Lesson 15: A Semester in Southeast Asia

March 13, 2025

Review:

  • China
  • Exam 2 next week

Presentation:

Southeast Asian Countries by GDP per Capita (PPP, USD)

Singapore’s economic success is a remarkable story of transformation from a small, resource-scarce island in the 1960s to one of the world’s most prosperous nations today. Key factors contributing to its success include:

  1. Strategic Location & Trade Hub – Positioned at a major global shipping route, Singapore developed one of the busiest ports in the world, facilitating international trade and logistics.
  2. Pro-Business Environment – The government implemented policies encouraging foreign direct investment (FDI), ease of doing business, and low corporate taxes, attracting multinational corporations.
  3. Political Stability & Effective Governance – Under the leadership of Lee Kuan Yew, Singapore adopted long-term planning, efficient public administration, and anti-corruption measures.
  4. Investment in Education & Workforce – A strong emphasis on education, skills training, and technological innovation created a highly skilled workforce, supporting economic growth.
  5. Diversified Economy – Singapore transitioned from a labor-intensive economy to a knowledge-based one, excelling in finance, biotechnology, electronics, and manufacturing.
  6. Strong Financial Sector – The country became a global financial hub, with well-regulated banking, low tax rates, and investor-friendly policies.
  7. Infrastructure & Urban Planning – Advanced infrastructure, world-class airports, and efficient public transportation supported economic activities and quality of life.
  8. Open Market & Free Trade – Singapore has a highly open economy with numerous free trade agreements, ensuring strong global trade connections.

As a result of these factors, Singapore consistently ranks among the top in global GDP per capita, competitiveness, and quality of life indices.

Vietnam’s economic success is a remarkable transformation from a war-torn, low-income country in the 1980s to one of the fastest-growing economies in Southeast Asia today. Here are the key factors behind the Vietnam Miracle:

  1. Đổi Mới Reforms (1986) – Vietnam shifted from a centrally planned economy to a market-oriented economy with private sector growth, foreign investment, and trade liberalization. State-owned enterprises were restructured, and land reforms boosted agricultural production.
  2. Export-Led Industrialization – Vietnam became a global manufacturing hub, especially for electronics, textiles, and footwear. Major global companies (Samsung, Intel, Apple suppliers, etc.) established factories, benefiting from low wages and a skilled workforce.
  3. Foreign Direct Investment (FDI) Boom – Vietnam aggressively attracted foreign investment with business-friendly policies and economic zones. It joined major trade agreements (WTO, ASEAN Free Trade Area, CPTPP, EU-Vietnam Free Trade Agreement), making it highly integrated into global markets.
  4. Thriving Agriculture & Food Exports – Once struggling with food shortages, Vietnam became a top exporter of rice, coffee, seafood, and cashews. Agricultural modernization helped millions move out of poverty.
  5. Digital Economy & Tech Growth – Vietnam is emerging as a tech and startup hub, with strong growth in fintech, e-commerce, and digital services. Internet penetration is high, and companies like VNG, MoMo, and VNPay are leading in digital innovation.
  6. Young & Competitive Workforce – Vietnam has a young, growing labor force (median age ~32) with improving education and technical skills. Rising wages remain lower than China, making it a preferred alternative manufacturing base for global firms.
  7. Infrastructure & Urbanization – Major investments in ports, highways, and industrial parks have supported economic expansion. Cities like Hanoi, Ho Chi Minh City, and Da Nang are rapidly modernizing.
  8. Resilience & Global Supply Chain Shift – Vietnam recovered quickly from COVID-19, maintaining strong exports and economic growth. It benefited from companies relocating production from China (China+1 strategy) due to rising costs and U.S.-China tensions.

As a result, Vietnam is consistently one of Asia’s fastest-growing economies (averaging 6–7% GDP growth annually) and it’s on track to become an upper-middle-income country in the next decade.

While Cambodia has experienced strong economic growth in recent years, it faces several key challenges that have hindered its ability to achieve broader, sustained economic success. The country’s economy is limited by (1) over-dependence on a few industrial sectors, (2) weak infrastructure, (3) governance issues, and (4) a lack of economic diversification.

Comparing Vietnam and Cambodia

Vietnam and Cambodia share a similar historical backdrop of war and conflict during the 1960s and 1970s. However, the countries have had very different economic trajectories since then.

  • After the “American War”, Vietnam was reunified in 1975 under a communist government that initially pursued centralized planning. However, starting with the Đổi Mới reforms in 1986, Vietnam shifted to a market-oriented economy, gradually opening up to foreign investment and global trade. This marked the beginning of its remarkable economic growth.
  • Cambodia faced its own devastating conflict under the Khmer Rouge (1975–1979), which led to killing of >1.5M people and the destruction of much of its infrastructure, education system, and economy. After the fall of the Khmer Rouge, Cambodia faced years of political instability and a slow recovery. Cambodia did not start significant economic reforms until the 1990s, much later than Vietnam.

Infrastructure & Governance

  • Vietnam:
    • Vietnam has made significant progress in building modern infrastructure (ports, roads, industrial parks, and energy).
    • The government has been relatively effective in promoting investment, maintaining political stability, and tackling corruption to some degree.
  • Cambodia:
    • Cambodia’s infrastructure is still underdeveloped compared to Vietnam’s. Though it has made strides in road construction, power generation, and urban development, it still lags behind Vietnam in areas like transportation and communications.
    • Corruption and political instability (including authoritarian rule) continue to hinder growth and development, making Cambodia less attractive for long-term investors.

Labor Force & Education

  • Vietnam:
    • Vietnam has a young and skilled labor force, with increased access to education and vocational training, which has facilitated the growth of its manufacturing and tech sectors.
    • The government’s focus on education reform has helped improve the quality of human capital, making it more attractive to foreign companies.
  • Cambodia:
    • Cambodia faces challenges in education and workforce skills. The country has a relatively young population, but many workers still lack the skills required for higher-value industries like technology or advanced manufacturing.
    • Though efforts are being made to improve education, Cambodia’s system lags behind regional neighbors like Vietnam in preparing a highly skilled workforce.

Political Stability and Governance

  • Vietnam:
    • Despite being a one-party communist state, Vietnam has maintained political stability, which has provided a predictable environment for economic reforms, investment, and long-term planning.
  • Cambodia:
    • Cambodia has faced periods of political instability, including the brutal Khmer Rouge regime, post-independence conflict, and authoritarian rule under Prime Minister Hun Sen. While the country has become more stable in recent years, weak governance and corruption remain significant issues.

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Justin

Justin Holman is CEO of Aftermarket Analytics, where he leads efforts to develop cutting edge sales forecasting and inventory optimization technology for the Automotive Aftermarket. Prior to joining Aftermarket Analytics, Justin managed corporate consulting for the Strategy & Analytics division at MapInfo Corporation, leading major projects for retail clients including The Home Depot, Darden Restaurants, Bridgestone-Firestone, Sainsbury’s and New York & Company. Before that, Justin served as Vice President of Software Development at LogicTools, now part of IBM's supply chain application software group. Justin holds a B.A. from Claremont McKenna College, a Ph.D. from the University of Oregon and an Executive Management certificate from Northwestern University's Kellogg School of Management.

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