Vietnam burns red tape but growth may be harder to rekindle

Vietnam’s drive to energise its economy may take time to materialise in the face of rising fuel costs and trade barriers, analysts say A bonfire of red tape to unleash investment and complete stalled projects across Vietnam may drive economic expansion but is unlikely to offset the damage caused by US tariffs and the fuel crisis which have threatened the country’s growth ambitions. Vietnam’s Communist Party General-Secretary and President To Lam, the most powerful leader in a generation, has set an annual growth target of 10 per cent until 2030 to galvanise a nation whose ponderous bureaucracy has snarled private investment and slowed development of infrastructure projects. Last month, the government issued eight resolutions to cut 680 administrative procedures and simplify hundreds more to speed up approvals for new businesses in sectors ranging from casinos to importing cars. To Lam, who is currently in India signing deals ranging from rare earths to payments systems and fruit, wields decisive power in Vietnam, which should speed up decision-making as the country strives to become a high-income nation by 2045. A blizzard of draft decrees aimed at slashing red tape is queuing up for approval by a government that has already reduced the number of ministries by a quarter and slimmed down the civil service. “Vietnam’s government has recently issued a slew of resolutions and directives to cut administrative procedures and simplify business conditions,” said Heng Jian Xin, senior country risk analyst at BMI, a unit of Fitch Solutions. “This will contribute towards Hanoi’s goal of having 3 million enterprises in the country by 2045.” Vietnam’s economy grew by 8 per cent in 2025, but analysts warn that To Lam’s drive to boost growth may take time to materialise. “For example, the original Doi Moi reforms began in 1986 but were implemented over multiple years,” Heng said, referring to the market liberalisation that transformed post-war Vietnam from a poverty-afflicted nation to one of Asia’s fastest-growing economies. “As a result, Vietnam only experienced brisk growth during the 1990s. We are thus sceptical of Vietnam’s economy hitting the government’s 10 per cent growth target for 2026-30.” Part of the risk stems from heavy government borrowing to fund hundreds of billions of dollars in promised megaprojects, including a new town and a massive stadium in the Hanoi suburbs, high-speed train lines, upgraded ports and airports. It is a debt burden only likely to mushroom as the fuel crisis raises oil prices and increases the need for state subsidies to keep industry moving, or if the US economy tips into recession in the event of an AI bubble bursting. Vietnam’s prognosis in a sputtering global economy is also uncertain. Supply chains that once fled China to divert through the Southeast Asian hub are now under pressure as the Donald Trump White House seeks to reimpose tariffs through other means, after the Supreme Court blocked previous attempts. The country’s gross domestic product grew 7.83 per cent year on year in the first quarter of 2026, a decline from the 8.46 per cent growth rate in the fourth quarter of 2025, as rising oil imports boosted inflation, authorities said. “The administration will start investigating Vietnam and other economies for exploiting ‘forced labour’ and ‘excess capacity’ when exporting to the US,” said a BMI research note from February. “We believe sustained diversion of US imports from China to Vietnam could motivate the present and future presidential administrations to impose new trade barriers on imports from Vietnam,” it added. But the near to medium term is bright, Vietnam watchers say, with thousands of stalled projects across the country likely to be unlocked by a draft decree to break legal and administrative deadlock on agreed development deals across the country worth around US$130 billion. “Government expenditure in Vietnam has tended to undershoot expectations, partially from administrative challenges,” said Adam Ahmad Samdin, an economist with the Asia Macro team at Oxford Economics. “Broadly, while investment commitments in the private sector, especially foreign investments, have been forthcoming, licensing and regulatory bottlenecks have slowed disbursement. Recent changes reflect a desire to change this.” By Aidan Jones – The South China Morning Post – May 8, 2026

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