Environmental factors, global geopolitical tensions, and the capacity for self-upgrade are the three major uncertainties Vietnam is facing at the moment. Deciphering these intertwined challenges, in their various forms, can help shape Vietnam’s success in the new era.

Policy issues from the story of unclaimed waste containers At major ports in Vietnam, there are always places full of unclaimed shipping containers. By the end of 2024, more than 8,000 such containers had been left unclaimed at major ports across the country. Many of these containers were imported from developed countries under the guise of recyclable materials, but the majority of them do not meet environmental standards. This not only limits the operational capacity of the port system but also creates a significant pollution risk, especially since Vietnam lacks sufficient technology to process certain hazardous waste types. This is not just a problem for Vietnam. Countries in the region, from Malaysia to Cambodia, have unexpectedly become the “new global waste disposal sites” of the world, especially after China’s decision to ban the import of plastic waste in 2018. In terms of plastic waste alone, by the end of 2022, Vietnam was the fifth-largest importer of waste in the world. This story raises several policy issues! First, in a world where nations’ interests are increasingly intertwined, the “butterfly effect” is becoming more apparent. A butterfly flapping its wings in the Amazon can cause a storm in Texas, just as an administrative decision by Beijing can completely change the environmental landscape in Southeast Asia. Looking at the broader picture, the importation of waste is just the tip of the iceberg. As climate change becomes increasingly unpredictable and countries fail to agree on solutions to mitigate its impacts, Vietnam would have to shoulder the consequences of unseasonal storms or devastating natural disasters. The multiple disasters across the country in 2024 indicated just how significant this risk is. Vietnam is identified as one of the countries that are most vulnerable to climate change. According to the World Bank, if sea levels rise by one meter, about 40% of the Mekong Delta would be submerged under water. The economic damage caused by climate change in Vietnam could reach 12-14.5% of GDP by 2050. With limited resources, we are not yet able to meet the demands of both rapid development and effective adaptation to these risks. As a mid-sized country, we cannot easily impose global solutions to reduce emissions. Second, the issue of value chain. While we continually emphasize improving the position of domestic manufacturing, in reality, Vietnam is still in a low position in the global value chain, being a favored destination for low-value-added activities and high environmental risks. Importing waste is an immediate issue, but importing outdated production technologies also brings similar long-term hazards. Vietnam has been successful in the past 40 years of “renovation” and “opening up,” but we cannot continue on the same path—relying on cheap labor and disregarding environmental, social, and labor standards—if we want to achieve prosperity. To move higher in the value chain, more than just a few good policies are needed. The three economists who won the Nobel Prize in 2024 emphasized the role of “inclusive institutions”—a framework for economic and social governance that ensures equal opportunities, universal values, property rights, and the rule of law. If we cannot achieve this, investors will only come when the cost differential is large enough and will leave when other places offer higher profits. The third issue is the risk of geopolitics. China’s ban on plastic waste import, while stemming from domestic policy needs, also partially resulted from the U.S.-China trade war. Until the time of the ban, the U.S. was the largest exporter of plastic scrap to China. After U.S. President Donald Trump imposed tariffs on certain Chinese goods in his first term, Beijing issued the ban as part of a retaliatory measure. The U.S.-China trade tensions are consequential for Vietnam because they are our two largest trading partners. Trade data indicated the increasing economic dependence between Vietnam and these two global powerhouses. In 2023, China accounted for 25.6% of Vietnam’s total imports, while the U.S. was the largest export market, accounting for 28.4%. This reality shows Vietnam’s ability to balance its relations, but also creates risks when the U.S.-China tensions escalate, particularly during the second term of Donald Trump. Moreover, after eight years, superpower competition is no longer limited to trade but has spread to all areas, from economic and technological cooperation to military matters. Along with this comes the end of the post-Cold War version of globalization, with the U.S. as the sole superpower and the priority of economic development above all differences. Today, the trend of “de-globalization,” with widespread protectionism and cooperation limited to small multilateral groups, is fundamentally changing the way the global economy operates. With its high degree of trade openness, second only to Singapore in Asia, Vietnam would be greatly affected. The de-globalization trend and its three key aspects First, there is a shift from pure efficiency to security in supply chains. While this creates opportunities for emerging production centers like Vietnam, it also demands higher standards for institutional quality and governance capacity. Second, the rise of regional trade blocs, such as the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), is gradually replacing global agreements. For Vietnam, this shift carries significant implications. With a network of 16 active free trade agreements (FTAs), Vietnam has the potential to act as a bridge between trade blocs. However, the challenge lies in leveraging this position to upgrade production capacity rather than merely serving as a transshipment point. Third, there is the emergence of technology ecosystems that are increasingly decoupled from one another. For example, in the semiconductor industry, instead of a global supply chain, regional clusters are forming, with Taiwan, South Korea, and Japan creating one axis, while China works to build its own ecosystem. Similar dynamics are evident in 5G telecommunications technology, military advancements, and other critical technologies. For mid-sized nations like Vietnam, choosing which ecosystem to join and to what extent is a strategically vital decision. Solving the puzzle of “inclusive institutions” Environmental and climate risks, the capacity for self-improvement, and the volatile geopolitical landscape are the three major uncertainties Vietnam is facing today. Deciphering these interwoven challenges in their various forms will shape Vietnam’s success in the “new era.” So, how can Vietnam thrive in an uncertain world? External uncertainties—geopolitical dynamics and climate change—are beyond control. We can mitigate their impacts but cannot fully resolve them. However, the question of how to solve the puzzle of “inclusive institutions” lies entirely within our hands. Inclusive institutions are built on a solid foundation of three pillars: the state, the market, and the society. Their collective principle is that the state fosters development, the market allocates resources, and civil society oversees and supplements market shortcomings. Recent efforts to streamline the government apparatus are a necessary step toward building an efficient state. Future reforms should aim to create a healthy and effective market economy while establishing mechanisms for meaningful societal participation in the processes of policymaking, critique, oversight, and implementation. The first mechanism must establish a framework for open, multidimensional, scientific, and tolerant policy debates. The second is a listening mechanism—not just for praise of achievements and positions but also for candid feedback on the challenges the country is grappling with. Like the shipping containers left unclaimed at the ports, problems would not disappear if we simply look the other way. As Vietnam has confronted past difficulties, the road ahead requires honesty, courage, and a willingness to step out of the comfort zone to reform institutions. New institutions will not only resolve the issue of abandoned containers but also enable Vietnam to proactively shape its position in a shifting global order. Vietnam’s first major transformation following the Sixth National Party Congress began with the spirit of “facing the truth, evaluating it correctly, and speaking it plainly.” The second transformation, in a world as uncertain as the post-Cold War era, may need to start with a similar spirit.