2020 Index of Economic Freedom

Vietnam

OVERALL SCORE58.8
WORLD RANK105
Rule of Law

Property Rights52.6

Judicial Effectiveness40.1

Government Integrity33.8

Government Size

Tax Burden79.5

Government Spending75.9

Fiscal Health58.0

Regulatory Efficiency

Business Freedom65.6

Labor Freedom62.5

Monetary Freedom68.2

Open Markets

Trade Freedom79.6

Investment Freedom40.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 94.6 million
  • GDP (PPP):
    • $710.3 billion
    • 7.1% growth
    • 6.6% 5-year compound annual growth
    • $7,511 per capita
  • Unemployment:
    • 1.9%
  • Inflation (CPI):
    • 3.5%
  • FDI Inflow:
    • $15.5 billion

Vietnam’s economic freedom score is 58.8, making its economy the 105th freest in the 2020 Index. Its overall score has increased by 3.5 points due to a dramatic gain in fiscal health. Vietnam is ranked 21st among 42 countries in the Asia–Pacific region, and its overall score is slightly below the regional and world averages.

The Vietnamese economy has gradually been climbing the ranks of the mostly unfree since 2011. Strong GDP growth over the past five years has mirrored this improvement, driven by export-focused manufacturing and processing sectors.

Economic freedom will be enhanced in Vietnam if the government can successfully expand economic liberalization by promoting international trade and restructuring state-owned enterprises, but progress on the latter is likely to be limited by pushback from established interests within the Communist Party. Improvement of the investment climate will be slow without improvements in judicial effectiveness and stronger efforts to fight corruption.

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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. In 2016, Dung was forced out after losing election as General Secretary of the Communist Party, but state-managed economic liberalization has continued under General Secretary Nguyen Phu Trong. 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 52.6 Create a Graph using this measurement

Judicial Effectiveness 40.1 Create a Graph using this measurement

Government Integrity 33.8 Create a Graph using this measurement

Although all land is collectively owned and managed by the state, as of September 2018, the government had issued land-use rights certificates for 96.9 percent of land in Vietnam. The underdeveloped judiciary is subordinate to the Communist Party of Vietnam, which controls the courts at all levels. Corruption and nepotism are endemic and plague almost every sector of the government, the Communist Party, and state-owned companies.

Government SizeView Methodology

The top personal income tax rate is 35 percent, and the top corporate tax rate is 22 percent. Other taxes include value-added and property taxes. The overall tax burden equals 18.6 percent of total domestic income. Government spending has amounted to 28.3 percent of the country’s output (GDP) over the past three years, and budget deficits have averaged 4.7 percent of GDP. Public debt is equivalent to 57.5 percent of GDP.

Regulatory EfficiencyView Methodology

Starting a business has become easier, and the cost of business registration has been cut. Corporate governance standards and the enforcement of labor laws are weak. 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 for up to 10 years.

Open MarketsView Methodology

The total value of exports and imports of goods and services equals 187.5 percent of GDP. The average applied tariff rate is 2.7 percent, and 80 nontariff measures are in force. The overall investment framework has been modernized and facilitates foreign investment, but it lacks efficiency. The financial sector continues to evolve, and directed lending by state-owned commercial banks has been scaled back in recent years.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Singapore89.40.0
2Hong Kong89.1-1.1
3New Zealand84.1-0.3
4Australia82.61.7
5Taiwan77.1-0.2
6Malaysia 74.70.7
7South Korea741.7
8Japan73.31.2
9Macau70.3-0.7
10Kazakhstan69.64.2
11Thailand 69.41.1
12Indonesia67.21.4
13Brunei Darussalam66.61.5
14Philippines64.50.7
15Fiji63.41.2
16Kyrgyz Republic 62.90.6
17Bhutan62.1-0.8
18Samoa62.1-0.1
19Vanuatu60.74.3
20China59.51.1
21Vietnam58.83.5
22Tonga58.81.1
23Papua New Guinea58.40.0
24Sri Lanka57.41.0
25Cambodia57.3-0.5
26Uzbekistan57.23.9
27Maldives56.53.3
28India56.51.3
29Bangladesh 56.40.8
30Mongolia55.90.5
31Laos55.5-1.9
32Pakistan 54.8-0.2
33Afghanistan54.73.2
34Nepal54.20.4
35Burma540.4
36Solomon Islands52.9-1.7
37Tajikistan52.2-3.4
38Micronesia520.1
39Turkmenistan46.5-1.9
40Timor-Leste45.91.7
41Kiribati45.2-2.1
42North Korea4.2-1.7
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