More evidence on Vietnam
Saturday, June 21, 2008 at 2:22AM Gunnar Peterson sent some additional evidence/analysis WRT last week's column, Capitalism's reverse domino effect in Vietnam.
From a Motley Fool email to subscribers (unfortunately, it's not available to link online):
Why Vietnam Is Going to Be Big
Sure, Vietnam is not the next China or China-Lite or anything like that, but it's going to be big ... eventually. That might be hard to believe about a communist country, but like China, Vietnam is not as communist as it may appear.
Welcome to the jungle
The tunnel network built by the Viet Cong at Cu Chi is not a wonder of the world like the Taj Mahal, the Great Wall, or even Angkor Wat in neighboring Cambodia. Yet its scope is impressive -- more than 120 miles of tunnels and underground bunkers where Viet Cong soldiers lived, transported people and weapons, and waged war.
As you saw in our last dispatch, you can visit sections of the tunnels today. And when you do, you don't just see the tunnels. You also see -- all around them -- large, circular hollows in the ground. These are the scars of bombs dropped from B-52s to neutralize the impact of these tunnels and the guerilla fighters living in and fighting from them.
The people dropping those bombs, of course, were American.
While the war can slip from your mind while walking in what is now called Ho Chi Minh City (to honor the longtime president of North Vietnam) amid the hustle and bustle of its inhabitants, at the same time, its specter is also always staring you in the face.
Blink ... and it's 1975
Our hotel was just a few blocks from 22 Ly Ty Trong Street -- the instantly recognizable site of Hubert van Es' famous photograph of a rooftop evacuation. There are other reminders throughout the city ... the old Presidential Palace, the War Remembrance Museum, heck, even the statues of Uncle Ho.
That said, of all the places I've traveled, Vietnam may be the one country whose people seem the most genuinely pleased to meet Americans.
Vietnam: An entrepreneur's paradise
Vietnam lasted just 10 years under communism before its government began to enact reforms that embraced free market capitalism. We also heard over and over again during our meetings that American investors shouldn't think of Vietnam as a communist nation (which would dissuade foreign investment), but as a nation under a predictable one-party system, which actually removes certain risk elements from the investment process.
So while the U.S. may not have been able to prevent the fall of Saigon in 1975 to the hands of the communist north (no one outside of the government actually calls it "Ho Chi Minh City"),
capitalism prevails today.Yet problems remain
This victory for the free market was likely unavoidable. Not only did people stream out of the country in the early 1980s to escape communist mismanagement, but once those shackles were finally cut, the turnaround has been spectacular: In 20 years, the percent of Vietnam's population living at subsistence level has dropped from more than half to about 10%. This rate
surpasses even that of China, and until this year, Vietnam's stock market was booming.However, while Vietnam's potential is big, it does lack a few of the things that have fueled China's recent economic success.
First and foremost
Vietnam has no Hong Kong, no Taiwan, no wealthy place with >cultural ties to slingshot it into prosperity. Remember that Taiwanese and Hong Kong capital helped jumpstart the Chinese
Miracle, and that Hong Kong and Taiwanese managerial know-how filled in the gaps until enough Chinese developed the skills necessary to manage for-profit companies.The managers we spoke with lamented that their labor cost advantages in Vietnam were at least partially neutralized by the country's lack of technically skilled labor. This will take time
-- more time than it did in China.Then there are the difficulties related to developing the country's infrastructure. While a Taiwanese company has built a giant mixed-use area called South Saigon that includes its own modern downtown, in Saigon itself, there are almost no cranes. This is the consequence of opaque property regulations and government red tape. (Jones Lang LaSalle (NYSE: JLL) named it the most opaque market in the world.) This comes as a bit of a shock following China, where development is a priority -- and a place that my colleague Paul Elliott described as looking like a "crane factory."
What is this government, anyway?
Vietnam's government is still totalitarian. But communism, for all intents, is dead here. In fact, the government's main purpose seems to be to retain power over this economic machine
-- and to skim some off the top.Still, to its credit, a reason that one sees so few cranes in Saigon is that its government lacks the Chinese government's ruthlessness in solving problems. Throughout the central city,
small landowners build on tiny plots of the same type that tend to attract eviction notices in China -- to be replaced by large, expensive, and more efficient land-use projects.As a result, this is not a market that investors must rush into. But Vietnam is going to be big ... eventually.
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