Vietnamese economy breaks into "moderately free" category

Vietnam has 13 preferential trade agreements in force, significantly liberalising trade

According to the index, Vietnam’s economic freedom score is 61.7, making it the 90th freest on the index.

Its overall score has increased by 2.9 points, primarily because of an improvement in fiscal health. Vietnam scored 82.8 in fiscal health, higher than the world average of 74.2. The score is up 24.8 against last year and is the highest growth rate over the last four years.

Vietnam ranks 17th among 40 countries in the Asia-Pacific, and its overall score is above the regional and world averages.

Vietnam’s economy broke into the moderately free category this year for the first time. According to the Heritage Foundation, Vietnam’s ranking could increase further if the government took additional action to liberalise investment rules and the financial sector.

Business freedom has declined slightly in comparison to other countries. However, Vietnam’s new 2019 labour code has added flexibility to labour contracts. The government funds a variety of subsidies for fuel, energy and water utilities, food, natural resources, and pharmaceuticals.

Vietnam has 13 preferential trade agreements in force. The trade-weighted average tariff rate is 5.5 per cent, and 83 non-tariff measures are in effect. The overall investment framework continues to improve, and several amendments related to foreign direct investment have been adopted.

However, there are ownership limits in various sectors. The state remains involved in the financial sector, and only about 30 per cent of adult Vietnamese use formal banking services.

The Heritage Foundation measures these indicators based on data from 184 economies. This is the 27th year in a row the organisation has conducted this survey.

The ranking is based on rule of law (property rights, judicial effectiveness, government integrity), government size (tax burden, government spending, fiscal health), regulatory efficiency (business freedom, labour freedom, monetary freedom), and open market (trade freedom, investment freedom, financial freedom).

Countries in the top list of the free economy index include Singapore (89.7 points), New Zealand (83.9), Australia (82.4), Switzerland (81.9), and Ireland (81.4).