Business in Vietnam
Vietnam Travel Blog› entry 1 of 2 › view all entries
October 1st, 2008 – by: elpaco222
Vietnam, the next best thingâ€¦?
After more than a century of turbulence, Vietnam has managed to find stability and raise the interest of foreign investors. Vietnam needs to climb from far down, but shows an enormous potential. Next year STARâ€™s international business study will conduct a extensive research on the possibilities of the country. It is time to dig into the past, look ahead and explore what the country is really about.
A turbulent past
The Vietnam War, which occurred from 1959 to 1975, had a detrimental effect on the country. The American economic embargo, which lasted until 1994, has put a continuing burden on the economic development.
In 1945 the British Army liberated the country. The patriotic, nationalist movement Viet Minh led by Ho Chi Minh, has strived for independence since the Second World War, now trying to take advantage of the power vacuum. The French colonizers however returned in strength and managed to regain control of Vietnam, at least in name by 1946. This was when the Franco ďż˝" Minh War broke loose.
The country was temporary divided into two zones until nationwide elections could be held. In the North the nationalist and Communist Viet Minh ruled and in the South a strong anti-communist Catholic regime. Nationwide elections however, were never held, as the Americans feared that Ho Chi Minh would win by a landslide. The American interference initiated the Vietnam War.
Vietnam, Rising star?
After more than a century of turbulence, the Communist regime has managed to bring stability to the country. With the lifting of the American trade boycott, the doors have opened for an economic revival.
Another source of future income is tourism. The country offers a wealth of attractions for all tastes: historic cities and churches from French colonial times; war sites like the tunnels in demilitarized zone, an idyllic coastline and an enormous potential for ecotourism with over twelve national parks. Surrounded by countries with a rising spending power, like China, South Korea, Taiwan and Japan, guarantee a steady inflow of tourism.
Vietnamâ€™s rise has been initiated in 1986 by the Doi Moi (renovation) politics; here the ruling Communists acknowledged that capitalism and open markets were the way forward. The government allows for a market-based system, while steadily controlling the pace to guarantee the Partyâ€™s power. The slow pace of the reforms, for example the the country's banks and to investment rules, has scared of investors in the 1990s. Slowly, but surely the country has managed to come forward. The government has come to realize that foreign investments are beneficial to the country and do not necessarily threaten the position of the Communistâ€™s party. The former skepticism towards the outside world has disappeared as the country welcomes tourists and works on the foreign relationships. The Vietnam news of the 29th of September, a government controlled newspaper, illustrates the recent outward look of the government: â€śLeaders see tighter world ties as vital to growthâ€ť.
A long road ahead
Vietnam however, has to climb from far down. It is still considered the poorest country in Asia, with income per head behind Indiaâ€™s. When you visit the country the signs of poverty are all to clear: market vendors that literally live and sleep at their market stand, waiters that spend the night on the restaurant tables and families living in sheds on the water.
Next to the obvious signs of poverty, the rapid economic development is also present, mainly in the big cities. In Ho Chi Minh City (the former Saigon), Vietnamâ€™s largest metropolis, you can see the flashy sport-utility vehicles passing expensive designer boutiques. With a population of 6.3 million people and 3.3 million motorbikes the city seems like a chaotic mess of traffic logged roads and urban bustle.
Meanwhile a shortage of land is hampering agriculture development and a surging inflation could instigate a currency collapse. The fertile valleys of the Mekong and Red rivers are already heavy populated. The availability of land seems to be one of the most prominent problems for the future. Next to that is the inflation, which is over 25% year-on-year, is a matter of concern, to say the least.
â€śHey you, need motorbike taxi? Want to buy banana? Very cheap.
Throughout the country commercial activity is dominant. On the floating markets, market vendors purchase their goods. The street vendors buy their goods from the market vendors and they approach the customers while carrying two baskets held up by a bamboo pole. On the sidewalks small restaurants serve the national dish Pho, a noodle soup with pork that is served for breakfast, lunch and dinner.
Here is where foreign investments and business could make a difference, by offering employment and knowledge. Agriculture, for one thing, could benefit from the sophisticated methods used in the Western world. Right now the preferred method of ploughing the land is still by oxen or water buffaloâ€™s.
Vietnam has fought its way up to being one of the multinationalâ€™ favorites, 1 out 5 multinationals has plans to transfer activities from China to Vietnam.
Private firms have long been illegal, but that ship has sailed. But private firms still face an excess of red tape, corruption and poor regulation. Communist bureaucracy makes the process of buying and selling land complicated and corrupt. In most occasions it is still forbidden for foreigners to own property in Vietnam, which makes things instantly more complicated. Businessmen like the Australian Craig Anderson, who runs several scuba supply stored in Vietnam, has everything on the name of his Vietnamese fiancĂ©.
Many investors have poured in loads of money in firms that are still considered government enterprises. The government shows willing toward continuing the liberalization and much work lies ahead to get there. Time will tell whether the government can live up to its promises.
The global downturn will hit Vietnam as hard as any other country. In a land where everything goes by motorbike, rising fuel prices can have a strain on the economy. While rice producers benefit from the rising food prices, the people that consume rice (read everyone in Vietnam) will be disadvantaged.
But other than that the outlooks are good. If the Communists speed up the reform and cut the red tape they will drag in even more investors. The government is already half-way through a huge project that strives to cut down bureaucracy and minimize official procedures.
The ambitions of the government are high, it wants to become a rich, high-tech country by the year 2020. The government plans are laden with targets for increasing output and improving infrastructure. If the government can live up to itâ€™s ambitions, foreign investment is stimulated and tourism will continue to flourish, Vietnam could really be the next best thing.
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