Foreign Policy.
HO
CHI MINH CITY – In what was once one of Asia's most exciting
emerging markets, Nguyen Van Nguyen sees only gloom ahead. Since 2008, his
business in southern Vietnam's economic capital has suffered through two volatile
bouts of inflation, peaking in August 2011 at 23 percent -- at the time, Asia's highest
inflation rate. Now he's only accepting small overseas
orders for Binh Minh, his once-thriving bamboo-screen factory in Ho Chi Minh
City, to hedge against price fluctuations. He says customers in Australia,
Europe, and the United States have decreased their orders following weakening
global demand. Production costs across the industry have risen approximately 30
percent while customers are only willing to pay about 10 percent more, says Dang Quoc Hung, vice president of
Association for Handicraft and Wood Industry in Ho Chi Minh City. Nguyen's
hiring fewer workers for the summer high season and cutting their pay to about $120
a month, down from $200. "We can only work at a slow speed, and things are
hard now," he lamented in late June.
The Communist Party of Vietnam would prefer that investors
see cases like Nguyen's as simply one-off local effects of the global economic
slowdown, not of a systemic weakening. In the two decades since the Communist
Party instituted economic reforms in 1986, annual GDP growth averaged a remarkable
7.1 percent. Indeed, four years ago, Vietnam seemed like the next Asian
success story. Before joining the World Trade Organization in 2007, the country's leaders pledged to do
even better, speeding up a vast restructuring and privatization of their
wasteful state-owned enterprises (SOEs), a process they euphemistically called
"equitization."
The International Monetary Fund predicted
in 2007 that cheaper imports as a result of WTO accession could contain
inflation, and that structural reforms could level the playing field between
local and foreign competitors. But on Hillary Clinton's visit to the capitol
Hanoi earlier this week, Prime Minister Nguyen Tan Dung was forced onto the
defensive, promising
favorable conditions for foreign investors as he tries to keep the "Vietnam
miracle" alive.
