ADRIAN SAVILLE: Economic miracles, one step at a time

Sometimes you feel an economic argument through experience. It happened to me on a recent trip to Vietnam. Walking to my hotel one night in bustling Ho Chi Minh City, I felt safe. I hadn’t seen a pothole in several days. Water leaks — a common sight on the streets of my home city, Joburg — were rare sightings. In five days, I didn’t see a single traffic light that was out of order. The pavements and public areas were generally free of litter. And as I got close to my hotel, I saw a refuse removal crew cleaning the streets — at close to midnight. One of the crew swept vigorously behind the truck as it moved down the street, ensuring no spilt garbage was left on the road. There was a clear sense of purpose in the team’s work. Bins were returned neatly to the pavement. If teams are busily sprucing up the streets late at night, you can almost feel the economic growth.

The data backs up the feeling. The introductory paragraphs on the World Bank’s Vietnam page read like a highlights reel. Real GDP per capita was under $700 in the mid-1980s (in constant 2023 dollars). By 2023 it was nearly $4,500 — a figure that starts to approach South Africa’s. The share of the population living in poverty was 14% in 2010; by 2023 that had been slashed to under 4%.

Last year Vietnam’s economy grew more than 7% — despite a devastating typhoon. That was up from just more than 5% in 2023. Global advisory firm Oxford Economics reckons Vietnam will outperform its Asean+6 peers again in 2025 with 6.5% growth, led by manufacturing.

How?

In 1986, during the Communist Party’s sixth national congress, a bold set of economic reforms was initiated under the Doi Moi policy. Roughly translated as “innovate” or “renovate”, the policy had the goal to move from a centrally planned economy to a socialist-orientated market economy, unleashing private enterprise alongside state-owned firms.

As is often the case, this drastic change was necessitated by the threat of impending collapse. Twenty-five years of war had ended just a decade before, in 1975. Initially, a reunified north and south adopted Soviet-style central planning and inward-orientated isolation.

But thanks to Doi Moi, farmers gained land use rights, boosting rice production to the point where Vietnam became a leading exporter. Trade liberalisation and foreign direct investment incentives attracted global manufacturers such as Samsung and Intel. State-owned enterprises were partially privatised and the country adopted a two-tier banking system, stabilising inflation and unlocking capital for growth, while huge investments in transport and industrial zones fuelled manufacturing and export-led growth.

Lacking space for a full dissertation, let’s call the rest history. Vietnam steadily built on these reforms to the point where it has doubled the size of its economy every 12 years since 1986 — making the economy 16 times bigger in just under 40 years. In 1990 Vietnam accounted for 0.06% of global exports. By 2024 this share had increased to 1.36%.

Universal lessons

We often talk about this sort of performance as an economic miracle. In fact, you can decipher the sorts of ingredients that reliably generate prosperity.

That is not to say there is just one way to do it. Rather, a variety of policy set-ups can work. What is important is that there are clear, stable policies.

Contrast this with nations that are in an extended economic stall. One would not suggest that their lack of Doi Moi is the problem. The Vietnamese present an appealing model. But it is one of many that make use of fundamentals in a unique combination.

Now, think of a flailing economy and ask: do they have a plan at all? Or do they have a disparate and sometimes contradictory mix of good, mediocre and bad policies that come and go?

Therein lies South Africa’s choice. The economic feeling is one of disorientation. So, the country sways from crisis to intervention to disappointment, and then new promises. Yet proven models for success abound. They’re free to adopt and adapt.

Before launching into the next grand wave of policy promises, let’s fix one CBD. Call it step one of our own economic “miracle”.

* Saville holds a professorship in economics, finance & strategy at the Gordon Institute of Business Science, where he is the founding director of the Centre for African Management & Markets