Tag Archives: Vietnam infrastructure

The Opportunity in Vietnam’s Spat with China

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.

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Rescuing Vietnam’s 882 Endangered Species

While Vietnam cultivates its industry and agribusiness, one arm of the government is looking to rescue economic development’s innocent bystanders:  882 endangered species of floral and fauna.  That number is up from 161 species 20 years ago even though some of those have become extinct, including nine kinds of animals.

Coming to the aid of non-human forms of life, Vietnam’s environment department this week introduced a national strategy to create 41 new nature reserves.  When and if that happens, 9% of Vietnam’s land mass and 45% of its forests will be protected — and there will be 10 biosphere reserves and 10 ASEAN heritage parks.  The agency’s biodiversity master plan also calls for 23 reserves by 2030 in addition to the 148 existing ones and the 41 to be established by 2020 (accounting for nearly 3,000 square miles of land).

Vietnam does not have a good reputation with organizations like the World Wildlife Fund, partly because the country — as one of the world’s most diverse — has so much to protect.  WWF and others have criticized Vietnam for not being more aggressive in combatting illegal trading of wild animals and habitat fragmentation that results from hydropower and other trappings of economic growth.

Even so, Vietnam has a passionate population of environmentalists who see biodiversity as the foundation of a green economy, a key to dealing with climate change, and a significant contributor to quality of life.  They want to balance the economic dreams of Homo sapiens with the needs of other species.

 

Communist Vietnam’s Ultra Wealthy Capitalists

The official newspaper of the Communist Party of Vietnam reports the country now has 195 “ultra-high net worth individuals” (worth $30 million or more), the latest consequence of Vietnam’s 30-year transition from collectivism to capitalism.

Not only has capitalism made a strong comeback.  Vietnam leads every country in Southeast Asia except Thailand in high wealth club growth — with 15% more members than last year — according to a new UBS report.  Vietnam’s 195 (the top 0.0002% of the country’s population) are said to control an aggregate of $20 billion in assets (about 15% of GDP).

Anyone paying close attention to Vietnam wouldn’t be surprised the country surpassed Singapore, Indonesia, Malaysia, and the Philippines in growing the ultra wealthy.

But why did the Communist Party newspaper report it?  Probably because pragmatic economics are now deemed more important than political ideology in a country with bold global aspirations.  The article points out, for example, that Vietnam holds promise for private global bankers (which would help grow Vietnam’s wealth).

The UBS study attributes the ultra wealth growth to investments in infrastructure and burgeoning private consumption — driven by a growing middle class and social reforms.   But optimism and consumer confidence are just part of the story; the rise of Vietnam also is related to economic slowdown in China — where the number of ultra wealthy individuals dropped 5%.

Chess and Vietnam’s Promising Brainpower

A Chess News Agency report this week speaks volumes about the potential of one of the world’s most dynamic frontier markets:  22-year-old Vietnam grandmaster Le Quang Liem won the World Blitz Championship, not only establishing his country as a global chess power but also calling attention to its brainpower.

Along with the gold medal, Liem’s defeat of the silver and bronze medalists from Ukraine earned him $40,000 in prize money.  He started playing chess 15 years ago, about the time Vietnam started gearing up to be a player in the global economy.

The achievement at the chess table is the latest of many signs Vietnam’s population of nearly 100 million has the capacity to be a global economic leader.  It remains to be seen whether the country will cultivate its human capital — or stifle its people’s creative energy.

Unleashing Vietnam’s brainpower and creative energy depends on development of social infrastructure — especially health and education.  that will require, as one wry Hanoi visitor from the countryside observes, less attention to gleaming skyscrapers that adorn the capital city and a greater focus on better schools and hospitals.

10 Dark Hours For Vietnam’s Infrastructure

Garment factories, fish processing facilities, traffic signals and everything else that runs on electricity in 22 Vietnamese provinces shut down this week for half a day when a crane operator accidentally knocked down a tree — and cut the power supply for a third of the country.

Accidents happen, but this one heightened investors’ anxieties about Vietnam.  As global manufacturers rush to Vietnam as an otherwise stable, lower-cost alternative to almost every other country in Asia, some of them wonder if Vietnam can keep with the surging demands on its transportation and energy infrastructure.

The country has been rapidly modernizing roads, seaports, airports, and energy supply — including oil refineries, hydroelectric facilities, and planning for two nuclear power plants — much to the chagrin of environmentalists concerned this is happening at the expense of Vietnam’s health and culture.  They may have considered the brief delay in economic expansion a breath of fresh air.

For a few hours, restaurants served tourists by candlelight.  Water supplies began to dry up.  Factories shut down.  Traffic jammed, especially near nonfunctional traffic lights.

When a tree falls in a developing country, the sound you hear is usually called progress. But when this particular tree fell on the nation’s main high voltage transmission line, the air conditioners stopped.  And the sound the government heard was sweaty criticism of the state-owned electricity company.

Sorting Out Vietnam’s Transportation Priorities

Vietnam has put on hold its controversial $56 billion high speed rail pipe dream that wold have transported passengers, but not cargo, between its two largest cities.  The country has higher priorities than getting people from Hanoi to Saigon faster by train.

Trains move cargo efficiently, but in Vietnam they are grossly underutilized.  Alhough government data show a 60% increase in cargo by train since 1995, that compares to a 627% increase by truck, 785% by ship and 522% by air.

Surely that’s partly because the Vietnam has a rudimentary railroad system — just a single track between Hanoi and Ho Chi Minh City, for example.  That’s why manufacturers and supplies are accustomed to using other options; since 1995, railway market share dropped from 3% to less than 1%.

The World Bank says rail is the most economical means of transporting goods between 300 and 3,000 miles whereas trucking is preferred for shorter distances and air or sea for longer distances.

Transportation infrastructure is essential to Vietnam’s economic future.  Cargo currently moves at about 30 miles an hour on Vietnam’s rails.  Doubling or tripling that cargo speed will boost the economy.

Investors should be encouraged seeing Vietnam sort out its priorities.  People can travel by airplane.

Free Enterprise (But Not Expression) in Vietnam

Vietnam says 85% of its people will have access to broadband within two years.  What each individual does with that access will determine whether he or she ends up living in luxury or prison.

Government leaders know Vietnam’s continued rapid economic development depends partly on Internet access, but they don’t want citizens challenging authority, government policies or, especially, the one-party system that keeps the current regime in power.

So Vietnam is leap-frogging generations of communications technology, such as skipping fixed-lined infrastructure, and getting the latest smart phones in the homes of remote villagers who only recently got access to electricity.

But anyone who uses state-of-the art technology to bite the hand that feeds them, as bloggers do worldwide, risks the fate of Nguyen Dac Kien, the journalist who was fired last month from a state-run newspaper and threatened with prosecution for criticizing a Communist Party leader on his personal website.

Vietnam faces a big challenge managing the freedoms that the communications revolution has brought.  Vietnam’s economy can’t thrive without technology that facilitates free enterprize — but its one-party system may not survive if the same technology facilitates free expression.