Middle class embraces capitalism in socialist Vietnam
HANOI - The middle classes of the Socialist Republic of Vietnam, as it is formally named, have taken quite well to capitalism.
Whether it is families dining at fancy restaurants, businessmen buying luxury cars or people shopping for vanity items, conspicuous consumption is "in" -- especially in the commercial hub, Ho Chi Minh City, and the capital, Hanoi.
"Vietnam is wealthier than what we believe, but we honestly don't know how wealthy," said Ralf Matthaes, managing director of TNS market research in Ho Chi Minh City.
"Urban Vietnam has a middle class and, when a country has a middle class, it means it is able to sustain itself for the future," he added.
TNS research showed that in an average household in the city most still call by its old name, Saigon, people spent 2.5 to seven times more than they said they earned.
Measuring the new wealth of the middle classes is difficult because Vietnam is largely a cash economy and the personal income tax-collecting system is in its infancy.
Those born in the baby boom years that followed the Vietnam War have turned 30, and a group known as the 8X-generation born in the 1980s strive to make their mark as professional choices increase.
In the one-party state, the Communist Party leadership has made clear that as far as the economy goes, there is no turning back. On Tuesday, Vietnam won formal approval to become the 150th member of the
World Trade Organization, the biggest capitalist free trade club.
The market-driven economic reforms that helped create Vietnam's middle class will be on view next week to the presidents, prime ministers and senior officials of the 21-member Asia Pacific Economic Cooperation (
APEC) forum in Hanoi.
The annual event promotes free trade among its members, but this year it is also an international coming-out party for Vietnam, which was relatively isolated only 12 years ago after more than a century of colonialism, wars and extreme poverty.
"Cadre kids"
The children of the middle class increasingly eat Western food, use mobile phones and the Internet and enrol at international schools that until a few years ago catered almost exclusively to expatriates.
They are sometimes called "cadre kids" -- sons and daughters of couples connected to the elite ruling group or of businessmen whose entrepreneurial skills in the new economy have completely transformed the lifestyle of their extended families.
"The rate of change in Vietnam is accelerating beyond even our optimistic assessments," gushed a Merrill Lynch report in October. "The rise in consumption is nothing short of shocking."
TNS market researchers found that annual per capita gross domestic product in Ho Chi Minh City households was about $2,400, three times the official nationwide figure of $720 for this year.
Vietnam's gross domestic product grew by an estimated 8.2 percent this year, second only to China.
In contrast, more than 70 percent of the 83 million Vietnamese live in the countryside and work in agriculture, in some places still struggling to make one dollar a day.
Even in Hanoi, hardy women in conical straw hats are still seen walking all over the city balancing two heavy baskets of cheap fruit and vegetables from a pole hoisted on a shoulder.
"In the past, having a bicycle was a dream already, let alone a motorcycle ... now even farmers go to the field on motorbikes," said To Vinh from Thai Binh province in the northeast as he shopped for a Honda for his son, a first-year Hanoi university student.
Car demand
Car sales keep growing, although Vietnam is one of the most expensive places in the world to buy a vehicle with import tariffs of up to 90 percent.
Honda, Mercedes, BMW, GM Daewoo and Toyota say sedan sales in the first 10 months of this year jumped 15 percent to 14,114 units. The tariffs will be lowered gradually to a maximum of 70 percent now that Vietnam is in the WTO.
"You are first-class citizens if you go to work in a car," Do Thanh Trung, manager of a small import-export firm, said proudly after spending $29,000 on a second-hand Mercedes C200.
Large supermarkets such as Metro of Germany and Big-C of France are filled at weekends with shoppers buying goods in bulk.
Big C is in a new Hanoi suburb with rows of Singapore-style apartment towers, designer stores, trendy bars and restaurants.
The middle-class suburb also houses the imposing National Convention Center that has been built over the last two years for the APEC gathering at a cost of at least $260 million.
Most observers believe that with the new U.S.-Vietnam trade deal signed in May, it is only a matter of time before Vietnam's young middle class will be sipping coffee at Starbucks and eating at McDonald's like their counterparts in Bangkok and Hong Kong.
By Grant McCool & Nguyen Nhat Lam - Reuters - November 10, 2006.
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