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Viet Nam Harmonising socialism with a market economy
By pursuing a policy of gradual renewal (“Doi Moi”), the socialist republic has already achieved remarkable economic results since the mid-1980s. Conditions for private-sector activity and international investment have improved, and exports have developed well. However, from Europe's perspective there are marked deficits with regard to the rule of law.
The economic progress has helped reduce poverty significantly. While more than 50 per cent of the people were still living below the national poverty line in the mid-1990s, this percentage had dropped to just under seven per cent by 2018. However, there are still many people, especially in rural areas, who are not yet able to benefit sufficiently from economic development. Moreover, the sharp decline in economic activity caused by the COVID-19 pandemic has pushed many people into renewed poverty, at least temporarily.
If the country is to be able to continue its successful course, it first needs to recover from the impact of the pandemic and resolve a number of fundamental structural problems. For instance, the envisaged privatisation of selected state-owned enterprises is only proceeding slowly, and there is a huge shortage of well-trained skilled workers in the country.
Moreover, economic growth in Viet Nam has been taking place at the expense of the environment. The Vietnamese government therefore seeks to achieve a more sustainable growth model on the basis of its Green Growth Strategy. In that context, Prime Minister Pham Minh Chinh announced at the COP26 climate conference in November 2021 that, with international support, his country wants to achieve net zero emissions by 2050 and exit from coal by the end of the 2040s.
Risk posed by climate change
According to the Global Climate Risk Index, Viet Nam is one of the 20 countries in the world that are most vulnerable to climate change. The densely populated delta regions along the Vietnamese coast are particularly affected by the consequences of climate change. The rise in sea levels that is to be expected and the increase in extreme weather events are already leading to serious consequences for the country's economic development. Another challenge is land subsidence caused by excessive groundwater extraction. The Vietnamese government therefore attaches great political importance to climate change adaptation measures.
German development cooperation with Viet Nam
Following the reunification of North and South Viet Nam in 1976, East Germany forged close ties with the newly founded Socialist Republic of Viet Nam. After German reunification, the Federal Republic of Germany resumed bilateral development cooperation with the country in 1990. In 2011, Germany and Viet Nam agreed a strategic partnership, with a view to further expanding their political, economic, cultural and development cooperation ties.
As part of the BMZ 2030 reform process, Viet Nam was given a stronger role, becoming what is termed a “global partner”. Vietnamese-German cooperation focuses on jointly finding answers to key global challenges in areas such as climate action and environmental protection, a stable world economy, and multilateral cooperation.
During the government negotiations in July 2021, the Federal Ministry for Economic Cooperation and Development (BMZ) committed 113.5 million euros in new funding for Viet Nam. 29.4 million euros of this has been earmarked for Technical Cooperation and 84.1 million euros for Financial Cooperation. 60 million euros was provided in the form of reduced-interest loans, with the primary purpose of helping to mitigate the impact of the COVID-19 crisis.
In the future, development cooperation will focus on the following core areas:
- Sustainable economic development, training and employment | Areas of intervention: private sector and financial sector development; technical and vocational education and training
- Climate and energy, just transition | Areas of intervention: renewable energy and energy efficiency; climate change mitigation and adaptation; sustainable urban development
- Conserving nature and natural resources, protecting life on Earth | Areas of intervention: biodiversity; forests
- Health, social protection and population policy | Area of intervention: health, pandemics and One Health
The BMZ is also involved in efforts to help improve governance in Viet Nam, especially with regard to the rule of law and legal certainty, and it is providing support for a values-based approach to the digital transformation.
As at: 22/06/2022