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[news] FEER: Take the Long View on Vietnam
Take the Long View on Vietnam
Far Eastern Economic Review
The statistics are inconclusive, but many
investors have soured on Vietnam.
Journalists, commentators, frustrated
investors and other doomsayers are busy
telling Vietnam to wake up or be left behind.
So should investors stay away? Not if they
take the long view.
Vietnam presents itself as a fat and easy
target, with its campaigns against
foreign-language signs, privatization
paralysis, laws promulgated and then later
withdrawn, and its recent decision to assign
party cadres to foreign-invested companies.
Observers, as well as some Vietnamese
decision-makers, readily agree that recent
criticisms are valid. But these are snapshots,
and they capture only a moment in time.
They don't tell us where Vietnam has been
or where it's going.
Twenty-two years after the country's
reunification, it is tempting to compare
Vietnam with its neighbours. When it comes
to cheap labour, Vietnam competes
reasonably well against the rest of Asean. But
in other sectors it is not competitive, and has
much to do before it can be. So comparisons
are difficult.
Vietnam, like the rest of Southeast Asia in
the recent past, is passing through its
prepubescent stage of development. Recall
Indonesia and Thailand's campaigns against
Chinese-language signs and
Chinese-language schools, and Malaysia's
attempt to make state-owned enterprises
drive development. Experience,
self-confidence and common sense limited
these and similar policies in the region. At
the moment of truth, each nation chose
between the comfort and security of looking
at the future as a simple extension of the past
and the anxiety of making bold but untidy
changes. Either the leadership seized the
challenge or a crisis forced a decision upon it.
That moment has not yet arrived in Vietnam,
but it is likely that the next generation of
leaders will face that choice.
While foreign investment is important, it is
still only one of Vietnam's priorities. Indeed,
it is easy to make the case that foreign
investment actually conflicts with Vietnam's
other objectives: political stability,
self-sufficiency, and preserving cultural
integrity. So an uneasy relationship between
foreign investors and Vietnam will remain
well into the future, and investors can expect
imperfect solutions and imperfect
compromises.
But reform will continue. Laws will be
amended as old decisions prove unworkable
or ineffective while new ideas appear to work.
Confidence will grow.
Investors with long-term objectives will not
-- indeed, cannot -- ignore Vietnam. Its
economic growth rate, young and literate
population, natural resources and location in
the centre of an increasingly prosperous
Southeast Asia argue persuasively against it
being left behind.
Even so, Vietnam is capable of irrational
conduct and regression. But by opting to
participate in the regional and global
community, the scope for aberrant behaviour
has diminished. Vietnam has taken some
steps to address its internal problems. In a
dramatic move, courts have imposed death
sentences for grossly corrupt practices. The
government has recently adjusted income
taxes to allow Vietnamese citizens to take
home more of their salaries. And it is slowly
moving towards more accountability by
state-owned enterprises.
But investing in Vietnam makes sense only if
the horizon is far and if the investor is
prepared to absorb body blows in the early
years. Some will invest modestly: Plant a flag
and expand slowly if conditions warrant.
Some will stay away, looking elsewhere while
waiting for conditions in Vietnam to change.
In this limited sense Vietnam is competing
with the rest of Asia.
Ironically, Vietnam's current advantage is
that, though it seeks industrialization, the
benefits it offers are those of a
pre-industrialized society: abundant labour
(if as yet unskilled); a rich agricultural
potential; and many unmet needs. But
inevitably, if Vietnam is to move to the next
stage of economic development, it must take
up the strategies its more successful
neighbours have adopted.
The rest of Southeast Asia has moved from a
modest base to higher levels of
industrialization. So will Vietnam. The pace
of development will accelerate, and the next
generation will see enormous change.
Vietnam will be a far different place in 2010
than it is today. The signs are everywhere.
With its recent membership in Asean, it is
dismantling its protective tariffs. Coveted
membership in the World Trade
Organization will require further
restructuring of state-owned enterprises.
Negotiations intended to lead to a
commercial agreement with the United
States will force Vietnam to accept a higher
degree of openness. The Internet will
eventually come to Vietnam and bring an
unimagined variety of information to
millions. More importantly, a fragile but
growing middle class is emerging, and it is
outward-not inward-looking.
Vietnam's future looks better than its
present. Its path to development and
openness will be erratic and anomalous, but
the pace will accelerate. In the meantime, it
will sometimes seem that it is working
against its own best interests. But
inevitably-and, today's critics will say, in
spite of itself- Vietnam will continue to close
the gap with the rest of Southeast Asia.
---
The writer practises law in Vietnam with
Russin & Vecchi and has lived there for 12
years.
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