Booming economy reduces poverty
HO CHI MINH CITY - Ho Chi Minh City is booming. As you approach from the outskirts, signs of economic growth are all around you. Buildings and roads are under construction everywhere. Neat three to five storey dwellings line the roads, tastefully designed and painted in gentle pink, yellow, blue, green or brown. Only rarely can you see the black mildew that so quickly attacks unpainted concrete in the tropics.
Billboards and shop windows advertise a wide range of consumer items. People on the streets are well dressed: their clothes are not merely clean and new, but also stylish. The Ben Thanh market in the city centre overflows with fruits, toiletries, watches, shoes, clothing. The streets swarm with motorcycles — more than 3 million of them for a population of 6 million. The last time I visited Ho Chi Minh City, 20 years ago, the prevailing mode of transportation was bicycles. The People’s Committee, the city’s government, is considering a plan to build an underground railway.
A front-page article in the English-language Viet Nam News begins: “The number of poor households in Viet Nam will increase from 8.3 per cent currently to 26.7 per cent ...” I do a double take and read on. Vietnam’s poor are not increasing; because of success in reducing poverty, the government is considering a proposal to raise the official poverty line, which will of course increase the number of official poor. Vietnam in 2003 achieved the United Nations Millennium Development Goal for 2015 by cutting in half the number of people who live in poverty. (The figure was 17.2% in 1990 and 8.3% in 2003.)
Since the adoption of the doi moi (“renewal”) policy in the late 1980s, Vietnam’s economy has shown remarkable growth. From 1991 to 2003, average growth of gross domestic product was 7.5% per year. Ho Chi Minh City consistently surpasses the national average in economic growth. For instance, from 1998 to 2003, Vietnam’s average annual GDP growth was 6.4%; for Ho Chi Minh City, it was 9.7%. From 1985 to 1995, the city’s per capita GDP more than doubled; by the end of this year, it will have more than doubled again.
Foreign investment
Much of this growth is due to Vietnam’s success in attracting foreign investment. Prior to doi moi, there was basically no foreign direct investment (FDI) in Ho Chi Minh City. In 1990, FDI produced 1.5% of the city’s GDP, while state firms produced 55.4% and non-state Vietnamese firms produced 43.1%. In 2004, the figures were FDI 18.9%, state 42.3% and non-state 38.8%.
According to the Vietnamese Ministry of Planning and Investment, quoting a UN report, Vietnam required about US$60 billion in investment to sustain a growth rate of 7% from 2001 to 2005; about one-fifth of this sum came from FDI. The top five investors in Vietnam are, in order, Singapore, Taiwan, Japan, South Korea and Hong Kong.
Vietnam now has close to 100 export processing zones, which have attracted 27.8% of the total FDI in Vietnam. Our group was taken to visit the oldest of these, the Tan Thuan Export Processing Zone, located on a 300-hectare peninsula formed by a loop of the Saigon River. Tan Thuan is a joint venture between a Vietnamese corporation and the Taiwanese Central Trading & Development Group. It currently has 108 tenants from 10 countries, who have invested a total of US$818 million. The zone employs 40,000 workers.
The same two companies are partners in another joint venture, the Phu My Hung Corporation, which is carrying out a massive urban development project on the southern edge of Ho Chi Minh City. “Saigon South” includes both a commercial centre and surrounding houses and condominiums. Phu My Hung spokespersons say the development, still in its early stages, will eventually accommodate as many as 1 million people.
Inequality
The housing currently being built and sold in Saigon South is an indication that there is a layer of Vietnamese society that is becoming quite wealthy. Condominiums are selling for US$50,000 to US$100,000, and a few villas for as much as US$1.5 million. We visited one of the new houses, a two-storey, three-bedroom free-standing building of 330 square metres, with a small garden. Its selling price is US$400,000. Phu My Hung’s investment in this housing is not speculative. It doesn’t build a house until it has a sales contract for it. Vietnamese law does not allow foreigners to buy land or housing, so these dwellings are owned by wealthy Vietnamese.
By Vietnamese standards, they are very wealthy. For comparison, the proposed new poverty line for an urban resident is 230,000 dong (about US$14.60) a month. It was to be expected that doi moi’s expansion of market mechanisms would increase inequality. Of course, it should also be kept in mind that income inequalities can be, and in Vietnam are, partially reduced by social welfare programs.
However, there is a political question of how much inequality can be tolerated in order to boost the economy’s overall growth, and socialists in other countries will watch with great interest as the Vietnamese work out their answer. In addition to class/income inequalities, Ho Chi Minh City’s rapid economic growth could multiply urban-rural and regional differences if it continues to outstrip growth in the rest of the country.
At present, Ho Chi Minh City, with 7% of the country’s population, produces 20% of its GDP and nearly 40% of its exports. With a per capita income of around three times the national average, the city is a magnet for migration from the countryside and from other cities. Since 1992, it has taken in an estimated 1.8 million migrants. Anyone who wishes can go to Ho Chi Minh City to find work, but becoming an official resident requires going through bureaucratic procedures that most migrants seem to regard as not worth the effort. The chief disadvantage of this is that children are allowed to attend public schools only in the official home town of their parents.
The government is pursuing a fairer and more effective method of discouraging migration into the city, which is to relocate industries, especially labour-intensive ones, to surrounding provinces. This could spread around some of the wealth being generated in Ho Chi Minh City and help to reduce inequalities over a wider area.
By Allen Myers - Greenleft Weekly -April 13, 2005
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