People usually ask me if Vietnam is a competitor to Thailand or if it has surpassed Thailand. It is because there is an anxiety in Bangkok about the quick leap to big growth in the economy and business in the neighboring Socialist Republic of Vietnam.
Principally, Vietnam’s GDP growth reached 7.1% last year, beyond the forecast 6.7% and being the fastest rate of expansion in 11 years, and is expected to be 6.9% this year, while the one of Thailand was a mere 4.1% last year and was projected to be 4.0% this year.
Obviously, the above-mentioned figures are quite impressive. Such an accomplishment has prompted an inquiry. Therefore, I returned recently to Ho Chi Minh City (HCMC), formerly known as Saigon, to see changes and reminisce with old friends and new ones to find out about the success story.
Upon my request, a room was reserved for me at a hotel in the centrum of the City. From the Bong Sen (Lotus) Hotel, it’s in a walking distance to a number of famous touristic places. From the balcony, I can overlook the Dong Khoi Street, meaning “general uprising,” formerly known during the Vietnam War time as the Tu Do(Liberty) Street. It’s still a sleepless night street. I remember this one-way street very well because I had been hit the first time in my life, on a crosswalk by a bicycle ridden against the traffic direction in 1986. Nowadays, I have to pay more attention to motorcycles when crossing the road, however.
Out of 95 million people in Vietnam, there are 13 million residents including immigrants and commuters in HCMC. While public transportation is inadequate or undeveloped, there are as many as 7.6 million motorcycles and 700,000 automobiles in the City. Traffic regulation and safety are not much observed in Vietnam, where one person (usually a motorcyclist) is killed in a traffic accident each hour. Therefore, foreign companies always think about giving away motorcycle helmets when asked what to contribute in a CSR (Corporate Social Responsibility) campaign. A diplomatic source revealed to me that the Honda Company, which dominates the 90% sale of the market in Vietnam, has planned to distribute helmets to a large number of elementary school pupils nationwide. In short, it is a paying back to the society approach.
While in HCMC, I was overwhelmed not only by many high rise business buildings but also by the huge size of the 20-km.-long First metro line from Ben Thanh to Suoi Tien toward Bien Hoa, Dong Nai Province, southeast of HCMC. It has been constructed since 2012 with the Official Development Assistance from the Japanese Government. However, with only 60% progress, it is doubtful that this railway system together with highway, underneath and above the ground level, will be completed as planned by next year. Lack of funding and old debt payment will continue to delay the construction. The Second metro line, stretching out 20 km. between between Ben Thanh and Tham Luong, southward of HCMC, has been put on hold because of the lack of funding which in turn affects the site clearance process. The construction did not start as planned in 2014. Recently, the two said projects’ costs have been re-evaluated upward to be almost twice higher than the original estimates. If without a budgetary support from the central government or the City, the construction will be in doubt.
While in Ho Chi Minh City, I met Mr. Vo Tan Thanh, Vice President of the Vietnam Chamber of Commerce and Industry (VCCI) and concurrently General Director of VCCI—HCMC. Vietnam, he said, welcomed Thailand’s investment in the areas of industry, agriculture and services. Particularly, Thai investment is encouraged in the supporting industries, that is, to produce raw materials to supporting areas for subsequent manufacturing. For example, accessories for automobile, electrical appliances, materials for garment industry. Presently, such raw materials are imported from China, Taiwan and Japan. Secondly, Thailand is welcomed to invest in the manufacturing of industries concerned with high-valued technology in order to help Vietnam produce goods for more exports outside the country. Vietnam enjoys tariff incentives arrangements if using raw materials from inside for export production. Moreover, Vietnam expects to produce and export the products out of the high technology industries, bio-technology, infrastructure development, high-technology agriculture including food processing industry for export from the Mekong Delta. In addition, Thai investors are welcomed to develop infrastructures or respective facilities for the tourism industry and administer the operations, not merely manage the services part of tourism.
Familiarization trip has become enlightening in my meeting with Mrs. Nguyen Thi Mai Trinh and Mr. Truong Vo Manh Khoa, who are with the policy and planning unit of the HCMC people’s committee. According to them, HCMC has prioritized in the four following industries: 1) mechanics; 2) electronics, information technology, pharmaceutical industry; 3) rubber and plastic sectors and 4) food processing industry. The two City officials referred to Thailand’s strong points and expertise in the manufacturing industries related to rubber, automobile, plastic, motorcycles, spare parts as well as the supporting industries.
In short, HCMC emphasizes high technology agriculture and supporting industries, not merely production in the old fashioned way. Furthermore, it’s in the discretion of the Prime Minister in approving an investment project at a given area or province in Vietnam. Mrs. Trinh took note of Thailand’s FDI in Vietnam at the amount of US$ 360 million, covering 195 projects and at the level of the 12th foreign investor since 1988. We agreed that Thailand has a lot of potentials to invest more. The Siam Cement Group (SCG) was singled out in reference to its business achievement in Vietnam.
Vietnam’s present emphasis on high technology manufacturing, high tech agriculture, chemistry, supporting industries, research and development for creativity and real life usage (rather than for the sake of research alone) was well presented in my conversation with Mr. Le Truong Duy, Director of Foreign Service Center, Department of External Relations, HCMC, a branch of the Ministry of Foreign Affairs in Hanoi. The young Vietnamese diplomat asserted that a number of foreign investors focus on trading, not investment to manufacture in Vietnam especially in the creativity field of high technology. Mr. Duy said his Service Center which was established in 2003 looks after international exchange and trade fair with the business corps and welcomes Thailand’s participation.
Really, what are the strong points of Vietnam that attract investment from abroad? There are many.
First, Vietnam has abundant natural resources such as oil and gas, coal, bauxite, iron, marine products, forestry and two fertile deltas in the North and the South.
Secondly, Vietnam has ample cheap labor for manufacturing production and foreign investment. Among 95-million population today, more than half are in the ages of work force. The Vietnamese workers are known for their discipline and hardworking characteristic. As Vietnam moves toward industrialization, these very diligent labor force are thus becoming the consumers enjoying benefits from the flourishing market economy.
Thirdly, Vietnam is politically stable under the Communist party rule. Vietnam is distinguished from other neighboring economies as it is immune from public disorder, political instability, terrorism and military insecurity at the threatening level.
Fourthly, Vietnam has been well recognized for its ability and experiences of hosting global-level conferences such as APEC summits twice or being chosen as excellent choice of venue in organizing superpower summit like the North Korea-USA summit recently. Vietnam’s reputation as a good venue in view of physical arrangements, traffic order, crowd control is to be noted here.
Vietnam in search of itself
Vietnam has just celebrated the 44th anniversary of the victory in Saigon liberation on 30 April 1975. If compared to a man, post-War Vietnam, at 44, is a middle-aged person. It’s a distinct generation that saw changes. Indeed, more than half of the population in Vietnam today were born after the war. They did not experience the war but rather have lived through the fall and rise again of capitalism.
Nowadays, Vietnam has realized that it cannot resist modern day changes and pressure from world capitalism. In my most recent visit, Vietnam or Hanoi in particular was markedly different from what I had seen in 1985. Ho Chi Minh City for its part is the never-giving-up city that was reemerging with its vigor in socio-economic outlook in the market economy way. While Hanoi has managed to lessen inequality and poverty, Ho Chi Minh City has blossomed and been distinguished as the center of prosperity of the entire country.
It’s straightforward in conversation with a countless number of local people over years that Vietnam has a high admiration of Thailand as a good model. However, while behind Thailand in terms of modernization, Vietnam never stops working and aspiring to be a par with Thailand. Recently, Vietnam has gained an upper edge because of a number of FTAs agreements signed – the latest one is with the EU taken effect later this year. Thailand which does not have a similar scheme will therefore lose its markets.
Thailand, for its part, should not indulge itself to think that it is always ahead and foremost. Thailand should realize its political stability and maturity. It cannot afford the return of public disorder, armed demonstration, political violence, lawlessness and deadlock and political corruption during the years preceding the coup d’ etaton 22 May 2014. If the political chaos should return and paralyze the system, then Thailand will lose the advantage and be surpassed easily. We cannot find fault with any country else, except to blame ourselves.
Ambassador Komgrit Varakamin presently serves as adviser to the Thailand-Vietnam Business Council, Bangkok. Views expressed are his.