From Tortoise to Tiger
The 'Jerusalem Post' is currently running a series of articles about Vietnam for investors interested to take advantage of the country's economic boom. This article gives a very good idea of the sheer scale of Vietnam's economic miracle. This post supplements the discussion started in the comments section of another post.
May. 2, 2007
By AARON LEITNER
During the early 1980s, Vietnam's communist-style centralized economic planning led to an inert economy, creating greater strife that literally caused many of its citizens to come close to starvation. In 2000, the government created a stock market and commenced a program of ongoing structural reforms including the lifting of restrictions on private enterprise and liberalizing regulations to encourage for foreign investments. With its natural resources, geographic location, a well-educated population of 85 million (70% under the age of 35), high work ethic (Chinese factor? NB) and half the average wage of China, only a structural change in Vietnam's market economy was needed to wake up a sleeping economic powerhouse.
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Last year, the country's economy witnessed an accelerated rate of expansion with 2006 GDP growth of 8.2% equaling that seen in 2005 and FDI above $10 billion, up 50% year-over-year. Most impressive about the current trend in FDI is that the sizes of the projects have increased with five or six-billion-dollar-plus projects having been approved.
Clearly, Vietnam is drawing the attention of some of the world's largest and most prestigious international corporations.
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There were several major developments in the last quarter of 2006 - Vietnam was accepted as a member of the World Trade Organization (WTO) and the APEC leader's summit was held in Hanoi. Vietnam's membership in the WTO will serve to open and strengthen the economy even further. In the beginning of December, the US Congress passed a measure elevating Vietnam to Permanent Normal Trade Relations status.
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Since the beginning of 2005, more than 38,000 private enterprises have started up - a 41% increase over 2004. For the past decade, the private sector has been the major source of jobs. It helped propel overall economic growth to 8.2% last year - second only to China. Just five years ago, only 9% of the population earned more than $500 annually. The number is at 35% as of last year, according to research by VinaCapital. Foreign investments have created opportunities for many Vietnamese, particularly the younger generation. College graduates who speak fluent English and studied in the US, Australia and other Western countries earn $1,500 or more a month working for a foreign firm - a fortune compared to laborers who toil in factories for less than $100.
Despite the country's official per capita income of $750, Prada and Gucci have come to town, as well as mall culture and the demand for luxury goods. At Zenta and many other coffeehouses around town, patrons with laptops sip espressos while surfing on the Internet - free and wireless.With new found wealth, Vietnam's new economic elite is creating demands on a budding entertainment and leisure industry. They can be found for teeing off at various golf clubs that have sprouted around the country, seen building swimming pools for their villas and sending their preschoolers to international schools at a cost of almost $10,000/year. Western-style homes and high-rise apartments have been springing up, and the bridal industry is booming - no wonder given that two-thirds of the population is under the age of 30.
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