2021 Index of Economic Freedom

Vietnam

OVERALL SCORE61.7
WORLD RANK90
Rule of Law

Property Rights51.3

Judicial Effectiveness35.9

Government Integrity38.0

Government Size

Tax Burden80.3

Government Spending86.0

Fiscal Health82.8

Regulatory Efficiency

Business Freedom65.2

Labor Freedom62.6

Monetary Freedom69.0

Open Markets

Trade Freedom79.0

Investment Freedom40.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 96.5 million
  • GDP (PPP):
    • $1.0 trillion
    • 7.0% growth
    • 6.9% 5-year compound annual growth
    • $8,374 per capita
  • Unemployment:
    • 2.0%
  • Inflation (CPI):
    • 2.8%
  • FDI Inflow:
    • $16.1 billion

Vietnam’s economic freedom score is 61.7, making its economy the 90th freest in the 2021 Index. Its overall score has increased by 2.9 points, primarily because of an improvement in fiscal health. Vietnam is ranked 17th among 40 countries in the Asia–Pacific region, 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. Its ranking could increase further if the government took additional action to liberalize investment rules and the financial sector. The biggest obstacle to greater economic freedom in Vietnam remains the country’s extremely weak rule of law because of corruption in the subservient judiciary and in the many unreformed and inefficient state-owned enterprises.

IMPACT OF COVID-19: As of December 1, 2020, 35 deaths had been attributed to the pandemic in Vietnam, and economic growth was forecast to decline to 1.6 percent for the year.

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Background

The Socialist Republic of Vietnam remains a Communist dictatorship characterized by repression of dissenting political views and the absence of civil liberties. Economic liberalization, however, began in 1986 with doi moi reforms aimed at transitioning to a more industrial and market-based economy. Vietnam’s economic growth, based on tourism and manufactured exports, was among the world’s fastest during the decade-long tenure of former Prime Minister Nguyen Tan Dung, and state-managed economic liberalization has continued under General Secretary and President Nguyen Phu Trong. Vietnam will hold party elections early in 2021 for the four highest governing positions, including general secretary and president. Vietnam joined the World Trade Organization in 2007 and signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership in 2018.

Rule of LawView Methodology

Property Rights 51.3 Create a Graph using this measurement

Judicial Effectiveness 35.9 Create a Graph using this measurement

Government Integrity 38.0 Create a Graph using this measurement

Protection of property rights is still evolving, and enforcement is uneven. The state owns all land, although land-rights certificates have been issued for most of it. Nevertheless, land tenure is still a very contentious issue. The underdeveloped judiciary suffers from corruption and is subordinate to the Communist Party of Vietnam, which controls the courts at all levels. Corruption remains a major problem throughout the government.

Government SizeView Methodology

The top individual income tax rate is 35 percent, and the top corporate tax rate is 20 percent. Other taxes include value-added and property taxes. The overall tax burden equals 18.5 percent of total domestic income. Government spending has amounted to 21.6 percent of total output (GDP) over the past three years, and budget deficits have averaged 2.9 percent of GDP. Public debt is equivalent to 42.9 percent of GDP.

Regulatory EfficiencyView Methodology

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

Open MarketsView Methodology

Vietnam has 13 preferential trade agreements in force. The trade-weighted average tariff rate is 5.5 percent, and 83 nontariff measures are in effect. The overall investment framework continues to improve, and several amendments related to foreign direct investment have been adopted. There are ownership limits in various sectors. The state remains involved in the financial sector, and only about 30 percent of adult Vietnamese use formal banking services.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Singapore89.70.3
2New Zealand83.9-0.2
3Australia82.4-0.2
4Taiwan78.61.5
5Malaysia74.4-0.3
6Japan74.10.8
7South Korea740.0
8Kazakhstan71.11.5
9Thailand69.70.3
10Indonesia66.9-0.3
11Brunei Darussalam66.60.0
12Philippines64.1-0.4
13Kyrgyz Republic63.70.8
14Mongolia62.46.5
15Fiji62.2-1.2
16Samoa61.9-0.2
17Vietnam61.72.9
18Vanuatu60.5-0.2
19Papua New Guinea58.90.5
20China58.4-1.1
21Uzbekistan58.31.1
22Bhutan58.3-3.8
23Tonga57.5-1.3
24Cambodia57.30.0
25Bangladesh 56.50.1
26India56.50.0
27Solomon Islands56.53.6
28Sri Lanka55.7-1.7
29Tajikistan55.23.0
30Burma55.21.2
31Maldives55.2-1.3
32Laos53.9-1.6
33Afghanistan53-1.7
34Pakistan51.7-3.1
35Nepal50.7-3.5
36Micronesia50.4-1.6
37Turkmenistan47.40.9
38Timor-Leste44.7-1.2
39Kiribati44.4-0.8
40North Korea5.21.0
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