Agenda: Vietnam's Economy
Video Transcript:
With inflation rising in Vietnam, Colin Chapman in Hanoi and STRATFOR East Asia analyst Rodger Baker discuss prospects for the Southeast Asian country.
Editor’s Note: Transcripts are generated using speech-recognition technology. Therefore, STRATFOR cannot guarantee their complete accuracy.
Colin: The changing of the guard outside the Ho Chi Minh Mausoleum in Hanoi. It's in this square on Sept. 2, 1945, that "Uncle Ho" declared Vietnamese independence.
Welcome to Agenda with Colin Chapman and, joining me this week, Rodger Baker STRATFOR's East Asia analyst.
Rodger: Colin, I know you've only been in Vietnam for a short time, but what are your first impressions?
Colin: Well the principal worry here seems to be inflation, which is now running at 14 percent. So that's eating into people's standard of living, particularly in a place like Hanoi, where housing is very expensive, as are food prices. Those that I've met say the economy is a real problem because its growth is slowing and the Asia Development Bank estimates only 6 percent this year.
The government is doing something about it, though. What's called well Resolution 11. That's a package of measures to keep borrowing rates high, curbing credit growth and cutting non-recurring, non-wages public spending by 10 percent. But some don't know if the government has the will to go through with this for fear of social unrest as elections approach, though there doesn't seem to be much sign of unrest. And, of course, people here are much better off than they were 10 years ago. But there are immense skills shortages. And there's a real need to spend up to $4 billion on infrastructure. One experienced Hanoi-watcher told me the government has put the brake on acting more boldly. Well they've never been that bold, not in dealing with the economy, anyway.
There are some interesting schemes in the private sector, such as the restaurant where I had lunch today, where some of Vietnam's 14,000 street kids are given training as chefs or waiters so that they can earn a living. Rodger, next week I'll be heading out into the countryside where I believe the farmers face a lot of difficult issues. What should we be looking for there?
Rodger: I think one of the things you want to look at is the issue of the wealth gap and how severely it's felt. Very similar to what we see in China, we have a perception that in Vietnam the farmers and fishermen are seeing greater distance between themselves and the rising urban classes. One of the problems with this is, of course, that if the farmers see themselves being left behind, that can become a sense of social instability, particularly if we see a slight slowdown in the Vietnamese economy, in which case there wouldn't be as much money to trickle down into the rural areas.
Colin: What else should we be looking for?
Rodger: I think some of what we're looking for also is a perception of the business climate. How open is Vietnam to foreign investment; how have their regulations changed or adjusted. Are foreign companies having problems, maybe not with the official paperwork, but with some of the unofficial ways in which Vietnam is run?
Also the differences between the north and south of the country. We know Vietnam is very bipolar country. It has a very distinct difference in culture and in history in the north and south. Are there tensions growing in the economic developments between those areas or is the infrastructure being built up better to connect the areas?
I think one other thing that you may want to be looking for is the perception of China and the United States in Vietnam. We know that as a middle power Vietnam stands to gain mostly by being able to play off the interests in the competition between the Chinese and the United States. We've seen this in part in the South China Sea; we see in some of their economic activities. I think getting a better sense of how the Vietnamese perceive their position in relation to these two great powers would be very useful.
Colin: And that's Agenda for this week. From me, Colin Chapman in Hanoi, goodbye for now.
