7/27/2019 Vietnam: The Miracle Decade

1/3

I N G L O B A L T R A N S I T I O N

Walking the streets of Vietnam we experience vibrant, colorful, horn-honking, life, with families of four piled on motorbikes and sma

businesses crammed into every possible inch of sidewalk. The Vietnamese have entrepreneurialism in their blood, and can

seemingly make a business out of anything. On any given street corner you ll witness women in conical hats selling everything from

fruits to fish to silk to SIM cards, while men collect mountains of recycled cardboard and Coke bottles piled on a bike; others sit atop

their motorcycles offering xe om (taxi rides). Makeshift sidewalk restaurants consisting of plastic

stools offer BBQ pork, shrimp spring rolls, and the national dish of Phobeef noodle soup. All part o

a neighborhood made up of tall skinny houses (built tall rather than wide, as taxes were once base

on the width of the facade).

Entering the countryside, youll witness stunning marble mountains, beautiful beaches, spa villas,

and 19th Century French architecture. This is not the Vietnam of Apocalypse NowIn fact, beyond a

few abandoned bunkers sitting awkwardly amid rice paddies,

signs of the Vietnam War are all but absent. Left isolated by

the U.S. embargo in 1979, followed by a decade of rigid

communist central planning that left them bankrupt and

starving, the Doi Moifinally made a breakthrough in 1986with market reforms, opening their country to the broader

world. It was then that the Vietnamese characteristically put

the painful past aside and oriented themselves to the

future. With unmatched determination they have turned

Vietnam into a growing, active, hip, place de la centralethat is anything but communist today,

despite its continued single-party rule. In the mid 90s Vietnam signed a bilateral trade agreemen

with the U.S. and later became an active member of the WTO. Since then, one American

interviewee living and working here described it as a "miracle decadewith unprecedented growth

unlikely to be repeated ever again.

Vietnam is not only an economy in transition, but

also a nation in transformation. Evidence of this

economic and social growth is visible in every

corner. The countrys 87 million people have new

levels of wealth and freedom, and there is an increasingly prevalent middle class

buying everything from condos, to motorbikes, from iPhones to entertainment

systems.

Despite its many successes, however, the Vietnamese government still has a bit of

work to do to encourage transparency, business investment, and opportunity. Most

describe the government as well-meaning, with a big difference between the law

on the books and the law in implementation, the latter suffering from lack of

experience and an unfortunate tendency toward practicing Frank Sinatras mantra:

Ill do it my way.

VIETNAMThe Miracle Decade

7/27/2019 Vietnam: The Miracle Decade

2/3

P R O G R E S S

Vi

The two juxtaposing images of Vietnams transition are the motorbike and the rice paddy.

Rice paddies pervade and are a symbol of traditional Vietnam. Agriculture still accounts for

one fifth of the economic output and over half the work force,1 with Vietnam being the

second largest exporter of rice in the world. Rice paddies stretch for miles along the

highway and surround each city. But while most of the population still lives in rural and

agricultural areas, they are moving to cities at a rapid pace. Motorbikes flood every street

in every city, with traffic lights and lanes considered a mere suggestion, thus intimidating

pedestrian tourists at every intersection. Where Americans turn to pick-up trucks or semis

to haul large loads and heavy boxes, the Vietnamese ingeniously pile them on the back of

a motoand drive with one arm navigating horrendous multi-lane traffic.

Much like the rise of the automobile in post WWII America, the motorbike has become the symbol of increased economic

opportunity and personal freedoms in this modernizing country. With 70% of it

population under 35 and of working age, Vietnam needs to create one million jobs per

year. An impressive 93% of the population is literate, but only 32% are skilled, and

four out of five still work in agriculture. This will change as foreign investment

continues to create the vast majority of new jobs, particularly in Vietnams garment

and tourism industries as well as higher-skilled sectors: Intel recently announced a

new plant for chip manufacturing just outside of Ho Chi Minh city, and companies like

First Solar are investing as much as US$1BB into Saigons Industrial Parks. That said,

many of our interviewees did not hold high hopes for the immediate future for the high

tech sector. Vietnams competitive advantage is still in low-cost labor, and that does not necessarily mean good value. The lack of

skilled workers, and a deficiency of local experts to train them in these skills, means that neighboring Thailand, Cambodia and

China remain more attractive to investors looking for higher tech production.

The government does not as yet seem committed to overcoming this skill gap. Though most agree the Party has its peoples best

interests in mind, the lack of emphasis on education is troubling. Approximately five percent of the country is university educated,

with only another few percent attending technical schools. Even among those lucky enough to

access higher education, the emphasis in curriculum seems to be on following orders and

memorization rather than management, initiative taking, or innovation, and every company we

spoke with cited the need to train their employees starting at absolute zero. In high growth areas

like tourist-central Mui Ne, jobs are more plentiful than workers, and retention past one or two

years is unusual, with management level

workers often poached from competitors.

The Vietnamese are, nonetheless, an

incredibly industrious and hardworkingpeople. Eager to help, learn, and succeed,

everyone we encountered was willing to go

the extra mile to ensure customer satisfaction.

In Hoi An we ordered custom-made shoes

from a young woman named Chung. At age

24, Chung garnered a bank loan of

VND25mm (just over $1250) to buy a shoe-

making store in touristy Hoi An, a one hour

commute from her village house. As a result her husband quit working to take

care of their toddler. Despite the late hour on a Saturday evening, Chung drove 30 minutes each way - not once, but twice - to our

hotel, to ensure our shoes fit perfectly before returning home to her family. We found Chung's work ethic to be the rule, not the

exception in Vietnam.

Although some basic infrastructure like telecommunications, high speed

internet, and power, are better than most emerging economies, public services

continue to be sorely lacking as the government struggles to play catch up.

Motor highways are few, slow, and inconsistently maintained, often with two

lanes of traffic and numerous potholes. Traveling a mere 70 miles in an urban

area along the highway can take as long as four hours in normal traffic. Trash

collection is limited to big cities and tourist sites; piled high on riverbanks and

burned in heaps on roadsides in smaller towns and side alleys; Recycling is

collected in straw baskets and on the back of bicycles by private citizens.

Power outages are not uncommon even in larger cities, and privately owned

back-up generators are a must for any business.

7/27/2019 Vietnam: The Miracle Decade

3/3

Private industry, however, seems to have no such distribution problem. Beer and soda are delivered to remote areas on

motorbikes, and cell phone SIM cards are available at every kiosk. A small portion of Vietnam is getting very rich; 200 Bentleys

were registered in Hanoi last year. Private banks are sprouting up everywhere, to serve the rising middle class and while the

majority of the economy still operates on cash, credit cards have been introduced and

heavily marketed over the last few years, and private equity is available even for local

business. Great opportunity in Vietnam comes from introducing proven foreign brands and

concepts and distributing them for the local market, and laws against nationalization protect

foreign investment with no tax on foreign profit extraction.

From a foreign investment and business perspective, "the system is still the system", and

the government still plays a large role in planning. Connections, inside understanding, anda willingness to work with the ruling party to facilitate the permit process are a must. As

many industries are still new and untested, pioneering entrepreneurs must not only blaze

the trail for the government in the way of building local infrastructure (water treatment and

power systems for a hotel, for example), but also retrofit after-the -fact to suit the

government regulations when the latter party gets around to catching up.

Indeed, the national government seems to be

continually behind the curve, though they are

well intended. Evidence of growth and

expansion are everywhere, flirting with edge of

overdevelopment. Where ten years ago foreign entrepreneurs built the first hotels on

virgin secluded beaches along Vietnams 2,000 miles of coastline, each of those hotels

has now been surrounded by unmitigated and usually unfinished competing resorts, inmany cases creating a Cancun-type ambiance where there was once an oceanfront

oasis. Beaches are frequently bejeweled with trash and abandoned construction

materials. Where the National Party has succeeded in encouraging investment and

private sector growth, it has failed in regulating the standards of that growth to ensure

sustainability or ecological standards.

Vietnam is not yet a modern nation, but it is well on the way. The country is pulling

itself out of poverty and into the modern economy quickly, without leaving behind its

traditional culture. The number of people living below the national poverty line has

dropped by 13% over ten years, and by as much as 26% in rural areas. With an

improved education system come higher value jobs; with better infrastructure,

investment and industry will follow. Vietnams risks are in ignoring the inflationary

pressures, identifying their role in the manufacturing value chain, and mismanaging

their vast natural resources. We hope it can continue to move without losing the rice

paddies to concrete and conical hats to more motorbike helmets.

We came to Vietnam with open eyes and ears, in this land freed by Ho Chi Minh and rebuilt by our generation. We leave a far

more peaceful and prosperous place to be carried even further by this next generation. Well miss wandering the ever-inspiring

streets of this driven populace that rises each day to create life and opportunity for itself despite all odds.