Vietnamese tighten belts,but just a notch HO CHI MINH CITY - At first glance it appears someone forgot to tell consumers in Ho Chi Minh City about Asia's economic woes. Motorbikes are driven out of showrooms and televisions sets and refrigerators are strapped into the cycle-drawn rickshaws known as cyclos for home delivery in Vietnam's business hub. To be sure, Vietnam's economy is slowing and consumers in this southern city and urban centers across the country are tightening belts, officials, executives and market research analysts said. The outlook for the next few years partly depends on regional economic recovery and executives from foreign consumer goods companies said they expected slower sales growth, especially on premium products. But the sector remains one of the better investment bets in a nation where business is hobbled by red tape and high costs, executives from foreign consumer goods companies said. Vietnam's youthful population and a yearning for modern trends make for a potentially lucrative niche market, they added. ``The consumer goods market is still growing but not at the same rate for foreign companies who came here three years ago when Vietnam was all the rage,'' Phil Worthington, an associate director at market research firm ACNielsen, told Reuters. But he added: ``This market is definitely not dying.'' He said ACNielsen studies showed Vietnamese consumers were generally optimistic about the future despite the Asian economic crisis. Many economists expect Vietnam's gross domestic product (GDP) to grow 3 percent this year versus an official estimate of 5.8 percent in 1998. ACNielsen research of five key cities showed slower 1998 sales growth for television sets, video recorders, telephones and washing machines compared with the previous year. Vietnam's urban market represents about 20 percent of the country's 79 million people, who have annual per capita income of just more than $300. But in Ho Chi Minh City, home to five million people, that annual average rises to around $1,000. Indeed, there has been an explosion in consumerism in the Communist-ruled country since economic reforms adopted in the late 1980s opened Vietnam to a flood of foreign goods. Many of the biggest multinational consumer goods players operate in Vietnam. They include Coca-Cola, Unilever, Colgate-Palmolive and Procter & Gamble. Jacques Ferriere, chairman of Unilever in Vietnam, said there had been a downward trend in demand growth recently but that increasing market share and better distribution networks had helped the Anglo-Dutch giant compensate. He said the outlook over the next two to three years was for overall slack to moderate growth, but not a collapse. Patrice Calmes, general director at brewer Fosters Tien Giang Ltd, said he expected slower growth over the same period for premium Foster's beer with reasonable sales for mainstream products such as the firm's local label BGI beer. Fred Coomb, general director for British American Tobacco in Vietnam, said consumers were cautious but still spending. He said the Vietnamese instinct to save for a rainy day would also prevent consumer buying power from collapsing. However, Coomb said consumer trends would partly hinge on Hanoi taking action to halt a slide in foreign investment inflows. ``If we don't see significant reassurance soon to investors this will have implications for consumer trends over the next few years. Without a turnaround in investment and a pick-up in GDP, consumer demand will decline further,'' he told Reuters. Coomb added that prospects for companies in the consumer goods industry were still reasonable partly because of the size of the population. Other executives point out that because Vietnam is poor most people do not own a car or take overseas holidays, leaving disposable income to be splashed out on motorbikes, televisions, washing machines and personal care products. ``In the end, this is a market in which consumer goods firms want to stake out a position for the long term,'' Coomb said. Worthington said prospective foreign firms needed to thoroughly study the market and be aware of distribution headaches posed by Vietnam's geography -- the country is long and narrow, and the infrastructure is poor and limited. Mark Webster, chief representative at advertising firm J. Walter Thompson in Vietnam, said consumer goods companies should focus on the country's young population -- more than 41 million people were born after the Vietnam War ended in 1975. ``That segment means energy and dynamism and a desire to move forward and keep up with the trends in other Asian societies,'' he said. ``There is still room in this market. It's not saturated but you have to have the right product because the Vietnamese are very discerning customers.'' Reuters - May 11, 1999.