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Tuesday, 25 April, 2000, 13:47 GMT 14:47 UK
Vietnam: A new Asian Tiger?
By BBC News Online's Emma Batha
Ten years ago, Vietnam was hailed as the next great Asian tiger. The Communist Party had opened its doors to the outside world and it looked like the biggest investment opportunity since China.
Global names like Unilever, Shell and Mitsubishi piled in, swanky hotels went up and economic growth hit 10% - quite something for a country then ranked among the poorest in the Third World.
Vietnam's lures include oil deposits and mineral and agricultural resources, but its biggest attraction is its huge labour force.
The population of 76 million, the second largest in south-east Asia, is well educated - the literacy rate is 88% - hard working and very cheap, even by Asian standards.
Firms from South Korea, Taiwan, Hong Kong and Japan were quick to set up garment and toy factories and build 'investment zones'.
The changes were nowhere more evident than in Vietnam's largest city, Ho Chi Minh City, which many locals still call by its pre-revolutionary name, Saigon.
Today teenagers crowd into discos with names like Planet Saigon and businessmen cruise around in Mercedes.
Entrepreneurs flog fake war memorabilia to tourists who talk about Vietnam as the new Thailand, and the US dollar is accepted as readily as the national currency, the dong.
This is hardly the Vietnam envisaged by the communists when they seized the city 25 years ago.
On 30 April 1975, a north Vietnamese tank smashed through the gates of Saigon's presidential palace and the last Americans were airlifted from the roof of the US embassy.
The following year, the country was unified.
But by the mid 1980s, catastrophic policies, the legacies of the war and increasing isolation were crippling the country.
The Communist Party introduced a policy of 'doi moi', or renewal, in 1986, which aimed to transform Vietnam into a market economy.
The reforms gained further impetus with the subsequent fall of Hanoi's communist friends in eastern Europe.
New investment laws allowed the establishment of wholly foreign owned enterprises.
Asian, Australian and European companies were the first to take advantage, but in 1994 America lifted its trade embargo on Vietnam and more than 400 US firms moved in.
By 1996, foreign direct investment had reached $8.3bn a year, a third of Vietnam's GDP.
But in the last few years, Asia's tiger cub has not been roaring so loudly. Many foreigners are now pulling back and economic growth has fallen to 4%.
Analysts say the problem is that the Communist Party's talk of 'doi moi' has turned out to be little more than talk - and that foreign investors misjudged the political climate.
One example of the party's reluctance to relinquish control was its 1996 campaign to eradicate ''social evils'', which ordered the removal of foreign language signs from shop fronts.
Endless red tape, corruption and a slippery legal system have also discouraged new investment.
But this is a western view. From Vietnam's standpoint, economic reform is continuing, albeit slowly, as is the significant reduction in rural poverty.
When the war ended, the country had to import rice. It is now the world's third biggest rice exporter.
Its currency also managed to remain stable through the Asian crisis which hit Indonesia, South Korea, Thailand and Malaysia so hard.
Political commentators say the crisis probably served to confirm the communist leadership's suspicions that opening up to the West too fast is not a good idea.
Hanoi and Washington were due to sign a bilateral trade agreement last autumn following nearly four years of negotiations.
Vietnam is the only country with which the US has established full diplomatic ties, without normalising trade relations.
Financial experts say a trade agreement would increase Vietnam's exports to the US by $800 million in the first year.
But Hanoi has had second thoughts and the deal, struck in July, is now on ice.
Many analysts see the stalling as proof of big disagreements within the secretive Politburo between reformists and conservatives over whether Vietnam really should commit itself to a free market economy.
But there is still hope and optimism about Vietnam.
Ironically, one of the country's largest sources of foreign currency is from the very people who fled after the war.
Last year $1.2bn was sent back by overseas Vietnamese. Some are also returning to work, bringing not just money, but ideas and skills acquired abroad.
However, many of the difficulties which have driven away foreign investors are also thwarting Vietnamese entrepreneurs.
Last year the US opened a $3m dollar consulate in Ho Chi Minh City.
The US ambassador Pete Peterson, a former prisoner of war in Vietnam, said the new building signalled reconciliation and a bright future.
But he recently summed up the general frustration when he remarked there was probably no other developing country in the world with such ''a vast void between potential and realisation".
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