Thu, Feb 14, 2008 page11

• FEATURE: Vietnam's growth not trickling down

  • AFP
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  Vietnam's rapid economic growth has earned the country international plaudits, but on a Hanoi street market most people complain that it is becoming harder every month to make ends meet.

  The reason for the sour mood is rampant inflation, especially in food prices, which last month surged by 22 percent year-on-year.

  Consumer prices overall spiralled upwards by more than 14 percent, the largest rise since 1995, according to the state-run General Statistics Office, in an increase that has outpaced wage rises and hit the poor the hardest.

  "I have to get by on a modest salary," said teacher Nguyen Thi Lien, 40, pointing with dismay at a butcher's stand where a kilogram of pork has gone to 80,000 dong (US$5) from 50,000 in just two months.

  "These steep price increases really affect my family spending," she said. "Now I have to think carefully about what to buy when I go shopping."

  Le Thi Man, a 31-year-old accountant, said her family of five has skipped the habit of starting the day with a streetside bowl of pho noodle soup.

  "One bowl of pho a few months ago cost 10,000 dong," she said. "Now it's 15,000. Some places charge 20,000 or even 40,000 dong. Now I cook at home ins`tead. I've just bought a box of instant noodles."

  Jonathan Pincus, the UN Development Program's chief economist in Vietnam, said: "The problem is serious because of the very large part that food makes up in the budgets of poor people in Vietnam.

  "It's probably forcing some people back into poverty."

  Vietnam -- a WTO member for the past year -- aims to run a "market economy with socialist orientation" and is especially sensitive to public anger over rising prices.

  The spiralling costs of food, gasoline and other basic goods have fuelled labor unrest, mostly among workers at Taiwanese and South Korean textile and shoe factories around Ho Chi Minh City.

  In the year's first 20 days, more than 25,000 workers went on strike at nearly 40 plants demanding better pay and conditions, the Saigon Times said.

  Vietnam has in some ways become the victim of its own success.

  Optimism about the nascent "tiger economy" that grew at 8.5 percent last year has fuelled foreign investment -- with US$20 billion more pledged last year -- a cash influx that has driven up prices.

  As state enterprises have part-privatized, a stock market boom had fuelled urban wealth before declining in recent months. Investors then shifted their money into gold and real estate, sending property prices skyrocketing.

  The boom has also fueled bank lending, which grew by over one-third last year, leading the government to raise the reserves that banks must keep, and to hike interest rates to slow credit growth and cool the economy.

  The galloping prices have also been driven by high world energy prices, which the government now passes on to consumers at the pump, and the stronger yuan in China, from where Vietnam imports many goods.

  High food prices worldwide have been blamed in part on higher biofuel and livestock production, trends which reduce the land area available for crops.

  The other major inputs -- labor and land -- are becoming more expensive too, Pincus said, as hired workers demand more money in the Mekong delta, Vietnam's rice basket, and more rice paddies are being turned into factory land.
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