prolonged conflict for decades. Although part of Southeast Asia, Vietnam’s location on the edge of the peninsula points towards cultural connections to East Asia. Indeed, Vietnam shares deeply rooted traditions with the Asian Tigers. Moreover, by “triangulating” between the world’s superpowers, Vietnam could boost its potential as an Asian Tiger.

Our observations

  • With 93 million people, Vietnam ranks as the 15th most populous country in the world. The population is relatively young, with a median age of 30.5 years.
  • Between 1990 and 2016, Vietnam achieved the world’s second-fastest growth rate per capita (behind only China). Due to its strategic maritime geography, low wages, trade deregulation, and free trade deals (as part of ASEAN), trade now accounts for roughly 200% of GDP. Vietnam will also sign a free trade agreement with the EU. If Vietnam can maintain a 7% growth rate over the next decade, it will have followed the same growth trajectory as Asian tigers such as South Korea and Taiwan in earlier periods.
  • Vietnam’s economy is increasingly dependent on China. China is Vietnam’s second largest export destination and largest source of imports. Trade between China and Vietnam and Chinese investment in Vietnam (last year doubling to 8% of incoming FDI) are rising rapidly. In China’s southern Guangxi region bordering Vietnam, exporters are labeling products as “made in Vietnam” to bypass U.S. tariffs. Since 2017, Vietnamese primary schools in the north provide Chinese as the first foreign language.
  • Vietnam nonetheless has a troubled relationship with China. According to a 2014 Pew Research survey, only 16% of Vietnamese people hold a favorable view of China. Last month, huge nationwide protests erupted over special economic zones that hand land to Chinese investors. Popular anti-China sentiment is based on China’s repeated attempts to subjugate Vietnam in the past. The cradle of Vietnamese civilization around the Red River basin was part of the Chinese empire for a millennium. “Vietnam” originates from “Yue Nan”, which means “those from beyond in the south”, as the Chinese called the people living in their southern province.

Connecting the dots

For centuries, Vietnam was either divided through internal conflict or conquered by the Chinese empire. An independent Vietnam in its present S-like form was only established in 1802. However, from 1862 onwards, French colonization, conflict with China and the American war wreaked havoc on Vietnamese stability. During this time, Vietnam created a proud national identity by winning wars against all of these countries. While Vietnam is still not on most people’s radar, its current path enables stable economic development free from foreign intervention.While Vietnam is part of Southeast Asia, its location on the eastern edge of the peninsula points towards its cultural connection to the East Asian world. In 111 B.C., the Chinese Han dynasty incorporated the southern “Vietnamese” lands into its empire. The Vietnamese people remained there until the 10th century as inhabitants of China’s frontier province of Jiaozhi. In times of independence, however, Vietnamese leaders proclaimed to be part of superior Han civilization – much like medieval kings in Europe claimed to be forming the new Roman empire. Indeed, Vietnamese rulers, after overcoming Chinese conquest, always turned to Chinese statecraft. In the 15th century, the Vietnamese borrowed from Chinese legal codes, military science, and a bureaucratic model for organizing its territory. In the 19th century, when a national Vietnamese state emerged, the emperor Gia Long turned Vietnam into a Confucian-structured civilian government: he restored meritocratic examination systems and built academies to train elites for government service. Most importantly, state-led development, rational bureaucracies and Confucian examination systems were components of modernity in all East Asian countries (i.e. China, Japan, South Korea, and Taiwan). Indeed, Vietnam’s Confucian roots place the country close to these Asian Tigers that became successful through state-led economic development, highlighting Vietnam’s potential as a future economic powerhouse.While Confucian culture is deeply rooted in Vietnam, the country’s troubled relationship with China will guide its trajectory into a new direction in the coming years. Possibly for the first time in history, Vietnam has the opportunity to protect itself from China’s ambitions by balancing against another superpower. We have previously noted that Asian countries will increasingly seek “triangular” relationships with China and the U.S., extracting benefits from both. As such, to protect itself from China in the face of rising economic dependence, Vietnam will increasingly move closer to the U.S. (already its largest export destination). By benefiting from rising Chinese wealth while ensuring security through cooperation with the U.S., Vietnam’s trajectory as an Asian Tiger could gain momentum.

Implications

  • Despite anti-Chinese sentiment, economic linkages between Vietnam and China will increase. China’s abundant capital, advanced technology, and management expertise complement Vietnam’s demographic dividend and cheap labor, high-quality workforce, huge market, and demand for infrastructure. Indeed, under China’s BRI, Vietnam and China have planned seven “cross-border trade zones” to benefit from economic complementarity. Railways already connect China’s regional capital of Kunming to northern Vietnam and more high-speed railways are planned.
  • Vietnam will become more active in the Southeast Asia region and take a central role within ASEAN (Vietnam’s latest Five Year Plan notes the goal to intensify ASEAN cooperation). The political landscape of Vietnam is stable in comparison to its regional counterparts and its economy is steaming ahead, opening up opportunities to become more active abroad. Vietnamese FDI is already rising rapidly in Cambodia, Laos and Myanmar.
About the author
At sister company Dasym, Alexander has been assigned a variety of tasks, for his interests transcend branches of knowledge as well as geographical boundaries. In brief, he writes policy papers, interprets and elucidates global developments, and conducts thematic investment research. His academic background spans public administration, history of international relations, and philosophy, having published dissertations on smart cities, Ethiopian sovereignty and independence, and Chinese philosophy towards technology. Integral to his responsibilities, Alexander wades through the latest literature on geopolitics, technology, financial markets and cultural anthropology.
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