Vietnam pushes reforms for a better future

Advantages include political stability and FDI

“Vietnam is my home and I am happy to be contributing in some small way to its reconstruction, remarked Nguyen Ngoc My from his newly opened Overseas Vietnamese Club, located at the Hanoi Horison Hotel.

A Viet kieu or overseas Vietnamese from Australia, My operates a successful construction enterprise, and like thousands of other returnees to their homeland are hard at work, winning contracts, creating business opportunities, and in the process, providing jobs for their Vietnamese brothers and sisters.

As Tet approaches, which is Vietnam’s lunar New Year festival, it is not only returning overseas Vietnamese, formerly pariahs of the Socialist Republic of Vietnam, but the entire country which finds much to celebrate during their biggest holiday.

Vietnam pins its hopes for a brighter future on many events: The most startling and dramatic is the recently signed bilateral trade agreement with the United States ushering in new trade and business opportunities. The historic signing represents an important milestone in the more than decade-long normalization of U.S.-Vietnam relations. For many, the signed deal signals a triumph of capitalist pragmatism over communist ideology.

U.S.-Vietnam Trade Council president Virginia Foote has called the trade agreement “arguably the most important step for our two countries since the end of the war.”

The trade pact pledges to have a measurable impact on Vietnam’s State owned enterprises often Byzantine management practices, requires that trade barriers be lowered, promises a level playing field for foreign companies in service industries from advertising to telecommunications, and offers some assurance of adherence to international copyright and investment regulations.

Meanwhile, in final preparation for Tet, the shopkeepers along Le Quy Don in Hanoi are already selling out of their ‘banh chung’ or sticky rice cakes, to the nearby locals, and decorating their simple tube-like homes with bright-colored flower blossoms, lanterns and handmade prints. Against this daily background of widening enterprise and cheerful optimism, Vietnam’s Politburo, now more than ever, seems poised to take on a new international voice and role in its quickening pace to fully integrate with the West.

Last year, the National Assembly welcomed Nong Duc Manh, as the elected new general secretary of the Communist Party, a self-declared consensus builder, who on the face of his present record, is breathing new life into the country’s unfinished promised reforms.

While addressing the Party members and the country, following his election, Manh spoke with measurable pride and confidence, stating “that the future of our nation is very bright but we will still have to overcome many difficulties and trials along the way.”

No one denies that Vietnam still faces formidable problems of excessive red tape, corruption and wasteful spending by government agencies and officials. And several senior economists bravely acknowledge that Vietnam must address weakening demand for its exports, declining prices for key products, and devastation from a series of natural disasters, including last year’s dramatic floods in the Mekong Delta.

Vietnam remains a poor country with barefoot street kids selling postcards along Dong Khoi in former Saigon and disgruntled hard scrabble peasants seeking redress in the Central Highlands.

Yet, it is a land and people well at peace and surely taking huge steps to insure new prosperity for its more than 80 million citizens. Consider these facts: Over the last decade Vietnam’s economy experienced 8 percent annual growth, resulting in drastic reduction of poverty, increased literacy, and a bloom of wealth in the cities, particularly in the sprawling, southern commercial hub of Ho Chi Minh City. Until very recently, HCMC accounted for a full 30 percent of the country’s entire economic output. The city’s population is already at five million, a remarkable 26 percent growth since 1989.

Never mind that the trade deal with the U.S. will not unleash an immediate flood of new investment, but it does place the country squarely back on the international investment radar screen. Even the Asian Development Bank admits that Vietnam’s economic growth rate is likely to increase slightly over 6.2 percent in 2002, in part because of a projected boost to exports, imports and foreign direct investment prompted by the ratified bilateral trade agreement.

Due to increased capital flows attributed to programs funded by the World Bank and the International Monetary Fund, gross reserves in the country rose from $3.4 billion at the end of 2000 to $3.9 billion at the end of 2001.

Along Hanoi’s banyan-lined streets, across the country’s numerous verdant rice paddies and frequent seasonal dark monsoon sky, the gentle rays of sunlight peek through swift moving nimbus clouds, offering the promise of continued political stability and hope to this once sorrowful and ravaged land at war far too long with the United States, France, and its neighbors, Cambodia and China.

Those definite signs of progress are visible in the streets of the capital Hanoi from the modern Hanoi Tower to the city’s beautifully and fully restored Opera House and in the South’s glistening and commerce bearing new parks like Saigon South and the Vietnam Singapore Industrial complex.

This is not just a veneer, scratch the surface and the reality is striking: Ask a local about present Asian economic downturn and he’ll tell you that 16 years ago his family was shoeless. Now witness a new generation of Vietnamese who have embraced their new-found freedom with enterprise and who reward themselves with designer mobile phones and the latest Honda Dream motorbikes whizzing by flashy Sony billboards.

“Vietnam’s advantages clearly include political stability, commitment in reform and now with the passage of the BTA, a strong capacity to expand export markets.” remarked Hanoi’s red capitalist, 58 year-old , Nguyen Tran Bat, who runs a large international investment consultancy, Invest Consult.

Guarded optimism despite post WTC attack
Although there is a sharp downturn in the U.S. economy after the dramatic terrorist attack on the World Trade Center and the Pentagon, it has had less direct impact on Vietnam than on other regional economies because of the relatively low volume of U.S.-Vietnam trade.

Now local textile and garment makers are already lining up and investing in new technologies to penetrate the U.S. market as the Bilateral Trade Agreement (BTA) comes into full force. The Viet Nam Textile and Garment corporation (Vinatex) is one of the first companies to take the plunge, opening a representative office in New York in December to capitalize on the agreement.

“We recognize that with the recent passage of the BTA, Vietnam will indeed have to gradually open up many areas allowing American investors to compete with domestic businesses,” remarked Tran Xuan Gia, Minister of Planning and Investment.

Although US companies will benefit from the trade accord, targeting the more than 80 million consumers, it is Vietnam that will enjoy tangible new business prospects, namely in the country’s apparel and manufacturing industries, increasing exports by nearly a $1 billion annually according to some observers. U.S. tariffs on Vietnamese-made products will drop from a high of 40 percent to 4 percent.

Future growth in Vietnam
While it is true that most Vietnamese still earn less each year than the price of a premium pair of tickets to a New York Yankees World Series game—”New Vietnam’s” cityscape and property development both in Hanoi, the political capital, and in Ho Chi Minh City, the commercial center, continue to belie these facts.

Most people agree that Vietnam’s potential to develop a modern, export-oriented economy remains real, based on an inexpensive, labor-intensive industry (most workers earn about $50 per month); a well-educated (92% literate) work force; and rich natural resources (Vietnam boasts significant energy reserves of one billion-plus tons of iron ore, five billion tons of oil and gas, and large agricultural capacity—10 million hectares of cultivated land). Furthermore, Vietnam’s new consumers are now purchasing over 12,000 Honda motor scooters each month, at an average cost of $2500 each.

Another important reason for celebration during Vietnam’s approaching lunar New Year is Vietnam’s tourism. The industry defies the current downturn in international travel trends. HCM City alone has set its sights high with an ambitious target of 1.35 million foreign visitors and a turnover of at least $335 million pumped into the local economy. Adding ballast to this optimistic picture is that the country was recently recognized as the safest destination in the Asia-Pacific region by the Hong Kong based Political and Risk Consultancy.

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