Thayer Consultancy Background Brief:

ABN # 65 648 097 123

Vietnam’s 3 Biggest Challenges
in the Next Five Years
Carlyle A. Thayer
January 10, 2021

In the run-up to the National Congress of the Communist Party of Vietnam, we are
preparing a report on what challenges Vietnam will face in the next five years. We
request your input and analysis of the following issues:
Q1. What do you see as the three biggest challenges Vietnam will face in the next five
years?
ANSWER: The first major challenge Vietnam will face over the next five years, due to
growing domestic demand for energy, is managing its South China Sea dispute with
China so that Vietnam can exploit the hydrocarbon resources in its Exclusive Economic
Zone under existing and new contracts with foreign oil companies and service
providers without provoking China into acts of bullying and intimidation.
The second major challenge for Vietnam is to resolve the long-standing numerous
tariff and trade-related disputes with the United States, its largest export market.
These disputes include obtaining market economy status and the restoration of less
developing country status from the Biden Administration, as well as the removal of
tariffs on catfish, shrimp, aluminium and steel, car and truck tires; restoration of
preferences as a developing country; and removal of punitive sanctions for currency
manipulation.
The third major challenge for Vietnam is economic recovery from the COVID-19
pandemic, restoration of reliable supply chains, and resumption of high sustainable
economic growth
Q2. And what are the chances that Vietnam will succeed?
ANSWER: First challenge:
Vietnam’s South China Sea dispute with China will remain intractable. China will
continue to harass oil exploration in Vietnam’s Exclusive Economic Zone in waters that
China claims thus constraining Vietnam’s ability to fully exploit its hydrocarbon
resources and meet domestic energy demand.
Second challenge:
Vietnam is likely to make progress on resolving some – but not all – of the tariff and
trade issues with the United States. Negotiations will be protracted as the Biden
Administration will seek greater market access for U.S. companies, increased
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intellectual property protection, and the removal of non-trade barriers. Other factors
influencing Vietnam-U.S. economic relations will be U.S. concern over human rights
and labour issues by a Democratic-controlled Congress and the results of the mid-term
elections in 2022.
Third challenge:
Vietnam is likely to resume high economic growth (6% plus) over the next five years.
The rate of growth will depend on successful domestic economic reforms as well as
successfully taking full advantages on a number of free trade agreements, such as the
Comprehensive and Progressive Trans-Pacific Partnership, the Regional
Comprehensive Economic Partnership, the Europe-Vietnam FTA, and the Eurasian
Economic Free Trade Union FTA.

Suggested citation: Carlyle A. Thayer, “Vietnam’s 3 Biggest Challenges in the Next Five
Years,” Thayer Consultancy Background Brief, January 10, 2021. All background briefs
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Thayer Consultancy provides political analysis of current regional security issues and
other research support to selected clients. Thayer Consultancy was officially
registered as a small business in Australia in 2002.