Can Vietnam lead ASEAN?

ASEAN member nations, like the rest of the world, are facing multiple, interconnected existential challenges: a global pandemic, climate change, a global economic recession and political turmoil. But Vietnam seems to be managing these issues better than many nations in Southeast Asia, especially compared with Indonesia. Could this put it in the best position to lead ASEAN through these ongoing problems?

Vietnam’s role in international climate change policy

The UN’s 13th Sustainable Development Goal is climate action; countries must reach five targets, including measures for reducing carbon emissions and investment in climate resilience. Vietnam has fulfilled these measures, while others, including Indonesia, Thailand, Malaysia, Singapore and even most European nations, are falling behind. According to the Sustainable Development Report 2020, Vietnam is the only Southeast Asian country to have achieved this. Vietnam is powering ahead of the rest of Southeast Asia as it pushes for greater reliance on renewable energy. In addition, according to The McKinsey Global Institute report on exploring alternative pathways for Vietnam’s energy future, Vietnam has tremendous natural endowments with four to five kilowatt-hours per square metre for solar and 3,000 kilometres of coastlines with consistent winds in the appropriate range, creating advantages for solar and wind generation in Vietnam.

In contrast, Indonesia is the world’s fifth-largest emitter of greenhouse gases and the largest contributor of forest-based emissions, spewing 240 to 447 million tons of CO2 annually from agriculture, the conversion of carbon-rich forests to plantations, and other uses, according to Global Forest Watch. Indonesia is also home to the top 4 regions responsible for 52% of all tree cover loss between 2001 and 2019. Unfortunately, there has been little progress towards reducing land-based emissions in Indonesia thus far. Indonesia could meet its emissions target if it strengthened existing policies to increase budgets for climate mitigation and adaptation efforts, as well as introduced fiscal policies to reduce emissions in energy and land-use.

Vietnam’s economy is growing despite COVID-19

Even during these unusually rough times, the Vietnamese economy has been remarkably resilient. Vietnam is in a good position to escape the COVID-19 economic trap for at least three reasons: the Vietnamese government’s incentives provided tax breaks, delayed tax payments, and delayed land-use fees for businesses. The investment law in Vietnam also has been revised several times, mainly adopting a more profitable approach for investors by reducing administrative bureaucracy and facilitating foreign investment in Vietnam. As a result,  over US$12 billion of foreign direct investment was registered between January and April 2020. Due to investment inflow, which is still on an unprecedented rise, Vietnam has the potential to be the fastest-growing digital economy in Southeast Asia.

Over the last four years, approximately US1 billion in funding has poured into Vietnam’s e-commerce sector and on 29 June 29 2020 Vietnam ratified a landmark trade deal with the European Union. This took effect in July 2020; the EU lifted 85% of its tariffs on Vietnamese goods, gradually cutting the rest over the next seven years. In return Vietnam will lift 49% of duties on EU imports and phase out the rest over ten years. In addition, Vietnam recorded a trade surplus of more than US$9.9 billion, also the highest level compared to the previous four years. Vietnam’s economy is predicted to grow positively in 2020. In fact, Vietnam’s economy grew by 2.6% in the third quarter of 2020, most of that being driven by the agriculture, forestry, and fisheries sectors, which grew by 2.93%. Then industry and construction grew 2.95% and services grew 2.75%. Overall Vietnam’s economic growth in 2020 will be in the range of 2.9%.

In comparison, the Indonesian economy is in a recession and indeed was under pressure even before the COVID-19 pandemic. Throughout the second quarter of FY 2020, Indonesia saw a decline in economic growth of around 5.32 percent year-on-year due to falling household spending (though this has improved as reflected in mobility data and investment.) Indonesia has been struggling to contain COVID-19 in the country as total cases near 900,000. The unemployment rate has reached a nine-year high of 7.07%.

Vietnam is one of the more politically stable countries in Southeast Asia

Vietnam’s economic and political stability is a great advantage compared to other Asian nations. Political stability is one of the main factors that has helped Vietnam pursue its economic development policy. Since 1990, most other regional countries, besides Singapore, have experienced coup d’états or political crises. Thailand is rising protests, Malaysia has suffered a “triple-whammy crisis”, and popular movements protested Indonesia’s introduction of the omnibus law. Although Vietnam is expected to change leadership at its 2021 party congress, any incoming leader is expected to maintain the country’s focus on pro-business and reformist policies.

Can Vietnam replace Indonesia’s position in ASEAN?

Vietnam, the 2020 Chair of ASEAN, has been involved in the building of the organisation since it joined in 1995. Vietnam has projected itself as an effective leader, particularly with its proactive governance in handling the COVID-19 pandemic, critical and long-standing engagement with climate change issues, and political stability. Vietnam’s successful strategy for combating the pandemic was informed by its experience with previous outbreaks. Low levels of transmission and fatalities have attracted the due attention of the international community. By contrast Indonesia has failed to protect the business world from the adverse effects of the pandemic. This can be seen from the relatively small amount of funding stimulus programs for domestic industries.

On one hand, Vietnam may need Indonesia’s geopolitically driven leadership to stand for regional stability, since Indonesia is the only Southeast Asian that has participated in the G20, the most diverse country, and one of the Non-Alignment Movement’s founding nations. On the other, Indonesia also needs Vietnam’s proactive governance, whether on resisting the COVID-19 pandemic, climate change issues, or digital economy. Together, both states can alter the security environment of ASEAN and lead the organisation towards members’ individual and collective goals.