Đoàn Trang
(Ms_Independent)
Điều hành viên
The good pupil
May 6th 2004 | HANOI
From The Economist print edition
Vietnam has become one of the fastest-growing countries in Asia
IF FOREIGN investment is anything to go by, the nominally communist rulers of Vietnam have made their peace with capitalism. The country raked in foreign direct investment worth more than 8% of GDP last year: even more, proportionally, than China. After its oversized and overheating neighbour, Vietnam also boasts Asia's best-performing economy. It has grown by an average of 7.4% a year over the past decade and is likely to achieve a similar figure this year. Better yet, the boom has lifted many Vietnamese out of poverty. As recently as 1993, the World Bank considered 58% of the population poor. By 2002, that had fallen to 29%. Can Vietnam maintain this remarkable momentum?
So far, its economy has proved unstoppable. Neither last year's outbreak of SARS, a respiratory disease which scared away tourists, nor this year's avian flu epidemic, which hurt poultry farmers, made much of a dent. Even during the Asian financial crisis of the late 1990s, when other countries in the region were plunged into recession, growth in Vietnam never fell below 4.8%.
At first, agricultural reform, which redistributed land from the state to poor farmers, propelled the boom. More recently, export growth, fuelled by cheap, efficient labour and burgeoning foreign investment, has driven the economy. Exports leapt 20% last year. As Do Duc Dinh, a local economist, points out, the money Vietnam earns from this trade—roughly $20 billion last year—now dwarfs the $2 billion-odd it gets each year in hand-outs from foreign donors. Vietnam's exports to America doubled in 2002, after the two countries signed a trade pact, and again in 2003.
Admittedly, as trade with America grows, it has become more controversial. Last year, American catfish farmers, by invoking arcane anti-dumping laws, persuaded their government to impose steep tariffs on imports of Vietnamese catfish. Now American shrimp-fishermen are trying to repeat the same trick. American bureaucrats are also contemplating reducing the amount of garments Vietnam can export to America, as a penalty for allowing Chinese-made clothes to enter America on Vietnam's quota. Even if Vietnam is let off the hook, the quota will from now on only grow by a few percentage points a year. Between 2001 and 2003, by contrast, textile exports to the United States grew from $47m to $2.4 billion.
But Vietnam's diversified exports—it produces commodities, agricultural goods and manufactures—provide insulation against fluctuations in any single product. Its markets are diverse, too: although catfish exports to America fell by a third after the new tariffs were imposed, overall exports of catfish grew, as Vietnamese exporters found new customers in Europe and Australia. Vietnam also hopes to join the World Trade Organisation next year. But even if this deadline slips, it still has its trade pact with America, its membership of AFTA, a South-East Asian free-trade area, and its proximity to China.
Small businesses have also boomed, since the government passed a new law in 2000 making it easier to set them up. By the end of 2002, over 50,000 new companies had sprung up. But as Martin Rama of the World Bank points out, Vietnam has almost no middling private firms between these mom-and-pop ventures and big exporters backed by foreign investors.
Such businesses find it hard to grow because they cannot readily get access to land or capital. About half of bank lending goes to state-owned enterprises, although that share is falling. What is more, even if banks (mostly state-owned themselves) wanted to lend to entrepreneurs, the latter have little collateral to pledge for their loans. In Vietnam, the state owns all the land and grants land-use rights to farmers, businesses and home-owners. Although these are theoretically transferable, banks are fearful that Vietnam's antiquated courts would not enforce their rights. Such fears have precluded a free market for land, further adding to private firms' difficulties. Corruption also weighs heaviest on small businesses: in some provinces, they can be subjected to as many as 15 different bureaucratic inspections each year.
The government, although trying to solve some of these problems, appears addicted to public enterprise. It continues to provide state-owned firms with loans and land—which many of them then rent on at a mark-up to the private sector. It invests with Stakhanovite zeal in impressive but uneconomical facilities, such as oil refineries, steel mills and fertiliser plants.
The net result is a massive misallocation of resources. Vietnam's ratio of investment to economic growth has fallen by roughly a quarter in recent years. To reverse that slide, argues Robert Glofcheski, an economist at the UN Development Programme, the government must revert to the same tactics that made its agricultural reforms so successful: more spending on health and education, further transfers of assets from the public to the private sector and faster deregulation.
Such moves are particularly important if poverty is to be reduced further. Thanks in part to the stunning success of the past decade, tackling poverty has become more difficult. The poor are now concentrated in remote, rural districts populated chiefly by ethnic minorities—just the sort of area least touched by the government's reform programme. Now that industry has replaced agriculture as the main engine of the economy, cities are growing faster than the countryside. Vietnam cannot afford to provide services to the rural poor, or cope with a population influx in the cities, and cosset state-owned firms at the same time—even during a boom.
May 6th 2004 | HANOI
From The Economist print edition
Vietnam has become one of the fastest-growing countries in Asia
IF FOREIGN investment is anything to go by, the nominally communist rulers of Vietnam have made their peace with capitalism. The country raked in foreign direct investment worth more than 8% of GDP last year: even more, proportionally, than China. After its oversized and overheating neighbour, Vietnam also boasts Asia's best-performing economy. It has grown by an average of 7.4% a year over the past decade and is likely to achieve a similar figure this year. Better yet, the boom has lifted many Vietnamese out of poverty. As recently as 1993, the World Bank considered 58% of the population poor. By 2002, that had fallen to 29%. Can Vietnam maintain this remarkable momentum?
So far, its economy has proved unstoppable. Neither last year's outbreak of SARS, a respiratory disease which scared away tourists, nor this year's avian flu epidemic, which hurt poultry farmers, made much of a dent. Even during the Asian financial crisis of the late 1990s, when other countries in the region were plunged into recession, growth in Vietnam never fell below 4.8%.
At first, agricultural reform, which redistributed land from the state to poor farmers, propelled the boom. More recently, export growth, fuelled by cheap, efficient labour and burgeoning foreign investment, has driven the economy. Exports leapt 20% last year. As Do Duc Dinh, a local economist, points out, the money Vietnam earns from this trade—roughly $20 billion last year—now dwarfs the $2 billion-odd it gets each year in hand-outs from foreign donors. Vietnam's exports to America doubled in 2002, after the two countries signed a trade pact, and again in 2003.
Admittedly, as trade with America grows, it has become more controversial. Last year, American catfish farmers, by invoking arcane anti-dumping laws, persuaded their government to impose steep tariffs on imports of Vietnamese catfish. Now American shrimp-fishermen are trying to repeat the same trick. American bureaucrats are also contemplating reducing the amount of garments Vietnam can export to America, as a penalty for allowing Chinese-made clothes to enter America on Vietnam's quota. Even if Vietnam is let off the hook, the quota will from now on only grow by a few percentage points a year. Between 2001 and 2003, by contrast, textile exports to the United States grew from $47m to $2.4 billion.
But Vietnam's diversified exports—it produces commodities, agricultural goods and manufactures—provide insulation against fluctuations in any single product. Its markets are diverse, too: although catfish exports to America fell by a third after the new tariffs were imposed, overall exports of catfish grew, as Vietnamese exporters found new customers in Europe and Australia. Vietnam also hopes to join the World Trade Organisation next year. But even if this deadline slips, it still has its trade pact with America, its membership of AFTA, a South-East Asian free-trade area, and its proximity to China.
Small businesses have also boomed, since the government passed a new law in 2000 making it easier to set them up. By the end of 2002, over 50,000 new companies had sprung up. But as Martin Rama of the World Bank points out, Vietnam has almost no middling private firms between these mom-and-pop ventures and big exporters backed by foreign investors.
Such businesses find it hard to grow because they cannot readily get access to land or capital. About half of bank lending goes to state-owned enterprises, although that share is falling. What is more, even if banks (mostly state-owned themselves) wanted to lend to entrepreneurs, the latter have little collateral to pledge for their loans. In Vietnam, the state owns all the land and grants land-use rights to farmers, businesses and home-owners. Although these are theoretically transferable, banks are fearful that Vietnam's antiquated courts would not enforce their rights. Such fears have precluded a free market for land, further adding to private firms' difficulties. Corruption also weighs heaviest on small businesses: in some provinces, they can be subjected to as many as 15 different bureaucratic inspections each year.
The government, although trying to solve some of these problems, appears addicted to public enterprise. It continues to provide state-owned firms with loans and land—which many of them then rent on at a mark-up to the private sector. It invests with Stakhanovite zeal in impressive but uneconomical facilities, such as oil refineries, steel mills and fertiliser plants.
The net result is a massive misallocation of resources. Vietnam's ratio of investment to economic growth has fallen by roughly a quarter in recent years. To reverse that slide, argues Robert Glofcheski, an economist at the UN Development Programme, the government must revert to the same tactics that made its agricultural reforms so successful: more spending on health and education, further transfers of assets from the public to the private sector and faster deregulation.
Such moves are particularly important if poverty is to be reduced further. Thanks in part to the stunning success of the past decade, tackling poverty has become more difficult. The poor are now concentrated in remote, rural districts populated chiefly by ethnic minorities—just the sort of area least touched by the government's reform programme. Now that industry has replaced agriculture as the main engine of the economy, cities are growing faster than the countryside. Vietnam cannot afford to provide services to the rural poor, or cope with a population influx in the cities, and cosset state-owned firms at the same time—even during a boom.