Vietnam, site of next Trump-Kim summit, model for growth

Vietnam, site of next Trump-Kim summit, offers model for transformation into export powerhouse

BANGKOK -- Vietnam, the location of President Donald Trump's next meeting with North Korean leader Kim Jong Un, has come a long way since the U.S. abandoned its war against communist North Vietnam in the 1970s.

GOING FOR GROWTH: The Vietnamese economy expanded at an estimated annual rate of just above 7 percent in 2018, fueled by a double-digit increase in manufacturing output. At 5.54 quadrillion Vietnamese dong ($238 billion in 2017), its GDP ranks in the world's top 50 economies. As the economy has grown, poverty rates have fallen and life expectancy has risen, to 76 years.

EXPORT BONANZA: By joining the World Trade Organization and regional groupings including the Pacific Rim accord called the Trans-Pacific Partnership, Vietnam has leapfrogged its neighbors in taking advantage of lowered tariffs, and its exports have soared. In the meantime, manufacturers from South Korea, Japan and China have crowded in to take advantage of lower costs and other incentives. Exports surged to $214 billion in 2017, up by more than a fifth from the year before. The U.S. is Vietnam's largest export market, at nearly $42 billion in 2017. It's not all cell phones: Vietnam's main exports also include electronics, shoes and apparel.

CHALLENGES: Having just barely reached middle-income status, Vietnam is struggling to raise productivity — the key to ensuring living standards will continue to improve. Economists say the country's productivity is only about a third of China's and much lower than in affluent countries. Heavy reliance on export-led growth leaves the country vulnerable to global downturns. Vietnamese leaders also have emulated China in keeping a tight grip on the media, political dissent and other freedoms. Rural poverty, pollution and corruption are serious concerns, and like its huge neighbor to the north, Vietnam is struggling to revamp state-dominated industries that are a legacy of the earlier era of central planning.

THE OUTLOOK: After years of absorbing large flows of foreign investment Vietnam could see that flow taper off along with global cutbacks. To sustain growth and remain competitive, the country needs to give a freer rein to private businesses, the World Bank and other experts say, and encourage adoption of more advanced technologies.