As Vietnam strives to build a fair and sustainable market economy, it often looks to major models like Japan or South Korea. But there are equally valuable, and perhaps more practical, lessons from Hong Kong and Taiwan (China) - economies that rose from scarcity to global competitiveness not by miracle, but by adhering to one principle: a transparent and predictable system.

Hong Kong – Prosperity through minimal interference

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Vietnam is facing an unprecedented economic opportunity in its modern history. Photo: Hoang Ha.

From a post-war British colony with few resources, Hong Kong transformed into a global financial and trade hub. The key? A laissez-faire approach - government steps back, businesses step up, within a framework of transparent, stable laws.

This vision was championed by John Cowperthwaite, Hong Kong’s Financial Secretary from 1961 to 1971. “No one knows a firm’s competitive advantage better than the firm itself,” he famously said. The state did not pick winners, offer tax breaks, or intervene in business strategies. Its job: build infrastructure, enforce clear laws, and maintain a low tax rate - around 15%.

There was no VAT, no sales tax, no capital gains tax. The guiding principle was simple: “Low tax, no favoritism, no discrimination.” This level playing field fostered healthy competition.

Unlike Japan or South Korea, Hong Kong rejected industrial policies reliant on subsidies or tax incentives. It didn’t pick strategic sectors, didn’t offer incentives for foreign investors, and didn’t create special economic zones. Instead, it relied on a legal system that was clear, accessible, and free from arbitrary interference.

The results were dramatic. Within a decade, by the 1970s, Hong Kong’s per capita income reached 25% of Britain’s. By the 1980s, it had surpassed the UK in global competitiveness. There was no “national brand,” just a business-friendly climate, a lean bureaucracy, and a legal system that empowered rather than punished.

This rational, consistent governance built societal consensus and trust - key ingredients for sustainable business development.

Taiwan – Growth rooted in social fairness

In 1949, after retreating from mainland China, Chiang Kai-shek’s government resolved not to repeat past mistakes. Determined to build a fairer society, Taiwan undertook sweeping land reforms to redistribute wealth and create a foundation of equity.

Rather than focusing on big corporations, Taiwan supported small and medium-sized enterprises with credit access, training, and export assistance. The government invested heavily in education and infrastructure, targeting export sectors like textiles and electronics.

From the 1950s through the 1980s, Taiwan’s GDP grew at an annual average of 9–10% - one of the fastest postwar growth rates in the world - earning it the title of one of Asia’s “Four Tigers.”

What sets Taiwan apart is that it combined high growth with low inequality. The Gini index - a measure of income disparity - remained stable between 0.28 and 0.30. In 1950, private enterprises accounted for just 30% of GDP. By 1980, that figure had grown to around 70% - proof of an open, inclusive economy.

What Vietnam can learn

Despite their different approaches, both Hong Kong and Taiwan (China) share core similarities: true market economies driven by exports, dynamic private sectors, and transparent legal systems. Taiwan emphasized equity and consensus. Hong Kong exemplified business freedom and institutional efficiency.

The message for Vietnam is clear: a good business climate must be matched by a credible legal environment. This doesn’t mean strict control, but rather a system that makes sense - a rational system breeds consensus; consensus builds trust; and trust fuels long-term investment and competitiveness.

Vietnam’s greatest asset today is its people. The country stands on the cusp of an unprecedented economic opportunity. Realizing it depends on courageous, committed leadership to update institutional frameworks and unleash the energy of its citizens and businesses.

Hong Kong and Taiwan (China) didn’t rise by chance. They followed a clear and achievable formula: true market principles, legal clarity, and private-sector development. Vietnam can do the same - if it dares to change, and most importantly, dares to believe in its own people.

Tran Si Chuong

Tran Si Chuong is an economic strategist and co-author (with Prof. James Riedel of Johns Hopkins University) of the World Bank/IFC’s first report (1997) evaluating Vietnam’s private sector potential. With over 30 years of experience advising businesses in the US and Asia, he has also served as Senior Policy Advisor to the U.S. Senate Banking Committee and Congressional Assistant on trade and foreign affairs.