Vietnam’s new consumer generation spends money
HANOI: A new middle class of young, tech-savvy consumers with money to buy mobile phones, home electronics and other luxury items is set to propel Vietnam’s economic growth for years to come.
Accounting manager Nguyen Minh Duc is one of this new generation in Hanoi, one of the few Communist Party-run capitals in the world. On a May morning at a shopping mall filled with brand name products, he bought a digital video camera imported from Japan for US$1,000 (RM3,800).
“I like electronics and I saved money for about five months to buy the camera,” said Duc, 30. “I’ll mostly use it to film my family.”
Market research shows that in the last two years, household spending power rose 25% in Hanoi and Ho Chi Minh City, the commercial centre, one indication of a middle class evolving in the cities and towns of the mostly poor South-East Asian country of 82 million people.
“You could say that Vietnam has literally gone from using the abacus to the Pentium 486 personal computer overnight,” said Ralf Matthaes, managing director in Vietnam of the TNS global market research firm, which surveyed urban households in 2004.
The consumerism trend showed that disposable income had risen in the past five years to 40% of income from 18% in Vietnam’s two main cities, Matthaes said.
Vietnam’s gradual liberalisation over 15 years toward a market system after decades of war has made it one of the world’s fastest growing economies, despite some criticism that reforms have been too slow.
Estimated economic growth was 7.7% in 2004 and the government aims for 8.5% growth in gross domestic product for 2005.
According to the International Monetary Fund, inflation rose sharply in 2004 to an estimated 9.7% and is estimated to rise by about 7.5% or higher in 2005, in line with other growing Asian economies.
For a country still largely agricultural, Vietnamese have embraced technology enthusiastically, the survey found. About 40% have used the Internet, whether in the office, at home or in an Internet cafe.
Half of all households of the estimated 11 million people who live in and around Hanoi and Ho Chi Minh City own mobile phones and about a third of those own personal computers, according to the firm which has studied market trends in Vietnam for the last nine years.
It said the survey of 1,200 households conducted annually was largely interpretive because obtaining precise information was difficult compared with a developed economy.
But it was clear from the research that “the lives of Vietnamese are a lot easier today,” Matthaes said. Purchases of cars, motorcycles, refrigerators and washing machines and house ownership were all up.
“People also work very hard, a kind of work hard, play hard mentality,” he said.
About 76% of the population live in rural areas and government statistics show a widening gap between rich and poor, with urban dwellers earning as much as five times as those in the countryside.
Roughly half of the population is under 25 years old, a generation that will drive the consumer market for years to come, economists say.
“The consumerism of the 20 to 25-year-old age group is part of the good story of Vietnam’s long-term ability to grow in the next five to 10 years,” said Susan Adams, the International Monetary Fund’s senior representative in Hanoi.
“Conspicuous consumption has not really been culturally accepted here before, you are just starting to see it.”
In some respects, Vietnam’s move away from a centrally planned economy have mirrored those of China, its northern neighbour. Economic analysts say Vietnam is taking its own course, however, by adopting concepts and policies it feels are the correct fit.
They generally agree that the economic future of Vietnam's young population is bright, even if the government does not achieve its goal of World Trade Organisation membership at the end of this year.
Entry to the WTO would enable Vietnam to integrate its economy with the rest of the world further. It would be able to fight protectionism better in vital industries such as garment manufacturing and give Vietnam access to more markets.
Textiles are Vietnam's second largest export after crude oil.
The National Assembly, the main legislative body, is working overtime in its summer session to change laws and regulations to improve chances of striking deals with key trade partners, notably China and the United States.
Economist Jonathan Pincus of the United Nations Development Programme in Vietnam said any country entering a free trade agreement should remember “that free trade is the beginning of the story, not the end of the story”.
Vietnam ought to focus on developing “a coherent competitiveness policy” in the trade deals it signs and encourage investment in technology, education, research and development for the future of its economy, he said.
By Grant MC Cool - Reuters - May 29, 2005.
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