It should turn country after country green with jealousy. Vietnam has managed to have a ‘good’ pandemic. The country with a population of 97 million and an active border with China, has seen only 355 confirmed coronavirus cases and not a single recorded death.
It is therefore sitting pretty to rake in a Covid dividend where a swifter return to normal translates into greater investments as multinationals look to rejig their supply chains. As it is the lockdown was less disruptive to businesses here by plan, with government allowing many non-retail companies and factories to operate through it. And before the lockdown Vietnam was in another sweet spot of having gained the most export market share in Asia over the last five years, thanks to which it was clipping along at a nice 7% growth.
While other economies are set to contract this year ADB is forecasting a GDP growth of 4.1% here. HSBC bank has dubbed the country “Pho’nomenal Vietnam”, the reference to its iconic noodle soup underlining how well it has managed both Covid and the economy. Good management is the key here. It is not like Vietnam doesn’t have notable vulnerabilities. Or that good fortune just landed in its lap. The real learning is how it has minimised weaknesses and maximised strengths. Making the most of the hand it has been dealt.
Consider the Covid battle first. Its medical facilities are less advanced than the peers in the region. Had the infection numbers grown here into hundreds of thousands its healthcare system would also have struggled. Its density of doctors of 8 per 10,000 people is marginally better than that of India but nothing to Brazil’s 22 or America’s 26. However, what Vietnam lacked in resources it more than made up for in preparation and prevention.
Prime Minister Nguyen Xuan Phuc declared war on coronavirus in January itself. Instead of trusting China’s narrative at that time Vietnam reportedly launched cyberattacks there to get better information about the infection. It didn’t have South Korean wealth for mass testing. Instead it mobilised the communist party, the military and the state’s vast surveillance apparatus to meticulously track and trace all infections, often down to their second and third hand contacts, and then put them in institutional quarantine, which was not fancy but well-organised and strictly enforced.
A perverse reading could mine this story for the wonders of a one-party state and state-controlled media. Likewise it could marvel how patriotic sentiment helped mobilise the entire Vietnamese society. This would be missing the wood for the trees. Manufacture of consent cannot last without a competent governing system. In Vietnam people are feeling a sense of national pride about how their country has outperformed the world in controlling Covid. Wartime imagery and rhetoric was used to drum up nationalism similarly in other countries too. But as their governments botch up the real job at hand, all that emotion is ending up in an unhappy place.
Moving on to management of the economy, Hanoi is using the stimulus opportunity to address some of the infrastructure shortfalls that limit the integration of domestic firms into the global value chain. From new metro lines to expressways, big projects are reportedly being fast tracked. As it is between 2016-18 Vietnam climbed from 64 to 39 in the World Bank Logistics Performance Index, which measures how efficiently countries move goods across and within borders. But the real feather in its cap is the FTA with EU ratified last month. Again, it is a measure of how unusually Vietnam has kept juggling many balls that this is the first FTA the world is seeing since the outbreak of the pandemic.
India’s long flirtation with FTAs with the EU and US has been stymied by a concern about risks. Vietnam also has its worries. For example, as economist Trinh Nguyen emphasises, the FTA requires the entire supply chain to be within the two markets to qualify for zero duties. This is a challenge for Vietnam which is heavily dependent on China for inputs. However, it has chosen not to play the defensive game. It has taken the bet that it can and will upscale.
A 2014 Pew Research poll found 51% of the public in Vietnam very concerned about a possible military confrontation with Beijing. This number has likely risen with the rise of Chinese assertiveness in the South China Sea since then. But such is the economic dependence that they still say, when China sneezes Vietnam catches a cold. In trying to script a different future what is exemplary is that Hanoi is acting clinically, building alliances and planning for change over the longer term. In this sense the EVFTA is already a ringing success.
For India on the other hand it is bad news. Of the 56 companies that moved bases from China in 2018-19, Nomura found that Vietnam got 26, Taiwan 11, Thailand 8 and India 3. Now the “shift” sentiment favours us even less. On really incentivising foreign firms to set up shop in the country, we are only playing catch up rather than leading the race. Of course India’s economy and human capital are many times greater. With suitable reforms and stewardship they can deliver much greater acceleration. But failing this, as an earlier generation of Indians watched living standards in China zoom ahead today’s generation may face the same with Vietnam.
DISCLAIMER : Views expressed above are the author’s own.