“Thirteen years after a North Vietnamese tank rolled through the gates of Saigon’s Independence Palace, Vietnam’s Communist rulers are openly waving the economic equivalent of a white flag,” Fortune’s Colin Leinster wrote in 1988.
This “white flag” was Doi Moi, a series of reforms in Vietnam that allowed foreign investment and private ownership in the centrally planned economy. “In a historic reversal of dogma, Party General Secretary Nguyen Van Linh, 74, has begun acknowledging that a strong dose of capitalism is essential to revive Vietnam’s moribund economy,” Leinster wrote.
Forty years after Doi Moi, Vietnam is now Southeast Asia’s most exciting economy. The country has slotted itself into global supply chains, with Vietnamese factories churning out electronics, apparel, and other goods bound for Western markets. Chinese, Korean, and Japanese companies are pouring money into the country. And it’s not just manufacturing: Vietnam is becoming both a tourist hotspot and a budding pop culture hub.
Doi Moi played a big part in that, REE Corporation chair Nguyen Thi Mai Thanh told me recently when I was in Ho Chi Minh City to report on the nation’s resurgence. “The fundamental problem was simple: Goods were scarce while money kept being printed,” she explained. “Doi Moi was like a fresh wind blowing into the Vietnamese economy.” (Nguyen’s REE Corporation became the first state-owned enterprise to privatize, and later the first to publicly list.)
Vietnamese companies on this year’s Fortune Southeast Asia 500, released earlier this week, generated $177.9 billion in revenue; the country is responsible for a quarter of the revenue growth on the list.
In 1988, Leinster was careful to sound a note of caution: “The enthusiasm with which Vietnamese describe their capitalist-influenced future can be contagious while you are there. But can Vietnam ever be made safe for market socialism?”
It seems like it has. Vietnam grew by 8% last year; Hanoi hopes to grow the economy by 10% annually by the end of the decade, and become a high-income country by 2045. “Vietnam has done quite a lot of things right, no matter how you look at it,” Alberto Vettoretti, a top ASEAN executive for Ascentium, an Asian business services firm, told me.
But there are still plenty of challenges: Executives and investors warn that there’s not enough liquidity, not enough labor, not enough infrastructure, not enough value-added manufacturing, not enough energy, not enough managers.
Still, that “enthusiasm” Leinster saw in 1988 is still there. “I feel a lot more excitement when I walk about Ho Chi Minh City right now than when I go to some industrial zones and startup parks in China,” Vettoretti told me. “There’s a real sense of hunger.”