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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Will Eric Trump’s real estate plans save Vietnam’s export-driven economy? With President Donald Trump threatening to impose 46 per cent tariffs on its goods from July 9, the country — which sends nearly 30 per cent of its exports to the US — could use some goodwill from America’s first family. Hanoi has rushed to clear the way for a $1.5bn Trump Organization golf resort. Eric Trump and Vietnam’s prime minister broke ground on the project in late May, just seven months after it was announced. The US president’s son has also been discussing a Vietnamese Trump Tower.
Vietnam’s hopes for a tariff reprieve do not rest only on real estate. It has offered to remove its own tariffs on US goods, clear non-tariff barriers and buy Boeing planes and US gas. American companies that have made Vietnam central to their “China plus one” diversification strategy, and which account for much of the south-east Asian country’s $125bn trade surplus with the US, have also been lobbying. President Trump should listen, not least because unnecessarily alienating a nation that is a potential pillar of resistance to Chinese regional domination looks like geopolitical madness.
Yet even if Trump softens his tariff threat, it is clear that Vietnam has to change its economic model. Surging foreign investment in its manufacturing sector has driven rapid growth in recent years, but with the ratio of exports to GDP standing at nearly 90 per cent in 2023, diversification and development of its domestic market is badly needed. Export-related employment grew rapidly between 1995 and 2019, but Vietnam saw “zero net job creation from domestic demand”, the World Bank said last year in a report that warned reform implementation had “stalled in recent years”. Exports are still dominated by low-value-added factories reliant on inputs from China. Only 5 per cent of manufacturing workers are high-skilled.
To Lam, Vietnam’s Communist party chief, is shaking things up. Lam is merging provinces, scrapping ministries and cutting bureaucratic jobs. Last month he unveiled plans to revamp the legal system, increase international engagement and provide more support for domestic technology and innovation to help Vietnam meet its goal of becoming a high-income nation by 2045. But the most important decision by the party’s governing Politburo, Resolution 68, was to officially recognise the private sector as the economy’s key driving force. Lam wants to foster 20 large private companies integrated into global value chains by 2030 and boost the number of private enterprises to at least 3mn by 2045, from under 1mn now.
There is much here to applaud. Bureaucratic streamlining, fairer and more open law enforcement, and support for the private sector will promote homegrown entrepreneurialism. But Lam makes clear it would still be “a socialist-oriented market economy, managed by the state, under the leadership of the party”. The focus on a cohort of private national conglomerates risks misdirecting capital and creating opportunities for corruption. Nor is Lam diluting the party’s power or easing its tight censorship and media controls, even though more diverse oversight could help his reforms succeed.
Still, the push for change is encouraging. As one of the world’s most rapidly ageing countries, Vietnam’s clock is ticking. In a speech last month, Lam referenced an old proverb on the price to be paid for arriving late at a watering hole. Vietnam, he said, currently had a golden opportunity for development, but without urgent reform would risk falling behind in the global race and being left “like a slow buffalo drinking muddy water”.
