Vietnam’s quiet ascent and the Philippines’ crisis of governance

A recent visit to Hanoi and Sa Pa with a group of retiree friends left us with an uncomfortable consensus: Vietnam appears to be overtaking the Philippines in ways that are increasingly difficult to ignore. The contrast is visible not only in infrastructure and tourism, but in a deeper sense of national direction and institutional confidence.

Consider the numbers. In 2025, the Philippines welcomed about 6.48 million international tourists. Vietnam attracted an estimated 21.1 million — more than three times as many. For two Southeast Asian countries richly endowed with natural beauty, culture, and hospitality, such a disparity is not accidental. It reflects policy choices and, more fundamentally, the quality of governance.

Vietnam’s rise is anchored in deliberate strategy. Since launching its Đổi Mới (which translates to “renovation”) reforms in 1986, Vietnamese leaders made a practical choice: preserve political continuity while liberalizing the economy. The reforms dismantled collective farming in favor of household production, legalized private enterprise, encouraged foreign direct investment, and opened Vietnam to global trade. Over the next three decades, these policies transformed Vietnam into one of Asia’s fastest-growing manufacturing and export hubs.

Crucially, Đổi Mới was not a one-time adjustment but a sustained reform trajectory. Successive governments maintained policy continuity. The lesson of Đổi Mới is that economic transformation requires both bold initial reform and the discipline to stay the course — a combination that has underpinned Vietnam’s steady rise.

Even a casual visitor notices symbols of industrial ambition. VinFast, Vietnam’s homegrown automotive brand, dominates taxi fleets in Hanoi and is now entering the Philippine market through the Green GSM brand. This is not merely commercial success; it signals confidence in domestic capability and a long-term industrial vision.

Infrastructure reinforces that message. While Vietnam’s mass transit systems are still evolving, the broader transport ecosystem — airports, highways, and urban development — suggests sustained, disciplined investment. The government’s plan to gradually shift from gasoline-powered motorcycles to electric vehicles points to forward-looking environmental and industrial policy. There is a sense that projects are executed with urgency and continuity.

Tourism policy provides another contrast. Vietnam has streamlined visa processes, expanded air connectivity, and marketed itself aggressively as a diverse destination. The Philippines, despite world-class beaches and landscapes, continues to struggle with infrastructure bottlenecks, regulatory friction, and uneven execution. These weaknesses are not technical problems alone; they are symptoms of governance deficits.

Here, the comparison becomes more uncomfortable. The Philippines today faces a visible erosion of trust in public institutions. Persistent corruption scandals, perceptions of weak leadership, and the politicization of key agencies have created uncertainty that deters investment and undermines public confidence. Infrastructure programs that begin with promise too often become mired in allegations of graft or mismanagement. Funds that should translate into roads, airports, and efficient services are suspected of leaking into private pockets. The result is not merely wasted money but damaged credibility.

Vietnam’s centralized political system has its own trade-offs, particularly in terms of political freedoms. Yet it has delivered a degree of policy continuity and execution that investors value. Long-term infrastructure and industrial plans are pursued across political cycles. In the Philippines, democratic pluralism is a strength, but when combined with patronage politics and weak accountability mechanisms, it can fragment decision-making and slow implementation. Leadership vacuums and public infighting further erode the sense of national direction.

Historical legacies are often invoked to explain divergence. Vietnam endured roughly a century of French colonial rule and the devastation of a prolonged war that ended in 1975. The Philippines experienced more than three centuries of Spanish administration followed by American influence. While these histories shaped institutions and culture, they do not predetermine present outcomes. Vietnam emerged from war impoverished, yet forged a political consensus around reconstruction and reform. Its pivot toward globalization in the late 1980s was decisive and sustained.

The Philippines, by contrast, has struggled to maintain reform momentum. Episodes of political instability and recurring corruption controversies have distracted from long-term economic transformation. When citizens perceive that institutions serve private interests rather than the public good, trust erodes. Without trust, even well-designed policies face skepticism and resistance.

None of this diminishes the Philippines’ considerable strengths: a young and talented workforce, strong cultural ties to global markets, and a dynamic services sector. But Vietnam’s trajectory highlights a central lesson: development requires more than resources and demographics. It demands credible institutions, disciplined execution, and leadership capable of inspiring confidence.

The impressions from Hanoi and Sa Pa should not provoke envy but reflection. Vietnam’s quiet overtaking of the Philippines is a warning that in a competitive region, governance quality is destiny. If the Philippines is to narrow the gap, it must confront corruption decisively, rebuild trust in institutions, and pursue infrastructure and industrial policy with consistency that survives political cycles.

The challenge is ultimately political as much as economic. Nations advance when citizens believe their institutions are fair, competent, and accountable. Restoring that belief may be the Philippines’ most urgent development task.

The views expressed herein are the author’s own and do not necessarily reflect the opinion of his office as well as FINEX.

Benel Dela Paz Lagua was previously EVP and chief development officer at the Development Bank of the Philippines.  He is an active FINEX member and an advocate of risk-based lending for SMEs. Today, he is independent director in progressive banks and in some NGOs.