Entrepreneurs emerge in Vietnam
HANOI - Everyone's hustling for customers on the street outside Nguyen Phuong Hoa's house. Within 20 feet of her front door, two people operate sidewalk restaurants, one man sells popcorn to school kids, and a woman peddles papayas 12 hours a day.
From their one-room apartment, Hoa and her family run a beauty salon and a convenience store, their open living room door offering a view of both their home life and a display of candy and cigarettes.
It's mom-and-pop stuff, a step down from the upscale shops sprouting around the corner on Pho Hue, which hawk every modern convenience from cell phones to DVD players.
Since the United States lifted its economic embargo in 1994, Vietnam has followed China's lead, implementing market reforms even as it maintains single-party communist rule. A decade later, its fledgling private sector has reached a critical juncture.
If the government moves swiftly to reform its money-losing state-owned companies and banking and legal sectors, Vietnam will make it easier for its private firms to flourish. It will also move closer to attaining another prized goal: joining the World Trade Organization.
The government is especially counting on the private sector to help generate jobs for the 1.5 million Vietnamese entering the workforce each year.
``We consider the private sector to be a permanent, integral part of the economy,'' said Nguyen Dinh Cung, an economist with the Ministry of Planning and Investment. ``Businessmen used to be considered exploiters. Now they are considered job creators.''
Since the 2000 passage of a landmark Enterprise Law, which greatly simplified the procedures for starting a new business, at least 80,000 companies have registered, with an average of 20 employees each.
``Vietnam is developing incredibly quickly,'' said Alan Duong, who employs 35 people at her upscale Hanoi housewares business, which has exported lamps to Neiman Marcus. ``You can see it and feel it in Hanoi, and even more in Ho Chi Minh City.''
In the new Vietnam, people still revere communist revolutionary Ho Chi Minh, but they have also embraced a new role model: Horatio Alger, the quintessential, up-by-the-bootstraps capitalist.
Everybody is selling something, from stylish sales associates at Dolce & Gabbana to street peddlers in plastic sandals. One of the world's last bastions of communism has turned out to be one of the most entrepreneurial places on earth.
But for all the economic dynamism that has been unleashed, most companies in Vietnam's private sector remain clustered at the bottom of the economic pyramid. At the top, huge state-owned firms continue to dominate the most important sectors, from electricity to telecommunications.
Most Vietnamese still poor
While an emerging urban class of wheeler-dealers is cruising around in Mercedes-Benzes and BMWs, most Vietnamese remain very poor, especially in rural areas. Per capita income has more than doubled during the past decade, but is still only $485 a year.
Government officials say they are building a ``market economy with a socialist orientation.'' They want to make room for capitalism while maintaining their profitable national corporations, just as some European nations do.
``The Vietnamese economy is moving on a two-track system,'' said Susan Adams, the International Monetary Fund representative in Hanoi. ``It's a huge experiment.''
But for its private sector to truly flourish, Adams and other Western economists caution, Vietnam must speed up its efforts to privatize unprofitable state-owned firms, root out corruption and improve the transparency of its banking and legal sectors.
``Vietnam's private sector has made good progress, but it's very fragile, with mostly small-scale, service-sector companies instead of robust, value-added industries,'' said Amanda Carlier, an economist with the World Bank in Hanoi. ``There needs to be more concerted action to accelerate the exposure of the state sector to real competition.''
In the 1980s, before the government began loosening its doctrinaire embrace of Marxist-Leninist economics, Vietnamese citizens could get in trouble just for selling a chicken to their neighbor.
Nguyen Kim Chi used to run an underground restaurant, dishing out an old Hanoi favorite -- chao luon, or eel soup -- to friends and neighbors on the sly.
She didn't dare put a sign outside her shop or serve too many customers at once.
``It was so miserable in those days,'' Chi said. ``No one dared to open a shop, because if we did, we would be fined.''
But by the late 1980s, as communist governments fell across Eastern Europe, Vietnam confronted the fact that its centrally planned economy was creating food shortages instead of an egalitarian utopia.
With a stagnating economy forcing people to queue up for supplies, Vietnam implemented doi moi, an economic ``renovation'' policy, embracing market reforms as a means of maintaining social stability.
Since then, the economy has grown steadily stronger -- and the personal liberty of the Vietnamese has grown.
Chi has a sign outside her restaurant now, and a long line of customers, many of them in business themselves.
``Nowadays, all you need is a head full of ideas and a willingness to take chances and you can get rich,'' said Chi, for whom rich is relatively a modest notion: the ability to buy a new motorbike and new furniture.
But an emerging class of larger-scale entrepreneurs is also striking it rich, cruising around in luxury cars and spending $300 on cognac during a night out on the town.
When Peter Ryder, an American businessman, arrived in Hanoi 12 years ago, nearly everyone wore drab clothes and got around on a bicycle.
Growing inequality
``It's a stunning change,'' Ryder said. ``You've got really rich people here now, lots of them.''
Indeed, as the nouveau riche flaunt their newfound wealth, concerns are emerging that the gap between rich and poor could become extreme.
Income inequality is still much less pronounced in Vietnam than it is in most other countries, said Martin Rama, chief economist for the World Bank in Hanoi. But with the bulk of new private wealth being generated in the cities, Vietnam must work to extend capitalism's benefits across the country, Rama said.
And if the government isn't scrupulous about developing a level economic playing field for private firms -- with open accounting rules and a rational legal system -- then Vietnam could still wind up with a form of crony capitalism that mainly benefits the powerful and leaves everyone else behind.
``This could still become a place where people make money not because of their business skills, but because of their connections,'' Rama said.
Vietnamese officials pledge to continue loosening their grip on the domestic marketplace and to regain the interest of foreign companies, which flocked to Vietnam in the 1990s only to become disillusioned by red tape and corruption.
With its gross domestic product surging 7 percent last year, Vietnam's economy is among the fastest-growing in the world. Inflation and unemployment are low, and exports are booming. Vietnam sometimes finds itself sparring with trading partners like the United States, which became Vietnam's largest export market last year in the wake of a bilateral trade agreement.
A small army of international organizations is financing projects intended to help Vietnam bring its legal, accounting and banking systems up to international standards.
The pace of change isn't always quick enough to satisfy outsiders. But if government officials say they must proceed deliberately and cautiously, they do seem eager to proceed.
Prime Minister Phan Van Khai recently attended the annual dinner of the Vietnam Young Entrepreneurs Association, where he cheered on the private business leaders who won the group's annual ``Red Star'' awards, including some who work in high tech, a sector the country is eager to develop.
``Young Vietnamese entrepreneurs are fighting to strengthen the nation's economy,'' Khai told the crowd. ``In this battle, young entrepreneurs are always the leaders.''
Vietnamese businessmen say the country's business environment has improved greatly, but big state-owned firms are still granted easier access to land, loans and market information.
When Hoang Huu Chuong founded the Nguyen Hoang Garment Co. 12 years ago, state-owned banks set extravagant collateral requirements and turned down his loan request, even as they praised his business plan. He was forced to scale back and raise money from friends and family.
And his request for land in Hanoi languished on a bureaucrat's desk for three years before he finally gave up and opened his factory in a neighboring province.
As a schoolboy, Chuong was taught that businessmen were self-interested exploiters of the working class. That message was eagerly reinforced by his father, who served in the Fatherland Front, the Communist Party organization that promotes adherence to revolutionary principles.
``The government had to change its attitude toward private business,'' said Chuong, whose company employs 700 people and has become Vietnam's biggest supplier of children's clothes.
Even Chuong's father, the aging revolutionary, has become a business booster. At 85, he doesn't get out much anymore. But once a year, he insists that Chuong take him for a tour of his factory, where the workers once idealized by Vietnam's revolution have made clothes for export to Kmart.
By Ben Stocking - The Mercury News - April 15, 2004.
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