The monied heroes of a new Vietnam

After a decade of roaring growth, wealth is no longer something to hide in the once unwaveringly Communist nation.

from the March 13, 2007 edition

Page 2 of 2

Page 1 | 2

Last year, 76 new companies were listed on the exchange, daily turnover soared to $50 million, and the index climbed 144 percent. That pace has continued this year, making Vietnam the world's hottest stock market. Recent wobbles in neighboring China, which sparked global sell-offs, barely made a ripple as ordinary investors scramble to join the frenzy.

Authorities caution that the frothy market may slide after its vertiginous rise. "I'm worried about inexperienced investors who've never faced a situation where the market goes down," says Le Nhi Nang, deputy director of the Securities Trading Center.

Virtually all the stocks are in state-owned enterprises that have been partly privatized – or "equitized," as Vietnam calls it. Allocations of shares are typically distributed at a discount to company bosses and workers, then auctioned to an eager public and listed on the exchange.

Vietnam has said that it will maintain state dominance in strategic sectors such as oil, shipping, and telecommunications, a policy that, economists warn, could be a brake on future growth. Over the past decade, the share of national output of state-owned enterprises has fallen to 35 percent from 45 percent as the dynamic private sector expands, according to Tran Du Lich, president of the Institute for Economic Research, a city government think tank.

Observers say this trend may be irreversible, despite the rhetoric from Hanoi on controlling the "commanding heights" of its "socialist-oriented market economy." As in China, Vietnam's Communist neighbor, rising affluence has created its own momentum, and any clumsy intervention that damages the economy could backfire.

"The train has left the station. This leadership has committed to reform, and it's joined the WTO," says Intel's Mr. Phuc.

For all the buzz of stock millionaires and real-estate booms, Vietnam remains among the poorest countries in Asia, with per capita GDP of only $720. About three-quarters of the population lives in rural areas, and the United Nations estimates that one-third of children ages 1 to 5 are underweight.

Incomes in Ho Chi Minh City are about three times higher than the national average. The city's sizzling export-led economy daily absorbs an estimated 500 migrants, who arrive in search of work, usually in the informal sector. Poverty may lie cheek-by-jowl with wealth, but the sense of optimism and can-do dynamism is overwhelming.

"If you look forward at the next three to five years, it's a rosy picture," says Marijn van Tiggelen, chairman of Unilever Vietnam, a unit of the Anglo-Dutch consumer-goods giant. "I see stability in the economy and governance ... People are able to buy things they could never afford before."

1 | Page 2