Vietnam's 'tiger' economy losing its roar
Growth next year is expected to drop due, as recent corruption scandals and splinters within the communist government weigh on the economy.
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With the country under such an economic pall, Prime Minister Nguyen Tan Dung recently made a rare apology for problems at state-owned enterprises – which make up 35 percent of the Vietnamese economy. The prime minister was on the end of a public rebuke from rival Communist Party bigwigs, leaving the party looking divided over the troubles facing the Vietnamese economy and the effect these travails could have on its legitimacy.Skip to next paragraph
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“Capitalizing on public grievances, mainly inflation, unemployment, and corruption, the old guard led by President Truong Tan Sang and Party Secretary General Nguyen Phu Trong has challenged Prime Minister Nguyen Tan Dung over the failure of his economic policies,” reported political risk consultancy Maplecroft, recently.
Despite the humble-sounding apology and internal Communist Party jostling, slowing growth and increasing public resentment at perceived government mismanagement and corruption has prompted the one-party Vietnamese government to intensify an ongoing clampdown on criticism.
"While Prime Minister Nguyen Tan Dung and President Truon Tan Sang represent competing political positions within the Communist Party of Vietnam, both prioritize party control above all else," says Christian Lewis of political risk consultancy EurasiaGroup.
On Oct. 30, the government jailed two songwriters in Ho Chi Minh City for alleged antigovernment propaganda, a vague catch-all accusation in a country where advocating for democracy can be deemed a crime. The sentencing comes soon after a Sept. 24 jailing of three well-known writers and journalists on similar charges.
Some dissident criticisms have focused on graft, a factor that is spooking investors and hitting growth, with Vietnam slipping in global league tables such as the World Economic Forum's Global Competitiveness Report, dropping 16 places from 2010 to 75th for 2012. Foreign investment into Vietnam peaked at just over $70 billion in 2008, but figures for 2012 to date show it at only $10.5 billion, a drop of 28 percent on 2011, according to the government.
Officials are worried that Vietnam will have trouble continuing to attract investors, and, perhaps in an effort to demonstrate a type of transparency they think the West wants to see, some are speaking more candidly than in the past about the challenges facing Vietnam's economy.
Vietnam's skills-base needs improving if the country is to continue to attract investors, with neighbors and challengers such as Myanmar and Indonesia offering lower-wages and bigger markets respectively, says Mai Thi Thu, director of the National Centre for Socio-Economic Information and Forecast, a think-tank at the country's Ministry of Planning and Investment.
“I know many investors come to Vietnam and face many difficulties to recruit appropriate labor,” she says.
For Vietnam, a failure to attract higher-tech investment and create better-paid, better-skilled jobs could mean becoming snared in the much-touted “middle income trap,” in which countries can no longer offer cheap labor because of rising costs but cannot compete with advanced economies in terms of skills or infrastructure.
“I don't think it can be easy for Vietnam to overcome this trap,” says Mai Thi Thu.
Nonetheless, she’s quick to point out that Vietnam's economy has come a long way since doi moi or “renovation” reforms introduced after 1986, when the country was one of the world's poorest, and officials in Vinh O are optimistic about the future.
“Five years ago we did not have the good road to here,” Nguyen Thi Hai points out, adding “and I think if you come back in five years time, you will see a very different place here again.”