Vietnam in 2021: A New Government Faces a Novel Virus Free

To begin with COVID-19, Vietnam successfully limited the spread of the virus for the first year of the pandemic. By rapidly closing its borders, imposing strict quarantine policies, and engaging in extensive contact tracing, Vietnam earned international plaudits in 2020 for its remarkable control of the virus. The situation changed in April 2021, when clusters of new variants bloomed throughout the country. Initially, they stemmed from Vietnamese nationals returning from overseas. However, by the end of April, community transmission became the dominant form of spread.

In contrast to 2021, when deputy prime minister Vu Duc Dam and the National Steering Committee led the response, in 2021 newly installed prime minister Pham Minh Chinh became its face. At the beginning of his term, the government relied on Directives 15, 16, and 19, issued in March by outgoing prime minister Nguyen Xuan Phuc, which specified differing levels of movement restrictions that localities could apply in cases of outbreaks. However, these measures did not have the same effect as in 2020, and cases mushroomed in July, particularly in the industrial areas in and around Ho Chi Minh City. This led to a dramatic ratcheting up of restrictive measures, such that by August, residents of some areas of Ho Chi Minh City were not allowed to leave the house even to shop for groceries. The military was also deployed to Ho Chi Minh City to assist in enforcing the lockdown.

As in 2020, surveys showed that Vietnamese citizens were broadly supportive of the government efforts and the restrictive measures. At the same time, there was some slippage from the high levels of support that obtained when Vietnam had successfully contained the spread. While 96% approved or strongly approved of the government’s COVID response in October 2020, the number had dropped to 83% in October 2021.¹ Part of the reason for the declining support could be the economic damage caused by the lockdowns. The restrictive measures, which lasted three months in some areas, caused hardship, particularly for those unable to easily access food, and for migrants who were unable to return to their home provinces. The restrictions in the most important industrial zone also inflicted major economic damage, which Vietnam had managed to avoid until then. In 2020, growth had slowed, but nonetheless remained in positive territory through each quarter of the pandemic. Most of the economic losses before the third quarter of 2021 were felt in the service and tourism sectors. But the protracted limits on mobility in Vietnam’s industrial heart in 2021 inflicted far greater damage, such that the third quarter saw GDP fall by over 6%.

This dramatic economic downturn led to the most pronounced public calls for relaxing the restrictions on mobility since the pandemic started. In September, the US, Korean, and EU chambers of commerce called on Vietnam to loosen its restrictions to open up the economy.² Prime minister Pham Minh Chinh also heard from domestic businesses during several meetings he held with the Vietnam Chamber of Commerce and Industry and other economic groups.³ Even some members of the newly elected National Assembly voiced concerns, with delegate and Finance Committee member Le Thanh Van suggesting that with increasing vaccinations and the spread of the Delta variant, living with “zero COVID” was no longer feasible or even necessary.⁴ At the end of September, Vietnam lifted its most restrictive measures in Ho Chi Minh City, effectively signaling the end of the “zero COVID” strategy and a shift toward seeing the virus as endemic. Some economists predict that the relaxing of restrictions will lead to economic improvement in the fourth quarter.

A bright spot in the COVID-19 story in 2021 is that Vietnam’s vaccination campaign, though delayed, proceeded without the public skepticism that has plagued other countries. Indeed, while Vietnam was slower than some neighboring countries in securing vaccine supplies, the public remains among the least vaccine hesitant, with nearly 90% saying they have received at least one shot or will do so when available (Zaini and Ha 2021). The area where media reports suggest there may be some skepticism is with regard to the Chinese vaccine, which occupied an increasingly prominent share of the overall vaccine supply in Vietnam as of November. Media reports suggest that Vietnamese prefer the AstraZeneca, Pfizer, or Moderna, both because of low trust in China and due to concerns about its efficacy. However, given the acute need to return to work, or in some cases to return home from idled factories, reports suggest that many were willing to at least grudgingly take Sinopharm.⁵ As of October 2021, more than 70% of Vietnamese had received at least one shot, with 30% fully vaccinated according to the WHO.

Amid a relative calm in the COVID storm, the Communist Party of Vietnam held its five-year Party Congress from January 25 to February 1, 2021. The two big prizes going into the congress were the general secretary and prime minister positions. Ahead of the congress, there was some question as to whether Vietnam would retain its more collective leadership structure or follow China in centralizing power in the hands of the general secretary position. This concern was fueled by Nguyen Phu Trong’s breaking precedent by being both party secretary and president after former president Tran Dai Quang’s death in 2018. Some expressed concern that Vietnam was moving to a less consensus-based and more personalized system around the position of the general secretary.

However, the outcome of the Party Congress seems to have quelled these concerns. First, Nguyen Xuan Phuc’s appointment as president restored the “four pillars” (từ trụ) collective-leadership model by ensuring that the presidency and general secretary positions were not held by the same person. Additionally, in a surprising turn of events, the party selected former Central Organization Committee chair Pham Minh Chinh as prime minister. Since Vo Van Kiet, the prime minister position, which is more powerful in Vietnam than in China, has gone to a southerner. Also, the prime minister has tended to emerge from the government by serving first as a deputy prime minister. Pham Minh Chinh, as a native of Thanh Hoa in the north, and previously a leading figure on the party side, broke the mold on both counts. With his powerful profile, his selection suggests that the prime minister position will remain an important position.

Still, Trong remains an important player. While the party seems to have delegated most decision-making over COVID policy to the government, Trong has continued the anti-corruption campaign, with former minister of industry and trade Vu Huy Hoang receiving a jail sentence in April for illegal land deals in Ho Chi Minh City. Investigations also ensnared former Binh Duong provincial party chief Tran Van Nam. The general secretary has also continued to emphasize ideological issues, with party mouthpiece Nhan Dan launching a website devoted to his ideological thought, and has been active in meeting or communicating with foreign leaders, including Xi Jinping in September. This all suggests that while the prime minister is visible and active, the general secretary continues to play a prominent role, thus preserving the balance between these two positions.

While COVID-19 and the Party Congress were the most important developments in 2021, other important economic issues that predate the pandemic are worth considering. One of these is infrastructure development. Before 2021, Vietnam was poised to benefit from diversification strategies as companies hedged against locating all their factories in China (Malesky and Mosley 2021). While it was welcome, this surge of foreign direct investment also exposed limits to Vietnam’s infrastructural capacity that constrained how much of their operations companies could shift to Vietnam. Despite spending more on infrastructure as a percentage of GDP than its ASEAN neighbors Indonesia, Singapore, and Thailand (Lan and Hoang 2021), Vietnam still needs significant upgrades in its ports, airports, and domestic transit. In April, the Ministry of Transportation drafted a proposal to spend more than USD 40 billion by 2030 on projects including the Long Thanh International Airport in Dong Nai, the Lach Huyen Port in Hai Phong, and more than 3,000 additional miles of highway.⁶

Fulfilling the plan, of course, requires financing, which as of 2021 is largely confined to the state budget. This limits the degree to which it can implement its grand plans (Lan and Hoang 2021). Vietnam was further pinched because as a “graduate” from the World Bank’s International Development Association, it no longer qualifies for many concessional lending schemes (Oxfam 2019). One tempting, but fraught, source of funding for such infrastructure development is China’s Belt and Road Initiative (BRI). However, Vietnam has been more reluctant to receive BRI aid than neighboring countries like Laos and Cambodia (Raymond 2021). Nationalism, protests over perceived Chinese influence, and concerns over unfair loan terms are some of the reasons for the hesitation. Whether and how Vietnam secures funding for these infrastructure needs will have important implications for its post-COVID growth trajectory and the degree to which Vietnam does take advantage of BRI funds.

Another important area where Vietnam continues to have infrastructure needs is energy. According to a plan issued by the Ministry of Industry and Trade in October 2021, Vietnam will need to increase its energy production capacity to meet its target of 6.6% annual growth until 2030. To meet the increasing demand, Prime Minister Chinh vowed at the COP26 to reduce fossil fuel consumption and increase the use of renewables.⁷ At the same time, however, the ministry issued a report for energy investment planning to increase coal capacity, though the proportion of coal in the overall energy mix could fall.⁸

Some international pressure may challenge this plan to increase coal plant construction. Mitsubishi, for example, announced in February 2021 it was pulling out of financing the Vinh Tan 3 power plant in Binh Thuan Province. Xi Jinping also promised in September 2021 to stop financing new coal plant construction. Even so, construction on some new projects, such as the Vung Ang 2 plant in Ha Tinh, will continue. Furthermore, Vietnam will still rely heavily on coal if existing coal plants are not shut down. More than 50% of its energy came from coal in 2020—far more than hydropower, which is the second-largest source at 26%.⁹ This reliance on fossil fuels continues despite public opinion seeming to support a transition to renewables. A recent study even finds that citizens are willing to pay more for renewables. The problem, however, is that they are also largely willing to support increased coal production if it is pitched as improving energy reliability. That is, while they would prefer renewables to coal, this does not mean they oppose coal if it will benefit the economy or energy reliability (Bakkensen and Schuler 2020). In short, coal is not anathema to Vietnamese citizens.

Continuing to rely on coal could put Vietnam in an increasingly awkward position as it engages in a global advocacy campaign highlighting its vulnerability to climate change to attract foreign assistance for climate mitigation, such as through the Green Climate Fund and the Adaptation Fund (McElwee 2021). Chinh also mentioned this vulnerability in his speech to the COP26. Continuing to highlight vulnerability while doubling down on coal could hurt Vietnam’s credibility on climate matters.

Vietnam has also taken other measures that could undermine its resilience to climate change and thus undermine its position. Despite the vulnerability of its coastal regions to flooding, much of Vietnam’s development plans are targeted at particularly vulnerable coastal areas (Balboni 2019). One project that has attracted concern from some environmentalists is Vingroup’s USD 9.3 billion Can Gio Tourist City project, planned for construction in the Can Gio Biopreserve. Not only would this project be vulnerable, it could also undermine the resilience of other populations centers upstream, including Ho Chi Minh City.

While Vietnam has some incentive to emphasize its environmental vulnerability, it is also keen to avoid generating panic over this vulnerability. As McElwee (2021) notes, too much concern could spook investors and cause credit agencies to downgrade its credit rating. Perhaps for this reason, Vietnam challenged a 2019 New York Times article that suggested that the Mekong Delta might “disappear” by 2050, suggesting the study was based on flawed data (McElwee 2021). Although it wants to generate sympathy for its environmental challenges, it must do so in a way that does not drive away investment or undermine its credit rating.

Both in terms of economic impact and as a source of domestic discontent, Vietnam’s relationship with China remains the most important foreign policy concern for the country. China is Vietnam’s largest source of imports, much consisting of intermediate goods vital to Vietnam’s export industry. This gives China tremendous leverage over Vietnam. At the same time, China remains immensely unpopular in Vietnam, particularly when compared to the positive perception Vietnamese citizens have of US influence in the region. This unpopularity can spark massive protests if China’s actions in the South China Sea are seen as particularly aggressive or if the Vietnamese leaders seem overly pliant to Chinese demands. In both 2014 and 2019, anti-Chinese sentiment sparked massive nationwide protests.

While the tensions remain and there have been no major changes to the policy positions on the South China Sea, as of November no major incidents have sparked overt public protests against China in 2021. Nonetheless, Vietnam continued to signal its consistent desire for the US to play a role in the region. In July and August, the US defense secretary and vice president Kamala Harris made successive visits to Vietnam. While these visits were bracketed by reassurances from the Vietnamese government to China that it was not considering an alliance with the US,¹⁰ there does appear to be momentum for upgrading the relationship between the US and Vietnam from a comprehensive partnership to a strategic partnership.¹¹ Thus, despite the need to placate China, Vietnam is interested in the US’s remaining a presence in the region.

Perhaps just as tellingly, Vietnam was silent after the US announcement of the AUKUS pact between the UK, the US, and Australia, which could transfer nuclear submarine technology to Australia. Though it was officially mum on the announcement, analysts believe that Vietnam welcomes the pact as a bulwark against further Chinese influence in the region.¹² Also quietly, Vietnam signed agreements with another Quad member, Japan, to transfer military technology to Vietnam (Choong and Storey 2021). This indicates that while Vietnam is unwilling to ruffle China’s feathers, it welcomes increased Western involvement in the region. This behavior is likely to persist as long as the dispute continues between Vietnam and China over the South China Sea.

Published online: February 9, 2022