Vietnam’s Over-reliance on Exports and FDI

Abstract

The EU-Vietnam Free Trade Agreement (EUVFTA) that came into force on 1 August 2020 is the latest in a string of free trade agreements that Vietnam has concluded to bolster its exports. The EUVFTA’s twin agreement, the EU-Vietnam Investment Protection Agreement (EVIPA), has also been ratified by Vietnam. Once it comes into force, the agreement is expected to attract more European investors into Vietnam, which has already been a favourite foreign direct investment (FDI) destination in the region. More than 30 years since adopting market-based economic reforms in 1986, Vietnam has turned itself from an isolated pariah state and one of the least developed countries into one of the fastest-growing and most dynamic economies in the world. Vietnam’s success story is unmistakably based on an extraordinary level of economic openness premised upon international trade and investment regimes like the EUVFTA and the EVIPA. But while most attention has been paid to the benefits that Vietnam had gained from its deepening international economic integration, much less has been said of the consequences of Vietnam’s over-reliance on exports and FDI.