Here's another article from one of my favourite publications, The Economist. It also points out the danger of too much state interference in wealth-creating private enterprise.
Although nothing is a given, Vietnam is indeed on the move. Stand on any street corner in Saigon and you will hear the rattle and hum.
Source: The Economist – August 3, 2006
Good morning at last
Aug 3rd 2006 | HANOI
From The Economist print edition
An economic boom is accompanied by remarkable success in
getting rid of poverty and raising life expectancy.
SIGNS of rapid development are visible everywhere around Hanoi: from the flashy
sport-utility vehicles on the city's roads to the dormitory villages of smart
“executive” homes rising among the fields on the capital's outskirts. George
Bush and other world leaders will see it for themselves when Hanoi hosts the Asia-Pacific economic summit
in November. That meeting will take place in a new satellite-city, Tu Liem,
which is now being built on Hanoi's
south-western edge. The futuristic conference centre, with a distinctive wavy
glass roof, looks almost finished. Nearby, a huge five-star hotel is getting a
final coat of paint. Along Tu Liem's broad, four-lane avenues, some apartment
blocks are already occupied, others are just steel skeletons. Between the
building sites, cows and buffalo still graze in what was open pasture only
recently. [charvey note: check out this post from another local blog, "Itsthefinalword," about rapid residential and business development on the southern outskirts of Saigon.]
Before starting its doi moi market-oriented reforms in the
mid-1980s, the Socialist Republic of Vietnam flirted with real communism and
came close to famine. Since then, a reform process that was uneven at first has
gathered momentum. Recent economic growth, though not quite as stellar as
Since 1990, Vietnam's
exports have increased faster than China's. Their growth shows no
signs of slackening. Between January and July they amounted to $22 billion, a
year-on-year rise of over 25%. Having alarmed the Brazilians by becoming their
main competitor in coffee growing, Vietnam is now ramping up its exports of
everything from shrimps to ships to shoes (the last prompting the European
Union to announce anti-dumping tariffs last month). It has just become the
world's largest exporter of pepper and aims soon to overtake Thailand in
rice. It is even selling tea to India.
Foreign-owned factories are chalking up the fastest gains.
The government's aim of increasing electronics exports by 27% annually should
be boosted by Intel's recent decision to build a $605m microchip plant in Ho
Chi Minh City. Though farmers' harvests are still rising, industry's
still-higher growth rate means that agriculture's share of economic output
continues to shrink—from about 25% in 2000 to 21% last year. By 2010 it may be down
to 15%.
This economic revolution is being accompanied by a social
one. Though Vietnam is
still, overall, one of Asia's poorest countries, with income per head behind India's, its
recent growth has been impressively egalitarian. The Asian Development Bank
(ADB) reckons that deep poverty in Vietnam—defined as a daily income equivalent
to under $1—is now only slightly more prevalent than the average for South-East
Asia, whereas in 1990 Vietnam's figure was more than twice the regional average
(see charts). By this measure, Vietnam has overtaken China, India and the Philippinesand now has only slightly more poverty than Indonesia.
Life expectancy has jumped and infant mortality plunged
since the 1990s. Vietnam does better on both these counts than Thailand, a far richer country.
Almost three-quarters of Vietnamese children of secondary-school age are in
class, up from about a third in 1990. Again, Vietnam has overtaken
China, India and Indonesia.
The new five-year plan, approved at April's congress of the
ruling Communist Party, is laden with targets for increasing output and
improving infrastructure, with the objective of making Vietnam a modern,
industrial nation by 2020. Of course, other Asian countries' leaders, from Malaysia to the
Philippines, declare similar
objectives. The difference is that Vietnam's rulers seem to mean
it—and their recent record suggests they might pull it off.
The April congress was preceded by a purge of high officials
suspected of corruption—most notably at a road-building agency where some staff
stole millions of dollars to bet on football matches. While Nong Duc Manh, the
party's general secretary, has survived, the other two members of the ruling
triumvirate—the president and prime minister—have since been dropped in favour
of youngish, southern Vietnamese officials, seen as supporters of continued
economic reform.
Good times, bad times
Vietnam is on a roll and its prospects look good. But much could still go wrong. As Vietnam joins the global economy (it should become a member of the World Trade Organisation in the coming year or so) it is becoming more vulnerable to volatile commodity prices and fickle bond-market investors, whose gyrations are largely outside its control. The recent export surge has been helped by strong global demand and high prices for the things Vietnam sells, from rice to crude oil, but a world recession—or an economic bust in China—could cause a big slowdown. The government is racing to build enough power stations, roads and railways to keep the economy moving. Any delays in these would spell trouble.
The communist government's continuing acceptance by ordinary
Vietnamese rests largely on its success in delivering prosperity and better
public services. If it fails to reduce corruption or produce jobs for the more
than 1m young Vietnamese who join the labour force each year and the 1m
villagers migrating to the cities, the country's social cohesion and sense of
purpose would be in danger.
That makes it vital to accelerate the government's programme
to restructure and sell thousands of state-owned firms. They are more
graft-prone than private companies, and devour the lion's share of scarce land
and credit while creating few new jobs. The private sector provides most of the
growth in jobs and exports, but would do better still if it was not crowded out
by the public sector. Le Dang Doanh, an economic adviser to the government,
reckons that, but for the vested interests slowing down privatisation, Vietnam could now be growing at 11%, just like China.