Washington-based think tank Heritage Foundation named Vietnam as a “moderately free” economy in its annual league table ranking the world’s freest economies.
With an overall score of 61.7, Vietnam ranked 90th, a huge jump from the 105th place last year.
Among the 40 countries in the Asia-Pacific region, Vietnam ranked 17th, with a score that’s above regional and world averages.
The increase, according to the Heritage Foundation, was primarily because of an improvement in fiscal health.
Vietnam’s economic growth has been making headlines recently, naming the country the top performing economy throughout Asia amidst a pandemic that disrupted global supply chains and economic activities.
The country managed to record growth of 2.9% last year, and even with the emergence of the new local infections, the expansion of foreign-owned factories, increase in trade turnover and surge in electronics exports are seen to drive the economy forward.
“Vietnam’s economy broke into the moderately free category this year for the first time. Its ranking could increase further if the government took additional action to liberalize investment rules and the financial sector,” read the report of the think tank.
As defined by the Heritage Foundation, economic freedom is the fundamental right of every human to control his or her own labor and property. It also emphasized that “economic freedom brings greater prosperity” as it is strongly associated with healthier societies, cleaner environments, greater per capita wealth, human development, democracy and poverty elimination.
The 2021 index, the think tank's 27th edition, measured data from 184 countries and territories based on the pillars of economic freedom: rule of law, government size, regulatory efficiency and open markets. For the 2021 Index , most data covers the second half of 2019 through the first half of 2020.
With a score of 89.7, Singapore is considered the freest economy in the world. New Zealand, Australia, Switzerland and Ireland complete the top five.
Challenges in Vietnam’s economic liberalization
Vietnam has come a long way since the end of the war that crippled its economy and halted trade cooperations with its allies. When the “doi moi” was implemented in 1986, Vietnam slowly transitioned from being mainly agriculture-based to a more industrial and market-based economy.
Banking on its growing tourism and manufacturing industries, Vietnam is highly considered as among the world’s fastest growing economies.
However, the biggest obstacle in Vietnam’s greater economic freedom is its weak rule of law because of the “corruption in the subservient judiciary and in the many unreformed and inefficient state-owned enterprises.”
“The state owns all land, although land-rights certificates have been issued for most of it,” according to the Heritage Foundation.
But it also acknowledged that the protection of property rights in Vietnam has evolved in recent years. It also mentioned the country’s 2019 labor code that added flexibility to labor contracts, and the government’s funding of a variety of subsidiaries to ensure fair use and distribution of water, energy, food and natural resources.
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Trade freedom and open markets
Vietnam’s participation in the World Trade Organization and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership helped greatly improve its overall investment framework. The 11-country Trans-Pacific deal was aimed at slashing tariffs across Asia-Pacific, cementing strong exports and foreign investments and improving labor rights and conditions of workers.
The country also has other preferential bilateral trade agreements currently in force, which has enabled it to import and export goods to economic powerhouses such as the UK, the US, China and Japan.
As underscored by the US think tank, Vietnam’s economic freedom has been measurably improving, enhancing its place in the global economy.