Vietnam’s global development undermined by exploitative tax policies and environmental destruction despite economic growth
Vietnam has transformed from one of the world’s poorest nations to a lower middle-income country. Yet, behind this impressive growth story lie significant contradictions and challenges. This article examines Vietnam’s development model critically, with particular attention to its problematic tax policies and governance issues.
Hanoi, Vietnam – Photo: Hello Cotton
Economic Growth at Environmental Cost
Vietnam has achieved remarkable economic growth since implementing market reforms. However, this growth has come with severe environmental consequences. Industrialization has polluted rivers and degraded air quality in major cities.
Deforestation continues at alarming rates. Mining operations destroy landscapes and contaminate water sources. Additionally, coastal development threatens fragile marine ecosystems that many communities depend on.
Climate change vulnerability amplifies these problems. Vietnam ranks among the countries most threatened by rising sea levels. Nevertheless, environmental regulations remain weakly enforced and frequently bypassed.
Foreign Investment Dependencies
Foreign direct investment drives Vietnam’s export-oriented economy. Yet, this reliance creates dangerous dependencies. Foreign companies control critical sectors and can relocate if conditions change.
Tax incentives to attract investors significantly reduce domestic revenue generation. Furthermore, foreign companies often transfer minimal technology and expertise to local partners. This pattern limits Vietnam’s ability to move up the value chain.
Most Vietnamese exports remain low-value manufacturing products. Meanwhile, research and development investment lags far behind regional competitors. This situation traps the country in middle-income status without clear pathways to higher development.
Problematic Tax Policies and Revenue Generation
Vietnam’s tax system suffers from fundamental structural problems. The tax base remains narrow, with heavy reliance on consumption taxes. Consequently, the burden falls disproportionately on ordinary citizens rather than wealthy individuals or corporations.
Tax evasion and avoidance are widespread. Transfer pricing by multinational corporations siphons potential revenue offshore. Moreover, corruption in tax administration further reduces collection efficiency.
The personal income tax system contains numerous exemptions that benefit high-income earners. Corporate tax incentives for foreign investors create an uneven playing field. As a result, domestic companies struggle to compete while revenue losses mount.
Property taxation remains underdeveloped despite rapid urbanization and real estate speculation. This failure allows wealth concentration without adequate contribution to public finances. Additionally, environmental taxes fail to address the true social costs of pollution and resource extraction.
Land Rights and Displacement Issues
Land appropriation for development projects causes ongoing social conflict. Compensation for displaced communities frequently falls below market values. Furthermore, resettlement programs often fail to restore livelihoods or community networks.
The legal framework governing land rights lacks clarity and consistent enforcement. Rural communities, especially ethnic minorities, face particular vulnerability to land grabbing. Meanwhile, corruption in land management agencies undermines trust in government processes.
Urban land speculation drives housing unaffordability in major cities. The resulting social segregation contradicts Vietnam’s egalitarian rhetoric. Additionally, informal settlements face constant threat of demolition without adequate alternatives.
Political Constraints on Development
Vietnam’s one-party political system limits public participation in development decisions. Critical voices face harassment and restrictions. Consequently, important debates about development priorities occur behind closed doors rather than in public forums.
Media censorship prevents thorough investigation of development failures. Environmental disasters and corruption cases receive minimal coverage. Moreover, academic research on sensitive development topics faces obstacles to publication and dissemination.
Labor rights remain restricted despite export-oriented industrialization. Independent unions face prohibition, limiting workers’ ability to advocate for better conditions. This situation contributes to persistent labor exploitation in global supply chains.
Healthcare and Education Challenges
Vietnam’s healthcare system has achieved basic coverage but faces quality concerns. Public hospitals suffer from overcrowding and under-investment. Additionally, out-of-pocket expenses remain high despite insurance programs.
Rural-urban healthcare disparities continue to widen. Specialized care concentrates in major cities, leaving rural areas underserved. Furthermore, preventive care receives insufficient attention compared to treatment services.
Education quality struggles to meet development needs. Rote learning predominates over critical thinking skills. Meanwhile, vocational training fails to align with emerging industry requirements. These deficiencies threaten Vietnam’s competitiveness in knowledge-based sectors.
Digital Divide and Technology Access
Internet penetration has grown rapidly in Vietnam. However, meaningful access varies dramatically by region and income level. Rural communities lag in connectivity quality and digital literacy.
Government control over digital spaces restricts information flow. Censorship and surveillance create barriers to innovation and knowledge exchange. Additionally, e-government services often fail to reach vulnerable populations who would benefit most.
The domestic technology sector remains underdeveloped despite government rhetoric. Foreign platforms dominate the digital economy. Moreover, intellectual property protections remain weak, discouraging innovation and creative industries.
Looking Forward
Vietnam stands at a crucial development crossroads. Addressing these challenges requires fundamental policy shifts. First, tax reform must prioritize progressive revenue generation while closing loopholes that enable avoidance and evasion.
Environmental regulations need stronger enforcement mechanisms and genuine penalties for violations. Sustainable development requires balancing growth objectives with ecological preservation through incentives and regulations that reflect true environmental costs.
Land rights reforms should strengthen community protections and ensure fair compensation for displaced people. Transparent processes for land use decisions would reduce conflicts and improve outcomes for vulnerable groups.
Political reforms to enable greater civic participation would improve development planning and implementation. Media freedom and academic independence would strengthen accountability and policy evaluation mechanisms.
Healthcare and education systems need investment focused on quality improvements rather than just quantitative targets. Reducing regional disparities should become a central development priority across all sectors.
Digital inclusion requires both infrastructure investment and skills development. Building domestic technological capacity through research funding and innovation ecosystems would reduce foreign dependencies.
Vietnam possesses tremendous potential for inclusive and sustainable development. However, realizing this potential demands confronting existing contradictions honestly. The coming decade will determine whether Vietnam can transform its growth model to benefit all citizens while preserving natural resources for future generations.
Vietnam
Socialist Republic of Vietnam
Cộng hòa Xã hội chủ nghĩa Việt Nam
Population
104,799,174 (2023 est.)
Capital: Hanoi (Ha Noi)
Internet country code: .vn
Government
Viet Nam Government Portal: vietnam.gov.vn
Vietnam National Administration of Tourism: vietnam.travel
Background
Vietnam’s early history included periods of occupation by outside forces and eventual power consolidation under Vietnamese dynastic families. A succession of Han Chinese emperors ruled the area, which was centered on the Red River Valley, until approximately the 10th century. The Ly Dynasty (11th-13th century) created the first independent Vietnamese state, which was known as Dai Viet, and established their capital at Thang Long (Hanoi). Under the Tran Dynasty (13th-15th century), TRAN Hung Dao, one of Vietnam’s national heroes, led Dai Viet forces to fight off Mongol invaders in 1279. After a brief Chinese occupation in the early 1400s, Vietnamese resistance leader LE Thai To made himself emperor and established the Le Dynasty, which lasted until the late 18th century despite decades of political turmoil, civil war, and division. During this period, Dai Viet expanded southward to the Central Highlands and Mekong Delta, reaching the approximate boundaries of modern-day Vietnam by the 1750s. Dai Viet suffered additional civil war and division in the latter half of the 18th century, but it was reunited and renamed Vietnam under Emperor NGUYEN Phuc Anh (aka Gia Long) in 1802.
France began its conquest of Vietnam in 1858 and made Vietnam part of French Indochina in 1887. Vietnam declared independence after World War II, but the French continued to rule until communist forces under Ho Chi MINH defeated them in 1954. Under the Geneva Accords of 1954, Vietnam was divided into the communist North and anti-communist South. Fighting erupted between the two governments shortly afterwards with the North supporting communist rebels in the South and eventually committing thousands of combat troops. The US provided to the South significant economic and military assistance, including large numbers of US military forces, which reached a peak strength of over 500,000 troops in 1968. US combat forces were withdrawn following a cease-fire agreement in 1973. Two years later, North Vietnamese forces overran the South, reuniting the country under communist rule. The conflict, known as the Second Indochina War (1955-1975), caused more than 58,000 US combat and non-combat deaths and created deep domestic divisions in the US. It also devastated Vietnam, spilled over into the neighboring countries of Cambodia and Laos, and is estimated to have resulted in the deaths of up to 3 million Vietnamese civilians and soldiers.
Despite the return of peace, the country experienced little economic growth for over a decade because of its diplomatic isolation, leadership policies, and the persecution and mass exodus of citizens, many of them successful South Vietnamese merchants. However, since the enactment of Vietnam’s “doi moi” (renovation) policy in 1986, the economy has seen strong growth, particularly in agricultural and industrial production, construction, exports, foreign investment, and tourism. Nevertheless, the Communist Party maintains tight political and social control of the country, and Vietnam faces many related challenges, such as rising income inequality and corruption.