May 09, 2019 

 

It’s a little-known fact that Sweden was the first western country to recognize the government of Vietnam, in 1969, at a time when many states were wary of ruffling the feathers of their ally, the United States, which was fighting a war in the Southeast Asian country.

 Sweden went on to become the biggest foreign donor in Vietnam, which faced international isolation in the 1980s leading up to the 1990s, when Washington lifted its economic embargo on Hanoi.

Now Stockholm and Hanoi are marking their 50 year anniversary with what they call a shift from aid to trade. Vietnam sees some potential pointers from Sweden, a small country with social democratic policies that is home to many companies people may not realize have Swedish roots: Skype, Spotify, and Ericsson, as well as Ikea, Volvo, and H&M.

 

Sustainable trade

 

The Crown Princess of Sweden, Victoria Ingrid Alice Desiree, brought a delegation to Hanoi this week to try some Vietnamese bun bo noodles and conical hats, as well as to promote commerce that is good for the environment.

“I would like to stress that sustainability and trade are not mutually exclusive,” the crown princess said, adding that, on the contrary, sustainable trade is the only option going forward.

That is in contrast to global trade after the first industrial revolution, when businesses did not mind burning fossil fuels and filling garbage dumps — known in economics as a classic externality, because the culprit does not suffer the direct impact of its pollution.

 

A different Kind of industrialization

 

As Vietnam industrializes, some hope it will do things differently from the west’s old polluting industries. It can join the “circular economy” that wastes fewer raw inputs, with more emphasis on putting materials back into the business process.

Swedish firms have been looking for ways to clean up their act. H&M, for example, allows shoppers to bring back clothes for recycling, although that can give them an excuse to consume even more new products.

The fashion retailer also aims to source from factories that treat and reuse wastewater. Ikea will ban single-use plastic from its stores by next year and find new uses for plastic so that it doesn’t end up in the ocean. The plastic efforts are an example of areas where big corporations may have a bigger impact than the individuals who have stopped using plastic straws and plastic bags to do their part.

 

A Swedish model

 

Vietnamese Deputy Prime Minister Pham Binh Minh said Sweden was a small country that turned to foreign trade and industrialized responsibly.

“That is a lesson Vietnam wants to learn from Sweden,” he said.
 Relations between the two countries used to be underpinned by Sweden’s official aid money to Vietnam, money that went toward common goals like gender equality. The Swedish crown princess, for example, is next in line to the throne because her country revised a law that had restricted royal succession to males. In Vietnam, Sweden has supported equality programs in areas from agriculture, such as training female farmers to market their products, to Wikipedia, where there are more biographies of men than of women.

 

Business partners

 

But today the focus is changing from development assistance to business development. Instead of getting aid from Sweden, Vietnam is getting investment, whether it’s Spotify launching its music streaming app in the communist country in 2018, or Electrolux selling air conditioners and washing machines to the emerging middle class.

 The change is also indicative of broader trends in Vietnam, generally shifting from cash assistance from foreign countries, to doing business with them. Among Vietnam’s many new trade deals is the European Union-Vietnam Free Trade Agreement, which Swedish officials also touted on their visit this week to increase cross-border commerce.

Such commerce, including more technology investment, could help Vietnam move up from lower middle income status.
“How to escape the middle income trap in a rapidly changing global economy,” Fulbright scholar Vu Thanh Tu Anh told an audience of Vietnamese and Swedish businesses this week. “That is our objective.”