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| Traditional transport, new
spirit: Vietnam changes fast, but some traditions
die hard. |
| Photo by Thomas Jandl |
Confucian history and the structure of the Vietnamese
government have one thing in common: decisions are
made by consensus and are thus not likely to be
revolutionary at any one time.
“In Vietnam, we do everything step by step,
but where do we go from one step to the other, that’s
the question,” explains Do Duc Dinh, the director
of the Department for Development Studies at the
Hanoi Institute of World Economy, an expert on Vietnam’s
integration in the world economy. But this does
not come as a criticism, but a recognition of the
Vietnamese development model that has done remarkably
well since the Communist government dispensed with
a more doctrinaire view and opened itself up to
the forces and benefits of the market.
In 1986, Vietnam’s largely rural population
depended on Soviet aid and still went hungry. Collectivization
had left this rice granary and world’s second
largest rice exporter in a state of constant food
deficiency.
When the government initiated its renovation program,
a form of Vietnamese perestroika locally known as
doi moi, the end of collective agriculture was on
top of the list. The success was stunning. It took
Vietnam barely a decade to become once again a top
agricultural exporter. Today, Vietnam is again the
world’s second largest rice exporter, after
Thailand. Moreover, the country is among the top
exporters of coffee, pepper, seafood, cashew nuts
and tea as well.
Aside from land use privatization (land is still
owned by the state, but long-term use rights can
be traded, inherited or used as collateral), Professor
Dinh credits the 1987 Foreign Direct Investment
Law for the stunning success of the economy of this
erstwhile laggard.
The numbers speak for themselves. Since doi moi,
gross domestic product has increased twofold. Inflation,
running at a whopping 700% in the 1980s, is now
tamed at around 1%. Economic growth averaged 8%
between 1991 and 1995, and even when the Asian financial
crisis rocked the region, Vietnam’s growth
rate remained a high 7.2%.
Thanks to this impressive performance, Vietnam benefits
from significant inflows of foreign direct investment
(FDI) and official development aid.
Since it implemented the Foreign Investment law
in 1987, Vietnam has received $38 billion in FDI
through more than 3,000 investment projects. In
addition, between 1998 and 2002, international donors
and lenders provided $20 billion in foreign assistance.
FDI is of great importance for the development of
the country, especially as domestic capital mobilization
through national savings is not pronounced. FDI
is credited for the creation of 400,000 full time
jobs and more than twice that number of part time
positions. Foreign-invested projects contributed
13% to GDP, almost 35% to industrial production
and 23% of the country’s export value.
The economic structure is changing rapidly. Between
1990 and 2001, the share of agriculture in economy
dropped to 25% from 39%, while industry increased
by 10% to 33%, and the services sector, a good measure
of the creation of a middle class, increased by
almost 4% to 42%.
A key cause for the rapid changes in the domestic
economy is the New Enterprise Law of 2000. Done
with intensive input from the business community
under the auspices of the business lobbying group
Vietnam Chamber of Commerce and Industry, it took
to heart the key grievances of the countries employers.
While it applies to Vietnamese businesses only,
it will serve as a basis for a common enterprise
law for all businesses, domestic and foreign. “We
will have a common law for domestic and foreign
enterprises by 2005,” says Pham Chi Lan, the
Chamber’s Executive Vice President.
In the meantime, the government is active in facilitating
the work of foreign businesses. “We have removed
the requirements for 200 licenses for foreign companies,”
she adds. Also reduced were restrictions on subcontracting.
And unlike in the U.S. or Europe, 90% of upstarts
survive. “There are very few businesses to
begin with. In a country of 80 million, there are
only 39,000 businesses. So there is a lot of room
in an expanding market for domestic as well as foreign
companies.”
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