Vietnam’s Economy and Foreign Trade in 2020

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The study of the economies of countries and their development trends is of particular value. Hence, such information can help in the formation of a more effective policy in this area. The article under study highlights openness to trade and investment as the main driving force of the development of the Vietnamese economy over the past thirty years. This factor has had a particularly positive impact on the country during the coronavirus pandemic. While many countries were experiencing difficulties in the economic sphere, Vietnam’s GDP increased by 2.9% in 2020 (“Vietnam’s growth model: The special sauce”, 2021). Moreover, the state does not plan to stop there and strives to further increase this indicator.

Very often, Vietnam is compared to China in many aspects, especially in the field of economic development. Thus, the main similarity of these countries is the use of a one-party political system. Moreover, they have both resorted to using capitalism in their economic development and rely heavily on exporting their goods abroad. In this case, the main difference between Vietnam is the level and nature of the foreign trade produced. Furthermore, such an advantage was signed by a high level of foreign investment and a wide number of deliveries abroad. The source emphasizes that a special achievement of the country is having 6% of the total investment flow, which is significantly higher than the level of other countries. Moreover, Vietnam is distinguished by low labor costs and a relatively stable exchange rate. However, such a competitive advantage can have negative consequences for the country. Therefore, with the cessation of foreign investment and an active policy of exporting goods, the country may enter a crisis situation.

In addition, it is worth mentioning an important factor that affects domestic procedures, consumers and national welfare the provision of subsidies. This policy can be characterized as a corporate tax reduction. However, this policy is not one of the most effective and productive. First of all, it is worth noting that the tax system is an integral part of the fulfillment of the fiscal function of the state. It contributes to the redistribution of state income while providing financial support to poor groups of the country’s population. Tax collection is an important instrument of regulation and development in Vietnam.

Taxes directly affect such an aspect of a country’s economy as its consumers. Thus, it contributes to an increase in consumer demand in the market for goods and services, which has a positive effect on the economy of Vietnam. Moreover, in this case, the solvency of the population increases significantly. The surplus of producers is increasing, the surplus of consumers is decreasing, and the general welfare is increasing thanks to the subsidy program. Subsidies also have a significant impact on national welfare. Hence, there is an increase in the number of producers, while the number of consumers is noticeably decreasing. However, welfare is still characterized by an upswing precisely due to corporate tax cuts. Providing subsidies to producers of goods and services can be useful, as it contributes to their greater productivity. This is reflected in an increase in supply and a decrease in the average cost of goods or services. However, granting corporate tax cuts to some companies may be a negative aspect for other companies. Hence, there may be a significant decrease in consumer demand due to low loyalty to companies that are given subsidies. Moreover, another factor that advocates the negative impact of Vietnam’s economy on domestic producers is that the country is a member of a Comprehensive and Progressive Partnership Agreement in the Field of Transpacification and a number of other trade and investment deals.

The real policy pursued by Vietnam is consistent with two theories of trade: mercantilism and the theory of absolute advantage. The second theory must be discussed since some factors contributing to this argument have already been mentioned. Hence, the export of a particular product should be handled only by the country that most effectively and efficiently produces it (Pugel, 2020). Thus, another condition of this trade is the naturalness of actions and compliance with market forces. The capitalist policy of Vietnam in the field of the economy contributed to the consolidation of the country as one of the leaders in the export of goods to foreign countries. Moreover, this activity is characterized by stability, constant improvement, and growth. According to the theory of absolute advantage, such success significantly enhances the specialization of labor. In addition, the sphere of application of new innovative methods of production of goods is receiving great development. An inexpensive labor force also makes its contribution, which is characterized by a high level of qualification and technical equipment for productive activities. All these factors allow Vietnam to have a well-structured and well-established export supply chain.

Furthermore, Vietnam’s economic policy has characteristic features inherent in the theory of mercantilism. This is due to the fact that, according to this theory, a country should improve its well-being by prioritizing foreign trade to the detriment of domestic trade. This policy contributes to the establishment of a trade balance in the country. Such aspects of Vietnam’s economic development as the emphasis on exports and the establishment of a supply chain to foreign countries, will confirm its belonging to the theory of mercantilism. However, it is worth noting that when targeting exports, the country does not exclude domestic trade, supporting local producers. In particular, this trend was noted after the coronavirus pandemic and the increase in GDP.

One of the concern factors is the impact of the growth and development of the Vietnamese economy on domestic wages and other prices for factors of production. Therefore, the growth of foreign investment and foreign trade can significantly complicate and complicate this process, becoming a problem for the expansion of the country. Moreover, the issue price will increase from openness to foreign financial investments in the country’s economy. This factor can also affect the increase in the level of competition and isolation between national producers of goods. Thus, in order to avoid such a situation and maintain growth, Vietnam should pay more attention to the domestic economy and reduce the emphasis on the external, which will be a comparative advantage for it.

Consequently, Vietnam is interested in the success of conducting foreign trade. This fact is facilitated by a large number of selected investments and an export orientation. However, these indicators may also serve as an obstacle to the country’s economic growth. This is due to the fact that the state should pay more attention to domestic trade. Cheap labor and advanced technologies will allow Vietnam to conduct this policy and avoid possible risks and negative consequences.


Pugel, T. (2020). International Economics 17th Edition. McGraw Hill Education.

Vietnam’s growth model: The special sauce. (2021). The Economist. Web.

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BusinessEssay. (2023) 'Vietnam's Economy and Foreign Trade in 2020'. 13 January.


BusinessEssay. 2023. "Vietnam's Economy and Foreign Trade in 2020." January 13, 2023.

1. BusinessEssay. "Vietnam's Economy and Foreign Trade in 2020." January 13, 2023.


BusinessEssay. "Vietnam's Economy and Foreign Trade in 2020." January 13, 2023.