Viet Nam Harmonising socialism with a market economy

Viet Nam has an ambitious goal: it wants to become a high-income country (by World Bank standards) by 2045. To that end, annual per capita income would need to rise from the current level of 2,650 US dollars to more than 12,695 US dollars.

Svenja Schulze, Federal Minister for Economic Cooperation and Development

A snack bar in Hanoi, Viet Nam — Straight to

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. In order to implement Vietnam's ambitious climate goals, an energy transition partnership (Just Energy Transition Partnership) was concluded with the G7 in December 2022.

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.

Apprentices in the welding workshop at a vocational school in Ho Chi Minh City (Saigon), Viet Nam

In order to ensure that economic growth is sustainable and socially equitable and in order to achieve competitiveness in regional and international markets, Viet Nam needs to further modernise its economy and train urgently needed skilled workers. The BMZ is assisting Viet Nam in enhancing vocational training and reforming the economy.

Maintenance work on a high-voltage power line in Vietnam

Viet Nam's growing economy means that the demand for electricity is also growing at an enormous rate – and as a result, so are the country's greenhouse gas emissions. At the same time, Viet Nam is one of the countries that are particularly vulnerable to climate change. Germany has been supporting Viet Nam's energy transition.

A farmer with mangrove seeds and seedlings

Viet Nam is one of the world's biodiversity hotspots. The biodiversity and ecosystem services of its forests are very important both with a view to climate change mitigation and adaptation and with a view to sustaining rural people's livelihoods. The BMZ assists Viet Nam with regard to sustainable forest management and biodiversity conservation.

Viet Nam's health system is changing. While medical care in larger cities is getting better and better, not least thanks to the growing private sector, medical services in rural areas are still lagging far behind. Germany's development cooperation is addressing this gap, for example through targeted investment in medical equipment for rural areas and through the establishment of a telemedicine network.