Vietnam is undergoing a twofold structural transformation: the transition from a centrally planned economy to a market-oriented economy and the shift from the still important agricultural sector to fast-growing manufacturing and services sectors. To support these processes, Switzerland supports Vietnam in achieving market-oriented and sustainable growth.
Vietnam is a priority country of Switzerland’s economic development cooperation. The objectives, priorities and business lines of the cooperation are laid out in the Vietnam Cooperation Programme 2021-2024. The program is implemented by the Swiss State Secretariat for Economic Affairs (SECO).
Opportunities and Challenges
Vietnam has become one of the most open economies in the world. In line with its rapid economic growth over the past three decades, Vietnam has achieved remarkable progress towards the Sustainable Development Goals. It has performed particularly well in human development, social inclusion, and poverty reduction.
Despite Vietnam’s impressive progress, development challenges persist. Labor productivity rates have started to slow down and the population is aging rapidly. Without further ambitious structural reforms to strengthen private investment, improve productivity, increase the efficiency of the public sector, and reinforce its financial sector, Vietnam might get stuck in a looming middle-income trap.
Furthermore, the country’s rich natural capital and biodiversity are threatened by environmental degradation, partially explained by its booming economic activities, rapid urbanization, and accelerated climate change impacts. Pollution from inefficient use of resources imposes severe costs on the society, negatively affecting health, the quality of life and constraining sustainable development.
Vietnam’s private sector-led growth model will require a cohesive set of reforms to pave the way for a market-based economy that promotes equal competition. The main objective of the economic development cooperation of Switzerland is to support Vietnam in achieving market-oriented, sustainable growth. To this end, SECO’s support will focus on promoting reliable economic framework conditions and an innovation-friendly business environment conducive to the development of Vietnam’s private sector:
Promoting market-oriented and reliable economic framework conditions: SECO supports the government of Vietnam in establishing an efficient and transparent management of public finances and a sound financial sector. This will help to foster a business environment that enables the private sector to flourish and innovate. With the same objective, SECO supports the government to improve and put in place the fundamentals for integrated urban development and infrastructure services.
Enhancing the private sector’s competitiveness and market access: SECO aims at increasing the overall performance of the Vietnamese private sector, with a particular focus on Small and Medium Enterprises (SMEs). SMEs play a central role in Vietnam’s economic growth, job creation and poverty reduction. However, a large number of SMEs still face significant challenges such as lack of productivity, lack of skilled workers, and inadequate access to finance and international markets. Considering the government’s focus on shifting to a private sector-led growth model, SECO can build on its long-standing engagement in these areas and further increase competitiveness of the Vietnamese private sector.
From 2021 to 2024, a total of some CHF 70 million is foreseen for SECO’s economic development cooperation with Vietnam. Apart from SECO, the Swiss Agency for Development Cooperation (SDC) from the Federal Department of Foreign Affairs also operates in Vietnam through global programs.