Vietnam as an Economic Lesson for Pakistan

Vietnam and Pakistan are often viewed as very different economies, yet they share several important characteristics: large populations, substantial labor forces, strategic geographic locations, sizeable domestic markets and considerable potential in agriculture, manufacturing and services. The more important difference, however, is not simply what the two countries possess, but how effectively they have leveraged those assets into production, exports, investment, foreign exchange and sustained economic growth.

The contrast is increasingly visible in the numbers. In 2025, Vietnam’s economy reached approximately $514.7 billion, compared with $407.3 billion for Pakistan, despite Pakistan having more than twice Vietnam’s population. GDP per capita was about $5,066 in Vietnam against $1,596 in Pakistan, while economic growth was 8.0 percent compared with 3.7 percent. Vietnam also attracted FDI equivalent to 4.2 percent of GDP, compared with only 0.5 percent in Pakistan. These figures do not mean that the two countries started from identical circumstances. They do, however, demonstrate the consequences of different approaches to leveraging economic potential.

Vietnam’s transformation began with the Doi Moi reforms in 1986, which gradually moved the economy towards market oriented production and greater integration with international markets. Over the following decades, Vietnam built a growth model around manufacturing, exports, foreign direct investment, infrastructure and participation in global value chains. Trade became one of their principal engine of growth.

The scale of this transformation is striking. Vietnam’s merchandise exports reached about $475 billion in 2025, while imports were around $455 billion, producing a trade surplus of approximately $20 billion. Total merchandise trade was therefore close to $930 billion, almost twice the country’s GDP. Manufacturing accounted for nearly 89 percent of exports. This demonstrates the power of economic leverage: labour, infrastructure, foreign investment and imported technology have been combined to produce goods for global markets and generate foreign exchange.

The access to US provides a particularly revealing comparison. Vietnam exported approximately $153 billion of goods to the U.S. market in 2025. China, meanwhile, remained its largest source of imports. This reflects Vietnam’s position within regional production networks, where it imports machinery, components and intermediate goods and transforms them into products for export. Vietnam’s experience shows that imports are not necessarily a weakness when they support productive investment and future export capacity.

Pakistan’s trade structure remains considerably different. According to the State Bank of Pakistan, goods exports were $32.3 billion in FY2025, while goods imports reached $59.1 billion, resulting in a merchandise trade deficit of $26.8 billion. Services exports were $8.4 billion, including ICT exports of $3.8 billion. The difference becomes even more significant when viewed through the balance of payments. Pakistan recorded a current account surplus of $2.1 billion in FY2025, but workers’ remittances contributed $38.3 billion to the external account. The goods and services trade balance remained in deficit by approximately $29.4 billion.

This highlights a fundamental difference between the two economies. Pakistan has been able to stabilize its external account partly through remittances, whereas Vietnam has built a much larger export generating productive base. Remittances are vital for Pakistan, but they cannot substitute for an economy capable of generating foreign exchange through competitive production and exports.

The U.S. market further illustrates the gap. The United States is Pakistan’s largest export destination, yet Pakistan’s goods exports to the U.S. are only a small fraction of Vietnam’s. The opportunity therefore exists, but Pakistan has not yet developed the scale, diversification and industrial capacity required to capture a much larger share of the market. The lesson is not simply to increase exports to the United States, but to develop the productive ecosystem that makes sustained export growth possible.

Vietnam’s experience also contains an important warning. Its impressive export performance has been driven heavily by foreign invested companies. This has helped Vietnam integrate into global value chains, but it has also created concerns about domestic value addition and linkages between multinational corporations and local firms. The lesson for Pakistan is clear: attracting FDI should not be the final objective. FDI should contribute to technology transfer, supplier development, skills, local procurement and domestic value addition.

Pakistan therefore needs to rethink the relationship between imports, investment and exports. Restricting imports may temporarily reduce pressure on the balance of payments, but it does not create competitiveness. Machinery, technology, industrial equipment and productive intermediate goods can expand future production and exports. The objective should be to reduce consumption driven imports while facilitating investment driven imports that strengthen domestic productive capacity.

Pakistan’s strategic location linking South Asia with China, Central Asia, Afghanistan, Iran and the Middle East offers major economic opportunities, but infrastructure alone cannot deliver transformation. CPEC, Gwadar, economic corridors, industrial zones and digital connectivity must be linked with productive clusters, reliable energy, logistics, skills and international markets. Pakistan should leverage its existing strengths by moving agriculture towards processing and higher value exports, textiles towards design and technical products, minerals towards processing and value addition, and IT, engineering, pharmaceuticals, tourism and business services towards stronger export performance.

Pakistan also needs to make exports a central objective of economic policy. Balance of payments stability cannot depend indefinitely on remittances, external borrowing and periodic financial assistance. FDI policy should focus on quality rather than simply quantity, with incentives linked to technology transfer, local supplier development, skills, domestic value addition and exports. Special economic zones should be developed around clearly identified industries and markets, supported by reliable infrastructure and efficient regulation. CPEC, ports, industrial zones, roads and digital infrastructure should function as integrated production and trade systems rather than isolated projects. Public private partnerships can help mobilize investment where projects are economically and financially viable.

The central lesson from Vietnam is that economic success depends on leveraging existing advantages through strong institutions, policy continuity and effective coordination. Pakistan has a large market, substantial workforce, strategic geography, natural resources and access to major markets. The priority should be to convert these assets into productivity, exports, investment and sustainable foreign exchange earnings. Pakistan must turn geography into connectivity, population into productive human capital, resources into value added exports, infrastructure into industrial capacity and FDI into domestic capabilities, moving from repeated balance of payments pressures towards sustainable, export led growth.