[Vnbiz] Economist Good Morning at Last

[Craig Stevenson]

*Vietnam*

An economic boom is accompanied by remarkable success in getting rid of
poverty and raising life expectancy

Dateline: HANOI

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.

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
China's, has been remarkable. In 2001-05 it averaged over 7.5%, reaching a
peak of 8.4% last year. This year the government is going all out to hit an
8% target.

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 Philippines and 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
*<http://web.ebscohost.com.ezproxy.umuc.edu/ehost/detail?vid=69&hid=116&sid=42dae0b1-bce7-47c5-9fc5-bd49485f5468%40sessionmgr102#toc>

*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.
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