Beating Poverty with Market Economy
What's happening in Vietnam?
By Dr Rainer Zitelmann
While economic freedom is declining around the world, Vietnam is bucking the general trend. The country still has a lot of work to do to join the ranks of economically free countries, but it is moving in the right direction. No other country of comparable size has made such strong gains in the Index of Economic Freedom in recent decades.
“Vietnam has been a development success story,” according to an April 2023 report from the World Bank.
“Economic reforms since the launch of Đổi Mới in 1986, coupled with beneficial global trends, have helped propel Vietnam from being one of the world’s poorest nations to a middle-income economy in one generation. Between 2002 and 2022, GDP per capita increased 3.6 times, reaching almost US$3,700. Poverty rates (US$3.65/day, 2017 PPP) declined from 14 percent in 2010 to 3.8 in 2020.”
Growth in Vietnam no longer revolves solely around agriculture as it has positioned itself in high-tech fields, including Industry 4.0, semiconductor chips, AI, and hydrogen, and is attracting international capital.
How can Vietnam continue making economic progress? In the 2024 Index of Economic Freedom, the Heritage Foundation notes that Vietnam is one of the rising stars, contrary to the global trend, but also identifies weaknesses:
“The overall rule of law is weak in Vietnam. The country’s property rights score is below the world average; its judicial effectiveness score is below the world average; and its government integrity score is below the world average. […] Vietnam’s overall regulatory environment is relatively well institutionalized but lacks efficiency”.
However, Oliver Massmann, partner at Duane Morris Vietnam LLC, sees progress in strengthening the rule of law:
“Positive recent developments include the new Credit Law. 2024, Vietnam’s National Assembly passed a new Law on Credit Institutions, providing greater protection against embezzlement and introducing more precise requirements for banks in crisis. Above all, the law simplifies approval procedures, an improvement sorely needed in Vietnam (as elsewhere in the world). The reform of land law is another positive aspect. Land prices should now be based more on market principles.”
Another positive aspect, according to Massmann:
“Vietnam has made commitments to open its market and increase legal certainty for investors in its free trade agreements and investment protection agreements. … The ISDS Investor State Dispute Settlement and Government Procurement Agreement stipulates that judgments against Vietnam can be enforced abroad without the Vietnamese government being able to object.”
This would be unthinkable in China, for example.
The Heritage Foundation also cites the level of taxation and public debt as positive features:
“The top individual income tax rate is 35 percent, and the top corporate tax rate is 20 percent. The tax burden equals 18.2 percent of GDP. Three-year government spending and budget balance averages are, respectively, 20.1 percent and -1.3 percent of GDP. Public debt amounts to 35.3 percent of GDP.”
How can Vietnam still improve? The proportion of state-owned enterprises there remains far too high, and further privatisations are urgently needed. Labour law also needs to be reformed, as there are too many regulations.
Vietnam's economic progress is also the subject of a new film, “Vietnam - Beating Poverty with Market Economy” which won the “Best International Documentary” Award at the ANTHEM Film Festival in Palm Springs on 14 June 2025. Produced by Tomasz Agencki and myself, the film was presented by the American economist Professor Mark Skousen and Steve Forbes, the publisher of FORBES magazine.
Forbes said: “Donald Trump should see this movie.” Some people claimed that Trump had only threatened other countries with high tariffs in order to achieve low tariffs in the end. "He threatened Vietnam with 46 percent tariffs, but Vietnam responded by offering a zero reciprocal tariff. Why doesn't Trump go for it?" asked Forbes, who is a fierce critic of Trump's tariff policy.
The film showcases several successful entrepreneurs, including Kao Seu Luc, founder of the most successful bakery chain in Vietnam. Originally from Cambodia, Luc narrowly escaped the Khmer Rouge regime in the 1970s. “I was on the death list in Cambodia and came to Vietnam with no money, no connections, and unable to speak the language,” the successful self-made entrepreneur recounts.
The film also features Xuan Phuong, a leading manufacturer of incense sticks in Vietnam, and the entrepreneur Nguyen Quoc Thong, who explain that entrepreneurs and rich people are held in great esteem in Vietnam. This sentiment is confirmed by surveys indicating that social envy in Vietnam is very low – much lower than in many European countries, for example.
Alongside the economic reforms, Vietnam’s success is also based on cultural factors and a particular mindset: despite being devastated by wars with the Americans, Chinese, Japanese and French over the last century, the people of Vietnam did not blame other countries, they looked for the root causes of their bitter poverty within themselves. As opinion polls and the interviews in the film show, Americans enjoy a very positive image in Vietnam today – regardless of the devastating war the two countries fought.
What can developing countries learn from Vietnam? Four things:
1. The only way out of poverty is more capitalism, not development aid.
2. International investment, free trade, and globalisation are not bad for poor countries, they are hugely beneficial.
3. When entrepreneurs and the rich are regarded as role models, not scapegoats, this inspires people and contributes to a nation’s economic recovery.
4. The same rule applies to countries and individuals: If you blame others for your problems and do not look for the reasons for your failures within yourself, you will never be successful.
Dr Rainer Zitelmann is the author of the book How Nations Escape Poverty: The Secret of the World's Most Successful Countries, which deals with Poland and Vietnam.
Dr Zitelmann, I am very glad for the people of Vietnam, I truly am. But in reality it’s the same old exploitation of the poor for self gain of the investor. Investors are the same the world round, they want a return on their investment for years to come and in itself sounds reasonable! I’m with you, entrepreneurs and the best and the brightest deserve the money they earn as well as those Vietnamese people and workers. I never have a problem with the reward for hard work, brilliance and excellence in leadership. But, what I have a problem with is the expectations that the framework for reward doesn’t keep the money rotating through SPENDING! Why should the rich be the ones not to have to SPEND their money back? What we have is capitalism that allows money to be held outside the working tax paying pot of the everyday worker. This creates a dam of money not being spent which makes the economy devoid of its rotation in and around those workers and consumers that prevents them from enjoying the proper fruits of their work. No tax is triggered on money that stays idle, sidelined, unspent and unused! Which is why in a fully capitalist society you still have mega rich next to mega poor. It only benefits the rich at the cost of the poor because SPENDING is withheld! I think the rich need to be wealthy from goods and services exchanged when all money is SPENT and exchanged. If it were, with a tsunami of SPENDING every day, much more tax revenue would be created that would instantly stop the need for government borrowing. At the same time, the poor will be no longer poor, wages would increase, benefits too! But ironically the rich would be richer as well! We are limiting our vision of happiness by allowing the status quo. If we now use computer bank accounts and reintroduce exchange control to keep all money in house and put a spend by date on money electronically to force SPENDING we can all be richer! Happier!! And the system can be autonomous and perpetual. An economy can’t work without two things. Money and SPENDING! If there is no money and no SPENDING it will never work! It really is that simple! I’m pleased for Vietnam but the system is stacked. The framework for capitalism has not been fully thought through because when most economists were thinking of it there were no computer bank cards!