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.