Vietnam has made huge economic advances over the past 10 years. But sustaining growth and ensuring everyone benefits from this progress will be challenging.
HANOI — It’s 8am in Hanoi and already thousands of motorbikes, mopeds and scooters flow through the streets. Some sway with the weight of two or three passengers, boxes of merchandise, sacks of rice, or tied-down pieces of furniture that look heavier than vehicle and driver combined.
For the first-time pedestrian, crossing the road is a daunting experience, but, amid all the apparent chaos, the “system” works. The trick is to just walk when you can, and let the torrent of bikes flow around you. Don’t look left, don’t look right. Just walk
This functioning chaos contrasts sharply with the mostly prudent macroeconomic course that Vietnam has been taking. The Doi Moi, or “renovation” economic reforms were launched in 1986, emulating China’s move to open up its markets, after more than a decade of stagnation since the fall of Saigon to the Vietnamese communist forces.
Vietnam has changed rapidly in the past 10 years, but locals say the country still lags behind its neighbours, such as Thailand and Malaysia, which have a gross national income (GNI) per capita of $3,760 and $7,230 respectively. Last year, Vietnam’s GNI per head was US$1,010, highlighting the country’s impressive progress on eradicating extreme poverty. Hanoi is a far cry from the quiet, inward-looking city it was prior to Vietnam’s economic take-off, though rural poverty persists, particularly in more remote and ethnic minority areas.
How to maintain this progress is the key challenge facing Vietnam’s policy makers. Thailand and Malaysia are hemmed in by the so-called “middle-income trap”, which suggests that while countries can move up from the ranks of the very poor, moving further forward is more complex, as competitiveness falls off and costs for investors increase. With the middle-income trap comes widening inequalities, as vast wealth often gets concentrated in a few hands.
Kuala Lumpur this year announced ambitious plans to transform Malaysia into an OECD-standard economy, attempting to emulate the rise of South Korea, once one of the poorest countries in the world. Crucial to South Korea’s rise was education reform, and that is one area in which Vietnam is doing well. In Hanoi, conversations with young Vietnamese professionals and students were all peppered with references to the importance of a good education to Vietnamese people. Investments in eduation and health were part of Vietnam’s renovation reforms.
Vietnam has just been promoted to this middle division of the international economic league tables, but wants to keep moving up the ranks. In common with much of Asia, Vietnam’s economy is vaulting clear of the global slowdown – which in hindsight now looks more like a western malaise. Growth for 2010 is projected to beat the 5% recorded last year – though these numbers are down on the 6.5% -8% average for the previous decade.
The opening, in October, of technology firm Intel’s largest plant in the world, in Ho Chi Minh City, was a high-profile reminder of the country’s emergence as an investment target for multinationals. Intel president and chief executive Paul Otellini joined Vietnam’s deputy prime minister, Hoang Trung Hai, at the opening, with Hai remarking that the new facility “supports our goal of accelerating economic transformation led by technology-intensive industries”. Less than a week later, at the culmination of the East Asian and ASEAN summits, held in Vietnam, US secretary of state, Hillary Clinton, witnessed the signing of investment deals by Microsoft and Boeing.
However, Vietnam’s move out of poverty and its economic growth owes a good deal to the thawing of its relations with the US and the subsequent forging of trade and investment links. The US is Vietnam’s second largest trade partner, but its largest is China. Despite all the historic enmities – Vietnam was a Chinese colonial outpost for a millennium – the Chinese style of political economy was adapted. The ambivalence toward the emerging superpower to the north endures, with Hanoi now trying to balance the fears aroused by Beijing’s growing assertiveness with the economic realities of having China as a neighbour.
Vietnam has been sidling closer to the US, letting China know that it has options should Beijing lean too hard on its smaller neighbours. When the naval destroyer USS John S. McCain docked in Da Nang port in mid-August, the symbolism was rich. The ship is named after the grandfather of 2008 US presidential candidate John McCain, a former prisoner of war in Vietnam.
However Hanoi’s strategy will likely be a balance between the two giants. China’s presence in Vietnam’s central highlands has proved controversial, with plenty of criticism fired at the ruling communist party by bloggers and writers who think that the country’s rulers have sold out to Beijing. Their focus has been on mining projects run by the Chinese, citing environmental concerns – a downside of Vietnam’s economic rise – and the siphoning-off of Vietnamese resources to China.
However, this outcry in turn has prompted a clampdown on opposing voices ahead of the five-year party congress, scheduled for early 2011. Around 20 activists have been arrested or jailed since October, a clear signal that, like China, Vietnam’s one-party rulers will not cede power or allow democracy to play a part in its “renovation”. And other damaging aspects of China’s governance model have been adopted.
Vietnam’s two-child policy has doubtless done a lot to boost the country’s progress in the millennium development goals in terms of reducing child and maternal mortality, but is leaving Vietnam with a demographic imbalance , just like China. In Vietnam, according to UN statistics, the birthrate is 112 boys to every 100 girls, as women have an average of three abortions in a lifetime, to meet the two-child policy.Show