Last week’s anti-China riots in Vietnam spooked investors, rattled the stock exchanges, threatened foreign business deals, and ignited conversation about whether that the political and economic risks in that region outweigh the potential rewards. But where some see the unraveling of peaceful co-existence in Southeast Asia, others see a golden opportunity.
Are businesses and investors over-reacting? Consider some of the more encouraging news coming out of Vietnam this month:
- Samsung is going ahead with expansion of manufacturing in the northern provinces of Thai Nguyen and Bac Ninh. As a result, about 50% of its smart phones made globally will be made in Vietnam. Already, Samsung’s factory in Bac Ninh was one of its largest worldwide, and the company accounted for $24 billion in exports from Vietnam. The Thai Nguyen factory opened in March will employ 16,000 workers and produce eight million units per month.
The Saigon port welcomed the largest ship ever docked there, a 54,000 ton vessel able to navigate the river safely thanks to a mammoth dredging project that will allow ships of this size to save $500,000 a year in transit costs. The port projects moving 120-150 million tons by 2025.
The investment ministry unveiled a proposed law that will cut red tape and streamline foreign investment by eliminating certificates for many projects, simplifying procedures, ending favorable treatment of domestic investors, and improving transparency.
Foreign investors have been snapping up stocks that domestic investors are rushing to sell in an over-reaction to last week’s riots. Foreigners are taking advantage of sharp drop in the VN Index, which peaked at 610 points earlier this year and fell below 530 before climbing back to 544 today.
- McKinsey released a study concluding that ASEAN, composed of Vietnam and nine other countries, will be the world’s 4th largest economy in 2050.
Business is getting done in Vietnam. Opportunities abound. The ugly events of last week are not likely to lead to war in the South China Sea. More likely, they will turn out to have been an exchange of moves in a chess game of diplomacy that will help clarify the figurative boundaries between two of the world’s fastest growing economies.
Posted in Vietnam development
Tagged Vietnam business, Vietnam development, Vietnam diplomacy, Vietnam economy, Vietnam exports, Vietnam government, Vietnam infrastructure, Vietnam investing, Vietnam law, Vietnam manufacturing, Vietnam stock market, Vietnam Trade, Vietnam transportation, Vietnam workforce
Vietnam has been selected to host ASOCIO, the trade organization of 10,000 mostly-Asian information and communication technology companies based in 29 countries. The event, scheduled in Hanoi for late October, is emblematic of Vietnam’s meteoric rise in technology.
The first time Vietnam hosted the annual convention, 11 years ago, the industry barely existed in the country. In 2003, less than 5% of Vietnamese people had access to the Internet.
Since then, Internet usage has grown to 35%, and Vietnam’s hardware and software industries are experiencing annual growth rates in the 30% to 40% range.
ASOCIO says the organization chose Vietnam because of its rapidly rising capacity and prestige in information and communications technology — and cited Vietnam’s vision, policies and strategies. Vietnam is positioning itself to become a major global tech center.
Vietnam’s newspapers are reporting that the Hong Kong-based Dragon Best International has agreed to a partnership with a Vietnamese company, Ho Tram Tourism JSC, that envisions investing in: a $32 billion real estate development in Ho Chi Minh City, an $18 billion eco-tourism project nearby Ba Ria – Vung Tau Province, and a $50 billion economic zone.
On a global scale, these are huge projects. In Vietnam, they are head-scratching, utopian dreams that make experienced developers and economists skeptical about Vietnam investors’ capacity for realism.
Many international investors believe Vietnam is a promising frontier market, but none of them are going to pour an amount of capital into Vietnam that approaches the country’s annual GDP. Vietnam’s economy cannot absorb $100 billion in capital; moreover, it could not generate a return on the investment any time soon.
For Vietnam, the problem is that this is not the first pie-in-the-sky project that didn’t materialize. Last year Dubai investor Global Sphere announced its plans to spent $30 billion on the Hanoi Wall Street — 70 apartment blocks at heights ranging from 40 to 70 stories and housing up to 400,000 people with a 102 story central tower. Hanoi’s planners hadn’t heard about the project, and it has yet to be registered with the government.
In 2007, the US Eminence Group announced its plan to develop a $30 billion economic zone in Thanh Hoa Province. However, soon after the group made an enthusiastic presentation on the project, the investor vanished.
Ultimately, the investors who will be successful in Vietnam are those patient and disciplined enough to develop realistic, credible plans — not pipe dreams.
If you don’t think Vietnam has arrived yet as a player in the global economy, consider the case of Flappy Bird. The sensational smart phone app dominated downloads of games on android and iTunes until its creator yanked it from the Internet last weekend.
The Flappy Bird inventor is a Vietnamese software engineer named Dong Nguyen, who lives with his parents in Hanoi. He withdrew the app — even though it was bringing in up to $50,000 a day in ad revenue — because he was tired of the notoriety that was ruining his tranquil life.
A few years ago, millions of people in Vietnam didn’t have electricity, land lines, computers or access to the Internet — much less smart phones, and nobody in the Western world could have imagined a 29-year-old Vietnamese geek inventing a silly game that would consume hundreds of millions of hours that could otherwise have been spent on something more productive. Yet that is exactly what has happened since Dong released Flappy Bird to the global economy last May.
Dong’s critics — and there are many of them — question whether he withdrew the game from the market as a publicity stunt to get people to focus on his next act. He says the game disappeared because it is too addictive and because the international attention caused him too much grief.
A broader explanation might be cultural: Vietnam has changed so dramatically and so fast that sometimes its ways of life cannot catch up with technology and market realities. One of the cultural attributes of traditional Vietnam is a tendency not to bring attention to oneself — to be unassuming, modest, shy. Could that be part of the reason Dong wants to get his life back?
The lesson for Western investors is they are well advised to learn the difference between cultural modesty and lack of initiative. Vietnam is full of Dong Nguyens — millions of brainy entrepreneurs prepared to transform their own country and, in the process, infuse the world with Flappy Birds.
Posted in Vietnam development
Tagged Vietnam business, Vietnam communications, Vietnam culture, Vietnam development, Vietnam economy, Vietnam exports, Vietnam investing, Vietnam society, Vietnam technology, Vietnam Trade, Vietnam workforce
Last week eight schoolgirls drowned in Vietnam, where children are valued and loved but more vulnerable than their peers elsewhere. Six 13-year-olds were swimming in a river on the South Central coast when one of them cried for help and her friends tried to rescue her; the same day, two 10-year-olds were swept away by strong river current 600 miles to the north.
Alliance for Safe Children says Vietnamese children are twice as likely to drown than average for the world. Vietnam’s vast river systems and coastline invite tragedy, and swimming isn’t part of the school curriculum.
Children in Vietnam face other perils as well, some outgrowths of poverty and others related to their country’s exposure to the Western world. Among these are exploitation by employers, nutritional deficiencies, child trafficking, educational roadblocks, and unexploded war ordinance.
Nutrition experts say 11% of Hanoi’s children younger than 11 are overweight. Thanks to fast food and soda, they consume up to 125% of their caloric need but just 60% of calcium required for their physical development. Their diets are also deficient in iron and iodine.
Education experts point out many poor families in Vietnam keep their children out of school because they can’t afford the uniforms, textbooks, and fees — or the tuition for high school. Many children end up wandering the streets selling lottery tickets.
In some parts of Vietnam, children are at risk because of previously unexploded war ordnance, which has killed or injured more than 100,000 farmers and children in fields over the past 40 years.
As with all countries, Vietnam’s promise is its children. Vietnam’s challenge is keeping them healthy and safe.
Vietnam has an “if you build it, they will come” philosophy. The country plans grand projects — like converting farmland into entire new cities — and then the government builds infrastructure to serve the idea that may or may not materialize.
The South central coastal city of Quy Nhon, the capital of Binh Dinh Province, exemplifies this approach. With Hanoi’s imprimatur, the province designated an 8-square mile peninsula near downtown Quy Nhon to become an industrial park served by Vietnam’s 3rd largest port, a new city of 90,000, and a series of high-end eco-resorts — ultimately an aggregate investment of more than $6 billion.
To get ready for the development, the province certainly has done its part. So far, the government has built the longest bridge over seawater in Vietnam (about 1.5 miles) and what currently serves as one of the world’s least used 6-lane highways.
When the dream materializes, the peninsula promises to be spectacular accomplishment that will enhance Quy Nhon’s current assets: beautiful seacoast, well-maintained public space, shipping center for much of Indochina’s exports, historical Cham charm.
The trick will be getting the capital in today’s tough economy from the world’s investors who tend to be reluctant to invest in a good idea, especially on the Pacific coast amid concerns about typhoons, climate change and tsunamis.
In this case, a formidable wall of mountains protect Quy Nhon’s grand plan. Even so, it could be a tough sell until the global economy recovers.
Vietnam’s planning ministry has identified its top five priorities for coastal development over the next three years. International investors are advised to know Vietnam’s priorities because (1) they signal where the government will cooperate, and (2) they indicate what parts of this fast-growing country will be developed in coming years.
The priorities are:
- The central provinces of Quang Ngai and Quang Nam, just south of one of the most popular destinations for tourists, Hoi An.
- A portion of the northern port city of Haiphong
- The northern province of Thanh Hoa, south of Hanoi
- The north central province of Ha Tinh, south of Vinh City
- Phu Quoc Island, south of Cambodia, in the southern province of Kien Giang
Vietnam is expected to spend $124 million as seed money to drive growth in the affected regions that were selected because of their potential for regional economic development, seaport facilities, airports, and major projects that can attract investment.
Since 2003, Vietnam’s planning ministry says it invested $524 million establishing 15 coastal economic zones that attracted $58 billion in investments, about half foreign and half domestic.