Vietnam Lags Behind Region In Economic Freedom

Vietnam ranks the 141st in the 2018 Index

Vietnam ranks 141st in the 2018 Index, lagging behind all regional countries, though its economic freedom score increased by 0.7 points to 53.1. Vietnam is regarded as a “mostly unfree” economy.

Dr Tran Quang Tuyen, Associate Dean of Faculty of Political Economy, VNU University of Economics and Business, and a member of the National Foundation for Science and Technology Development, said Vietnam’s ranking did not surprise him because he has been researching the index for many years. 

The essence of the market economy is the freedom to do business, to exchange goods and to work. 

A full market economy is an economy which has a high level of economic freedom, and therefore, the government’s intervention in resource allocation and enterprises’ operation must be minimal. 

Moreover, government needs to have a legal system and enforcement agencies which can effectively implement the rights of ownership and create an effective legal framework for enterprises’ operation.

The 12 aspects of economic freedom measured in the index are grouped into four categories, namely Rule of law (property rights, judicial effectiveness, and government integrity); Government size (tax burden, government spending, and fiscal health); Regulatory efficiency (business freedom, labor freedom, and monetary freedom); and

Market openness (trade freedom, investment freedom, and financial freedom).

The indexes reflect the quality of governments and the development levels of different kinds of markets (labor, monetary, finance, goods and services).

“The strong point of the component indexes is that they can measure and quantify the development of market economy in countries and compare the development levels of countries,” he said.

Tuyen went on to say that if looking into component indexes, one would see that Vietnam has made greater efforts than other countries in property protection, government spending, tax burden, and labor, monetary and trade freedom.

Meanwhile, the indicators related to judicial quality, fiscal system and investment freedom are much lower than that of the region’s averages.

In 1995, the level of economic freedom in Vietnam was approximately 40 percent, while it was 60 percent on average in the world and Asia-Pacific.

However, the gap has gradually narrowed as Vietnam’s economic freedom has increased over the last decade. In 2008, Vietnam’s economic freedom index reached 50 percent, but it was still lower than the Asia-Pacific level.

Tuyen affirmed that after two decades of transition, the Vietnam economy has seen platforms established for a more comprehensive market economy. However, Vietnam still needs to do many more things to improve its ranking, especially in the fight against corruption.

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