Celebrated as a new “Asian Tiger” two decades ago, Vietnam has lagged behind its neighbors and needs further reforms in order to catch up, foreign investors say.
Overloaded infrastructure, an under-qualified workforce, excessive bureaucracy and corruption are just some of the problems investors cite.
The hopes and promises of the early 1990s, when the communist nation abandoned a planned economy for the laws of the market, have not been realized.
Photo: AFP
“Most investors agree that Vietnam has huge potential,” says Adam Sitkoff, executive director of the American Chamber of Commerce Vietnam (AmCham).
“However, the country is struggling to live up to its full potential, hindered by slow progress on a list of perennial barriers to investment,” he said.
Over the past two decades Vietnam has been among Asia’s fastest-developing countries, with average annual growth of 7.1 percent between 1990 and last year, according to the Asian Development Bank.
With a per capita income of about US$1,200, the nation of 86 million people is now a “middle-income” country, according to World Bank criteria.
However, Vietnam remains far from resembling Taiwan, Singapore or South Korea, whose fast growth earned them the label “Tiger” economies, and whose success it dreams of emulating.
The country “risks falling into the ‘middle income trap,’ the inability to arise out of an economy based on cheap labor and low-technology manufacturing methods,” said Matthias Duhn, executive director of European Chamber of Commerce in Vietnam (Eurocham).
The warnings come just before a five-yearly Communist Party Congress, expected in the middle of next month. A gathering as opaque as it is fundamental, the congress will determine key political posts for the next five years, as well as the country’s main “economic themes,” said Benoit de Treglode, director of the Research Institute on Contemporary Southeast Asia in Bangkok.
The international community has stepped up calls for reform in the weeks before the congress, hoping the top leadership will take note, he said.
Foreign business leaders reemphasized their concerns on Thursday at the twice-yearly Vietnam Business Forum, held by the World Bank and Vietnam’s Ministry of Planning and Investment. They urged infrastructure development, upgrading workers’ skills, streamlining bureaucracy and other reforms.
The chairman of AmCham also told the forum that Vietnam has violated its WTO commitments with a new price control law targeting overseas firms.
Some officials close to the regime admit the need for reform.
“Too much attention has been given to the increase of investment rather than that of quality, productivity, efficiency and competitiveness,” Tran Tien Cuong, of the Central Institute for Economic Management, was recently quoted as saying in the state-run Vietnam News.
Eurocham cites estimates that Vietnam needs around US$70 billion to US$80 billion of investment in road, rail and seaport infrastructure over the next five to 10 years.
The figure rises to US$120 billion if energy infrastructure is included, it said.
Other obstacles include endemic corruption and the instability of the Vietnamese currency, the dong, which has been devalued three times since late last year.
Serious concerns have also emerged in recent months about the financial health of big state conglomerates.
While Vietnam Airlines stands out as a regional player, investors wonder whether other state-owned firms are in the position of Vietnam Shipbuilding Industry Group (Vinashin). The company has been driven to the brink of bankruptcy with debts of at least 86 trillion dong (US$4.4 billion).
Sitkoff regrets that the state sector continues to play a dominant role in the economy.
“Investors wonder which over-extended state-owned conglomerate will be the next to fail, or which will be forced into taking bad assets onto their balance sheets,” he said.
Vietnam has always introduced reforms at its own pace — slowly and carefully. However, de Treglode said the requests of the international business community have increased resonance ahead of the Communist Party Congress.
With 1 million young people entering the job market annually, the ruling party, concerned about maintaining its power, “is not in a position to close the door” on the foreigners’ suggestions, he said.
With the midday sun blazing, an experimental orange and white F-16 fighter jet launched with a familiar roar that is a hallmark of US airpower, but the aerial combat that followed was unlike any other: This F-16 was controlled by artificial intelligence (AI), not a human pilot, and riding in the front seat was US Secretary of the Air Force Frank Kendall. AI marks one of the biggest advances in military aviation since the introduction of stealth in the early 1990s, and the US Air Force has aggressively leaned in. Even though the technology is not fully developed, the service is planning
INTERNATIONAL PROBE: Australian and US authorities were helping coordinate the investigation of the case, which follows the 2015 murder of Australian surfers in Mexico Three bodies were found in Mexico’s Baja California state, the FBI said on Friday, days after two Australians and an American went missing during a surfing trip in an area hit by cartel violence. Authorities used a pulley system to hoist what appeared to be lifeless bodies covered in mud from a shaft on a cliff high above the Pacific. “We confirm there were three individuals found deceased in Santo Tomas, Baja California,” a statement from the FBI’s office in San Diego, California, said without providing the identities of the victims. Australian brothers Jake and Callum Robinson and their American friend Jack Carter
Le Tuan Binh keeps his Moroccan soldier father’s tombstone at his village home north of Hanoi, a treasured reminder of a man whose community in Vietnam has been largely forgotten. Mzid Ben Ali, or “Mohammed” as Binh calls him, was one of tens of thousands of North Africans who served in the French army as it battled to maintain its colonial rule of Indochina. He fought for France against the Viet Minh independence movement in the 1950s, before leaving the military — as either a defector or a captive — and making a life for himself in Vietnam. “It’s very emotional for me,”
UNDER INVESTIGATION: Members of the local Muslim community had raised concerns with the police about the boy, who officials said might have been radicalized online A 16-year-old boy armed with a knife was shot dead by police after he stabbed a man in the Australian west coast city of Perth, officials said yesterday. The incident occurred in the parking lot of a hardware store in suburban Willetton on Saturday night. The teen attacked the man and then rushed at police officers before he was shot, Western Australian Premier Roger Cook told reporters. “There are indications he had been radicalized online,” Cook told a news conference, adding that it appeared he acted alone. A man in his 30s was found at the scene with a stab wound to his back.