In its efforts to become an open economy, Vietnam jumped 23 notches to become 105th on the 2020 Index of Economic Freedom by The Heritage Foundation.
According to the report on the 2020 Index Economic Freedom, Vietnam jumped 23 positions higher from its global rank of 128th in 2019, becoming one of the top 5 economic freedom gainers in the Asia-Pacific region with a score of plus 3.5.
Vietnam ranks 21st among the 42 countries in the Asia-Pacific region and 105th in the world. Overall, the country’s economic freedom score is 58.8, slightly below the regional and world average, which are 61.1 and 61.6, respectively.
The country’s current rank is a 36-place improvement against 2018 when it was 141st in the world. Additionally, its economic freedom ranking and score has been constantly improving for three years in a row now.
The rise was made on the basis of a dramatic gain in fiscal health and export-focused manufacturing and processing sectors driving strong GDP growth over the past five years.
Economic freedom is measured based on 12 quantitative and qualitative factors, grouped into four broad categories:
- Rule of Law (property rights, government integrity, judicial effectiveness)
- Government Size (government spending, tax burden, fiscal health)
- Regulatory Efficiency (business freedom, labour freedom, monetary freedom)
- Open Markets (trade freedom, investment freedom, financial freedom)
The report mentions several positive trends worth noting. In property rights, although all land is collectively owned and managed by the state, as of September 2018, the government has begun issuing land use rights certificates for 96.9 per cent of land in Vietnam.
Starting a business has become easier, and the cost of business registration has been cut. Corporate governance standards and the enforcement of labour laws remain weak, however. Price stabilization controls remain in effect for fuel, energy, and water utilities, natural resources, and pharmaceuticals. In 2019, the government pledged to continue subsidies to the national air carrier (Vietnam Airlines) for up to 10 years.
The total value of exports and imports of goods and services equals 187.5 per cent of GDP. The average applied tariff rate is 2.7 per cent, and 80 non-tariff measures are in force. The overall investment framework has been modernized to facilitate foreign investment. The financial sector continues to evolve, and directed lending by state-owned commercial banks has been scaled back in recent years.
Vietnam has made attempts to be an increasingly open economy. Until now, Vietnam has 13 effective free trade agreements (FTAs), including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) with 10 other countries.
Reporting by Truc Anh @ VIR