Hard market lessons for emerging Vietnam

The growing number of luxury stores reveals just how much better off some in Vietnam have become.

Hanoi’s streets are crowded. It was ever thus. But no longer do the smoky pre-war vehicles and creaking bicycles dominate. The roads are now full of new cars and motor bikes, evidence that ordinary Vietnamese are becoming more prosperous.
The growing number of luxury stores reveals just how much better off some have become.

Since the communist government embraced the policy of ‘doi moi,’ or economic openness, more than a decade ago, millions have been lifted out of poverty.
Vietnam has become one of the best performing economies in South-East Asia, averaging growth of between 8 and 9 per cent every year.
Ray Mallon is an Australian economist based in Vietnam’s capital.

“When I first visited Vietnam in 88 you saw poverty everywhere in the streets,” he says.

“There still is poverty here (but) it’s increasingly in the more isolated areas. There just has been an incredible bustling of entrepreneurial activity. Things have opened up, everything is much freer to move around.

“It’s far from being totally free but it’s just a very different economy, a very different society, standards of living have increased dramatically,” he says.

But there are worries now that the economy might be overheating.

Inflation is running at more than 26 per cent, the stock market has dropped 50 per cent this year and there are fears of a real estate bubble.

This week Vietnam’s communist government moved to depreciate the currency, the dong, to relieve some of the pressure.

“In the last 12 months or so inflation has taken off and is a scary levels, as is the current account deficit,” Mr Mallon says, though he adds that its not all doom and gloom.

“When you look at inflation, about half of that’s due to external factors. If you take out food price inflation then the inflation rate is more like 12 per cent which is a worry but less scary.

“So overall other sectors, manufacturing, agriculture, still doing very well. Employment growth is still very strong. This suggests that there will be continuing strong consumer demand. So it’s somewhere in between really. There’s cause for concern but there’s also cause for optimism,” he says.

Despite the fact that Vietnam is still a one-party, centrally controlled country with the constitution describing the system of government as Marxist Leninist, it has always been more open to market realities than some other, similar governments.
The business spirit is alive and well, with a high level of entrepreneurial activity combined with a strong work ethic, reflected for example in the rapid transfer of new technology.

“The level of use of the internet as a percentage of the population is up from nothing to higher than the Philippines for instance and similar levels to Thailand. So these sorts of things, picking up of language skill, anything related to technology, people invest a lot of their time in getting ahead and learning,” Ray Mallon says.

The Government still keeps a firm hand on the flow of capital, the currency and central bank policy.

There are still many government-run businesses too.

That is changing, but there are concerns that if the economy doesn’t improve soon, the Government might be tempted to turn its back on the policies that have brought the country this far.

Dissident Vietnamese monk dies in Vietnam

HANOI, Vietnam (AP) — Thich Huyen Quang, the patriarch of an outlawed Buddhist church in Vietnam who spent more than two decades in and out of house arrest, died Saturday after months of ailing health. He was 87.

The leader of the Unified Buddhist Church of Vietnam died of multiple organ failure a day after being transferred from a hospital to his monastery at his request, said Penelope Faulkner of the International Buddhist Information Bureau in Paris, which speaks for the outlawed church.

An outspoken proponent of religious freedom and human rights, Quang had long been confined to the Nguyen Thieu Monastery in the southern province of Binh Dinh.

“He was a real pioneer, and that’s why Vietnam kept him isolated and they wanted to keep him out of the way,” she said. “He kept determined to the very end.”

The church’s deputy leader, Thich Quang Do, 80, broke out of house arrest at his monastery in Ho Chi Minh City to be at Quang’s side when the patriarch was hospitalized, Faulkner said. Do held a prayer service after Quang’s death and plans to oversee a funeral scheduled for next week, she said.

Buddhist monk Thich Minh Tuan said Quang’s followers are preparing a “simple but solemn funeral” and he will be buried at the pagoda.

“He passed away very peacefully with many of his followers at his bedside,” Tuan said.

State-controlled media over the past few days have accused Do, a Nobel Peace Prize nominee, and other senior members of the banned church of attempting to use Quang’s death for “personal political gains.”

The Buddhist sect was effectively banned in 1981 when it refused to merge with the state-sponsored Buddhist Church of Vietnam.

Vietnam’s Communist government allows only a handful of officially approved religious groups to worship, outlawing all other sects.

Despite the longtime standoff with the government, there were signs of a thaw in relations in 2003 when Quang had an unprecedented meeting with then-Prime Minister Phan Van Khai in Hanoi.

But six months later, the government launched a new crackdown after the Unified Buddhists held a meeting to elect a new church leadership. Quang and Do were accused of possessing official papers with national secrets.

Since then, both monks were mostly confined to their respective monasteries, their followers say. The government denied they have been under house arrest.

Buddhism is the primary religion among Vietnam’s 86 million people. The government has also clashed with other religions in recent years, mostly for political activities. It has sentenced Roman Catholics, Protestants and followers of other religions to lengthy jail sentences.

Vietnam’s students pray for luck in high-pressure exams

HANOI (AFP) — Hundreds of thousands of Vietnamese students Friday sat university entrance exams, kicking off a nail-biting season when family nerves are frayed and police are deployed to ferret out cheats.

All week students have flocked to Hanoi’s ancient Temple of Literature, where mandarins were once trained in the Confucian classics, to pray for luck and burn incense at the country’s oldest university.

“Last year I failed the exam, so I spent the whole year studying,” said 18-year-old Tran Van Lam of northern Thai Binh province, who said he wants to study engineering at the Hanoi Polytechnic University.

“I really hope I’m luckier this time. If not, I’ll try again next year.”

More than 500,000 students are due to sit maths, physics and chemistry exams on Friday and Saturday assembled in 24,000 rooms throughout 974 examination centres, competing for places at 92 universities, institutes and colleges.

Learning is highly valued in Vietnamese society, yet many complain about a tertiary education system constrained by funding shortages and a less-than-open academic environment.

Communist Vietnam, where two thirds of people are under the age of 30, is struggling to cope with surging demand for higher education, and several foreign universities now offer degree programmes to fill the gap.

Foreign education experts often complain of too much knowledge-cramming and a culture where the idea of students questioning their teachers is still sometimes frowned upon as a sign of disrespect.

Overseas Vietnamese have a reputation as academic high achievers, yet many are reluctant to come home to teach in a system where faculty staff typically earn 150 dollars a month and work at several institutions.

Many feel stifled by a system where classes on Marxism-Leninism and Ho Chi Minh Thought are mandatory and many political topics remain taboo.

Professor Jim Cobbe, a Fulbright Scholar teaching economics at the University of Danang, said that while academic standards vary widely, many universities lack adequate teaching materials and equipment.

Another problem, he said, is that “the incentive structure for academic staff is highly counterproductive because it encourages them to teach as many hours as possible because that’s how they raise their income.”

Foreign business groups have complained that the often poor quality of universities will stifle Vietnam’s economic growth and say they can’t find enough graduates in finance, management and information technology.

The European Chamber of Commerce here has recommended Vietnam lift restrictions on setting up foreign-invested educational establishments.

This year, the Ministry of Education and Training has launched an ambitious programme to produce 20,000 PhDs by 2020, many of them foreign-trained, and there are plans to set up “international-standard universities.”

Despite the current limitations, competition is fierce for university places and has often fuelled rampant cheating and graft.

In recent years police raided photocopy shops mass-producing tiny cheat-sheets and arrested a ring that used bluetooth mobile phone earsets hidden under wigs to feed answers to people sitting the exams.

This year the Ministry of Education in an urgent message warned exam organisers that the papers are “top secret” and urged them to “ensure maximum security in printing, management and distribution.”

At the largest exam halls at Hanoi’s University of Natural Science, 50 police will keep an eye on 17,500 students taking exams — and even the officers will be barred from carrying mobile telephones.

Vietnamese economy slowing down

Vietnam’s economy slowed in the first half of the year as soaring inflation dampened consumer spending, and pushed up imported energy and food costs.

One of Asia’s economic success stories in recent years, Vietnam enjoyed growth of 7.9% in 2007 but expansion slowed to 6.5% in the first half of 2008.

Economists said the dip was welcome to prevent overheating but warned more action was needed to tackle inflation.

Consumer prices are currently more than 20% higher than a year ago.

‘Unpredictable challenges’

Across Asia, countries are struggling to cope with the burden of higher fuel and food costs.

Vietnam’s trade deficit has soared this year as the cost of importing fuel, fertilizer and steel has jumped although, as the world’s second-largest rice producer, it has also benefited from rising crop prices.

It is important for Vietnam to give up short-term growth for long-term benefits Prakriti Sofat, HSBC

Despite the slow down in gross domestic product (GDP), ministers described the growth performance as a “major victory” given the uncertainty over the global economy.

However, officials warned of social pressures from the spiralling cost of basic goods after annual inflation hit 27% last month.

“In the second half of the year, the social-economic situation remains complicated,” Vietnam’s General Statistical Office said.

“We will continue to face the existing difficulties and possibly unpredictable challenges.”

The International Monetary Fund said on Monday that Vietnam needed to tighten monetary policy further despite already having raised interest rates three times this year.

Growth choice

But experts said lower growth, if combined with other deflationary measures such as higher borrowing costs and credit restrictions, would have a positive impact.

“Overall, things are moving in the right direction,” said HSBC’s Asia economist Prakriti Sofat.

“It is important for Vietnam to give up short-term growth for long-term benefits.”

Vietnam’s economic resurgence has made it a magnet for foreign investment, with direct investment levels in the first half of 2008 almost $10bn higher than for the whole of 2007.

Vietnam Needs to Combat Industrial Pollutions says World Bank

June 30, 2008 — Industrialization is taking its toll on Vietnam’s environment and more funds should be dedicated to fighting pollution, the World Bank said in a study published on June 27. Between 1990 and 2005 Vietnam achieved an average annual growth rate of 7.5% in gross domestic product, driven largely by the industrial sector, but little was being done to protect the environment, the study said.

“There is a growing pressure on the government to raise public expenditure on pollution control and to force business to do the same,” the study said. “The cost to the economy of pollution, which is increasing in volume and toxicity, are becoming evident to the government and the public at large.”

Funds dedicated to fighting pollution gradually grew from 2000 to 2005, when it reached $600 million , But the bank said Vietnam needed about $2.5 billion  to adequately address the problem.

Five provinces or big cities, including the financial hub Ho Chi Minh City and capital Hanoi, are home to 63%  of manufacturing jobs and nearly 55% of the country’s industrial firms. “Industrial pollution is highly concentrated in certain areas of the country, and originates from a few manufacturing subsectors,” the study said.The manufacturing of chemical products and shoes were among the top polluters in the country, the bank said.

Copyright Agence France-Presse, 2008

http://www.industryweek.com/ReadArticle.aspx?ArticleID=16694

PCI ‘bribed’ Vietnamese official

A manager of a Vietnamese organization that oversaw a multibillion yen highway construction project in Ho Chi Minh City received bribes allegedly paid by Pacific Consultants International to secure the contract for the project, which was funded with Japanese official development assistance, a PCI source said.

It also has been learned that PCI allegedly paid bribes on at least two occasions–once in 2003 and once in 2006–reportedly instructed to do so by the headquarters of the major consultancy firm.

“Headquarters ordered us to give money as remuneration for receiving the order,” a former PCI executive reportedly told the special investigation squad at the Tokyo District Public Prosecutors Office.

Investigators are looking into whether PCI violated the Unfair Competition Prevention Law by bribing an overseas public official.

PCI received about 1.1 billion yen in fiscal 2001 for consultancy work on a project to build a highway traversing Ho Chi Minh City from east to west. In fiscal 2003, a consortium that included PCI and other firms won a contract worth about 2 billion yen. Both were for ODA works funded with yen loans.

According to the PCI source, a manager of PMU–the organization managing the highway construction project–received the alleged bribes.

PMU is a management organization established by the Ho Chi Minh City People’s Committee–an administrative organization similar to a city office in Japan. It is responsible for overseeing infrastructural improvements such as roadworks and waterworks.

The cross-city highway was a massive project that involved tunneling under the Saigon River in the city. The total project cost was about 80 billion yen.

The alleged bribes were paid in spring 2003, immediately after the consortium received the order for consultancy work, and again in 2006. Both payments were in U.S. dollars, reportedly amounting to a sum equivalent to several tens of millions of yen.

“Both the payments were ordered by the headquarters,” a former PCI executive is said to have told investigators during questioning. The executive also reportedly said the funding in 2003 was “remuneration to get the order.”

The executive later worked as the head of an affiliated company in Hong Kong that was allegedly used by PCI as part of a tax evasion scam. PCI sent money to that company to help win contracts for ODA projects in southeast Asia.

Investigators plan to cooperate with judicial authorities in Vietnam to investigate the alleged shady funding.

http://www.yomiuri.co.jp/dy/national/20080629dy09.htm

Speaking Up for Vietnam

A Buddhist monk missing since authorities evicted him from his pagoda. A Montagnard Christian beaten to death in police custody. A lawyer involuntarily committed to a mental hospital after she championed the rights of farmers kicked off their land. Journalists jailed for exposing corruption. A young man sentenced to prison after chatting online about democracy and human rights. More than 400 people wasting away in harsh prison conditions for their political views or religious beliefs.

This week, the prime minister of Vietnam, Nguyen Tan Dung, brings Vietnam’s road show to Wall Street and meets President Bush and leaders likely including the U.S. presidential contenders, John McCain and Barack Obama.

When America’s political and financial leaders sit down with Prime Minister Dung, they should not forget these courageous individuals and should address directly the systemic pattern of rights violations in Vietnam that they represent: the Vietnamese government’s lack of tolerance for dissent and denial of fundamental rights to freedom of expression, assembly, association, and religious belief.

In Vietnam today, the government still controls all media, as evidenced by the arrest in March 2008 of two investigative reporters who exposed a major corruption scandal in 2005. The reporters, Nguyen Viet Chien of Thanh Nien (Young People) newspaper and Nguyen Van Hai of Tuoi Tre (Youth) newspaper face charges of “abusing their positions and powers while performing official duties.”

Police harass and arrest bloggers and cyber-dissidents for Internet postings critical of the government. In January 2008, a court sentenced cyber-dissident Truong Quoc Huy to six years of imprisonment for distributing leaflets criticizing the Communist Party and participating in pro-democracy forums on the Internet. He was charged with “abusing democratic freedoms of association, expression, assembly to infringe on the interests of the state.”

National security laws are used to imprison members of opposition political parties, independent trade unions, and unsanctioned press outlets or religious organizations. Laws such as Ordinance 44 authorize the detention without trial of dissidents at “social protection centers” and psychiatric facilities if they are deemed to have violated national security laws.

In March 2008, police arrested Bui Kim Thanh, an activist who defended victims of land confiscation and involuntarily committed her to a mental hospital.

Mr. Bush should know that Vietnam’s leaders harass and arrest church leaders campaigning for rights or choosing not to affiliate with state-controlled religious oversight committees. For the last 30 years the Unified Buddhist Church of Vietnam’s Supreme Patriarch, Thich Huyen Quang, has either been in prison or under house arrest for publicly protesting government policies.

Authorities have beaten and arrested members of ethnic minorities in remote areas such as Montagnard for refusing to join state-sanctioned church organizations, protesting land confiscation, making contact with relatives or Montagnard groups abroad, or trying to seek political asylum in Cambodia.

In April of this year, police arrested Y Ben Hdok in Dak Lak after other Montagnards in his district tried to flee to Cambodia. Police refused to allow his family or a lawyer to visit him during three days in detention. On May 1, police told Mr. Y Ben’s wife to pick up his battered body. His rib and limbs were broken and his teeth had been knocked out. Police labeled the death a suicide.

During Prime Minister Dung’s visit to America, he should hear that the American people and government care about how Vietnam treats its people. This is an all too rare chance to back Vietnam’s courageous activists, writers, and human rights defenders, who have risked their liberty to make their country more open, tolerant, and free.

Why Vietnam Needs Freedom Now

PROTESTS will surely sur round Vietnamese Prime Minister Nguyen Tan Dung’s meeting today with President Bush. But Dung will no doubt still find it a relief to be out of his own country: Back home, the economy is in turmoil, with popular discontent rising.

Yet the crisis presents Dung with a huge opportunity: the chance to open up the system and go down in history as a reformer.

Vietnam has enjoyed strong growth these last few years, and acceptance into the World Trade Organization has put it firmly on the path of integration into the world economy. But Dung’s campaign of doi moi (economic renovation) is in trouble, as the people suffer a host of ills.

Inflation rose 25 percent in May, with food prices up to 42 percent higher than a year ago. Unemployment is high. Soaring global oil prices add to the pain - as does the weaker US dollar, which lowers the value of remittances sent from overseas Vietnamese.

And all this helps expose a bigger problem - an oppressive state bureaucracy that is now the chief obstacle to progress.

The government can’t seem to control inflation; the education system doesn’t teach young people the skills they need for a global economy.

Huge government investments are plowed into inefficient national companies. Abuses of power, such as the expropriation of land without fair compensation, are rampant.

Increasingly, Vietnamese are showing their frustration - with responses ranging from simple non-cooperation to the nationwide wave of factory strikes.

The government has responded in typical fashion - arresting activists, freelance bloggers, lawyers, businessmen, students, farmers and workers.

Vietnam still has huge growth potential. Last year, overseas Vietnamese sent more than $7 billion to family back home - a significant boost for the economy. Overseas donors and lending agencies have promised millions in aid.

And foreign direct investment rose by $15.7 billion in just the first few months of this year.

In short, the problem Dung faces is not a lack of willing investors. It is a government bureaucracy that remains defiantly rigid and unaccountable.

Consider Vietnam’s most notorious recent corruption case, where government officials appropriated millions of dollars - some of it funded by foreign aid - to place bets on European soccer matches.

Several officials were put on trial and convicted of misusing the funds and then trying to cover up their misdeeds with bribery.

But then, last month, two newsmen who helped expose the scandal were arrested - which most Vietnamese see as the bureaucracy’s revenge.

It will be next to impossible for the nation to address corruption and hold authorities accountable if journalists who expose these misdeeds are threatened with jail.

This is Dung’s moment - if he’ll take it. He needs to impress upon the politburo of the Vietnamese Communist Party that managing all the strains of a fast-developing society is easier if there is a free market of opinions as well as of goods and services.

Economic strains will confront the government with some tough decisions. But these decisions will be easier to sell to the people if citizens feel they have had some say in reaching them.

Why wait? By using today’s problems to open up, Dung can help bring stability and prosperity to Vietnam. By changing its present stagnant course, Hanoi can ensure that unrest does not break out into chaos - something no one wants, least of all foreign investors with hundreds of millions at stake.

And by opening up, Dung will help the Vietnamese achieve something that millions of their neighbors already have: freedom.

This is also a unique moment for the United States. American influence (mainly via growing US investment) is the only real agent for change in the country right now; Vietnam desperately needs that influence to continue.

The people need increased trade and outside investment so we can improve our education system and lift ourselves out of poverty. But we also need investors to speak out on the need for reform that will increase transparency and accountability - and help build a democratic Vietnam that respects the dignity and rights of its people.

We Vietnamese want change. We know that the government can’t deny us our freedoms forever. And we hope America’s business and political leaders take the chance to remind Vietnam’s prime minister of that truth during their meetings this week.

VIETNAM: Ban on street vendors threatens livelihoods

Photo: Martha Ann Overland/IRIN

A bicycle vendor carries dozens of baskets for sale through the streets of Hanoi

HANOI, 23 June 2008 (IRIN) - For the past decade, Nguyen Thi Lan has risen at 3am to boil up a pot of sticky rice. Before the sun comes up, she packs it into a bamboo basket, secures it to her bicycle and begins the long ride to Hanoi. In the city, she serves up scoops of rice sprinkled with dried pork, peanuts and sesame seeds and on a good day she will return home with $3.50.

Lan has no choice but to do this work ever since most of her family’s rice paddies were “reclaimed” by local officials, she says, and sold to developers. Far from grumbling about the long hours and meagre pay, Lan says the money has allowed her to send her children to school and ensure they do not go hungry.

But from 1 July, Lan will no longer be able to sell her packets of sticky rice in the city because street vendors will be banned from commercial streets. Lan says her family will starve.

“We will all go hungry,” Lan says. “We are poor people. We have no land. We are dependent upon the street.”

Mobile vendors have been an integral part of Hanoi’s street life for centuries. Women in conical straw hats, balancing twin baskets suspended from bamboo poles, are one of the city’s most enduring images.

Selling goods from bamboo baskets and bicycles also provides income to villagers with little education and few other means of support. According to the Asian Development Bank project, Making Markets Work Better for the Poor, an estimated 5,000 mobile vendors – mostly women - operate in the city centre. Like Lan, most are the family’s main breadwinners.

Photo: Martha Ann Overland/IRIN

These women will be banned from Hanoi’s streets as of 1 July 2008

Vendors also provide a service. In a country that has yet to develop a supermarket culture, mobile vendors provide city dwellers with everything from cheap fruit and vegetables to bras and live tropical fish.

To the People’s Committee of Hanoi, however, they are a menace. As the capital modernises, cars, motorbikes, rickshaws and street vendors all try to squeeze through the Old Quarter’s narrow lanes. With shop wares spilling on to the sidewalks and instant hairdressers and bike repairmen to dodge, walking down Hanoi’s congested streets is not for the faint-hearted.

The ban is designed to make the city more habitable, says an official from the Hanoi Trade Management Division, who asked not to be named. “It is to beautify the city,” he said, referring to Decision 02, which bans mobile vendors from 62 streets. “Hawkers are a major reason for traffic problems. We believe that once the ban is enforced it will help improve urban sanitation, food hygiene and ease congestion.”

On the run

Hanoi has no programmes to help mobile vendors find alternative employment. No NGO has taken up their case. These traders do not belong to a labour union. Because they are literally on the run all the time, they are notoriously difficult to organise.

“What will we live on?” asks Ng Thi Hoa, pausing nervously before setting down her baskets. If she stops too long, police can give her a Green Ticket, which varies from 20,000 (US$1.15) to 50,000 dong (US$2.90) depending on the infraction and is supposed to go to a street cleaning and waste removal fund.

Photo: Martha Ann Overland/IRIN

Vegetable sellers will no longer be allowed to ply Hanoi’s busiest streets beginning 1 July

Hoa sells bundles of incense sticks, earning about 7 US cents for every pack she sells. Out of the $2 or $3 she earns, she has to pay 70 cents for a place to sleep – a mattress on a floor in a room shared with other market women. Food and shelter take up half her earnings, the rest goes to her children in her village. “The entire family depends upon the sale of these ancestral offerings,” Hoa says.

But not everyone sees the ban as spelling the vendors’ demise. The status of Hanoi’s street hawkers is very murky, says Paule Moustier, a food marketing researcher with CIRAD, the French institute that studies agriculture in Asia. One regulation calls it illegal and another one taxes it with the Green Ticket.

“The new ban essentially recognises that they can carry out activities but in restricted areas,” says Moustier. By establishing that they are legitimate, it would be easier to organise street vendors and minimise harassment from officials, Moustier argues.

For now, Hoa’s plan is to outrun the police when the ban goes into effect, making working conditions even more desperate. But with all her family’s land gone and two children back home, a life on the run, she says, is better than starvation.

http://www.irinnews.org/Report.aspx?ReportId=78877

Human rights in Vietnam on agenda

President Bush will meet with Vietnam’s prime minister this week in Washington, and it is being reported that the White House is committed to bringing up the subjects of human rights and religious persecution.

Vietnam has a history of persecuting Christians involved in the underground movement. Todd Nettleton, spokesman for Voice of the Martyrs, says although the situation has improved over a five- to ten-year period, Vietnam still has a long way to go.

“… [T]hey are still not at the level of saying to their people [they] can worship God how [they] want to … without the interference of Communist officials …,” he notes. “They have worked very diligently to try to present the world a picture of more openness and more freedom of religion — but the reality is that thousands of Christians in Vietnam don’t have the freedom to assemble together ….”

Judith Ingram of the U.S. Commission on International Religious Freedom also agrees that Vietnam has improved. “But we think really it’s too soon to determine whether the Vietnamese government is truly committed to respecting religious freedom instead of maintaining control of its religious communities,” she contends.

However, human rights groups and some members of Congress suggest Vietnam has increased repression of political activists and religious leaders. And the Commission on International Religious Freedom is hopeful Vietnam will be under the watchful eye of the State Department.

“We believe strongly,” notes Ingram, “that Vietnam should continue to be on the list of ‘countries of particular concern’ because of persistent and severe religious freedom restrictions targeting some ethnic minorities, Protestants, Buddhists, Vietnamese Mennonites … and monks and nuns associated with the Unified Buddhist Church of Vietnam.”

She points out that one of the purposes of establishing positive trade ties with Vietnam was to help develop a dialogue on issues such as religious persecution.

http://www.onenewsnow.com/Persecution/Default.aspx?id=147738