Vietnam has unveiled to the world its freshly painted capitalist face

By Karl D JohnVietnam was the seat of the APEC summit this weekend. According to many observers, this was a “golden opportunity” for the Vietnamese leadership while under global spotlight to show the world its new capitalist face. The Asia-Pacific Economic Cooperation forum is a group of Pacific Rim countries that meet with the purpose of improving economic and political ties. It has standing committees on a wide range of issues, from communications to fisheries. The heads of government of APEC members meet annually in a summit called the APEC Economic Leaders’ Meeting rotating in location among APEC’s member economies. Its members are: Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, Chinese Taipei (Taiwan), Thailand, the United States and Vietnam. In this article, Karl John brings us into perspective about the new face of Vietnam. The capitalist credentials of Vietnam’s Communist Party will be under the global spotlight when the country hosts the Asia-Pacific Economic Cooperation (APEC) summit. [1] At the same time, the massive security presence surrounding the event has underscored the strict social controls that still exist alongside Vietnam’s booming market economy.When world leaders arrive in Hanoi on Friday, they will be chauffeured around in Ford and Mercedes vehicles manufactured in Vietnam, sip local Trung Nguyen coffee, and take notes at meetings with fancy Thien Long pens provided by the event’s organizers. The new US$250 million National Convention Center was designed to dazzle with its imitation limestone islands rising dramatically from a simulated ocean on its roof, a seeming allegory for Vietnam’s recent dramatic economic emergence.All roads leading to the new facility have been freshly built or repaved, with certain main avenues laid with porcelain tiles. Flower beds spelling out “welcome” messages to APEC guests have been planted throughout the city, while little ubiquitous blue-and-white APEC flags flutter in the autumn wind. Officials have been toiling on the capital’s facelift for well over two years.Behind that pretty veneer is a heavy security presence, underscoring Vietnam’s still-severe social and political restrictions. Armed police, dressed in battle fatigues and carrying automatic weapons, greet visitors at the street entrance of five-star hotels. Military vehicles are commonly seen on the streets, prompting some visiting foreigners to ask whether Vietnam is still under some sort of siege.Small-scale capitalists operating on the city’s sidewalks without official permission, including cafes, newspaper stalls and fresh-fruit stands, have been abruptly closed down. There has been a coincident clampdown on entertainment facilities, where in recent weeks police have visited bars, restaurants and karaoke lounges to remind them of their government-mandated midnight closing time. There have been unconfirmed news reports that street children have been bundled away and hidden out of sight of passing dignitaries.Vietnam’s sharp contrast of openness and repression, modernity and tradition, capitalism and communism, speaks of a society in rapid transition from isolationism toward engagement with the wider world. For all the communist leadership’s efforts to show the country’s bright upside, it will be glaringly clear to the meeting’s many distinguished participants that Vietnam’s extraordinary economic progress has not yet initiated significant political or social loosening.Follow the leaders Significantly, this week’s APEC meeting has been stage-managed to introduce the country’s new Communist Party leaders to the world as individuals rather than the faceless, nameless cadres of the party’s recent past.For the first time since 1975, when communist forces from North Vietnam conquered the US-backed government in the South and reunited the country, Vietnam’s new leadership hails predominantly from the country’s more commercially oriented southern regions. Since assuming office in June, they have expedited many significant economic reforms, including revisions in foreign-ownership and land-usage laws, toward meeting the country’s obligations under World Trade Organization (WTO) rules and regulations.Prime Minister Nguyen Tan Dung, who was groomed for the top spot for more than nine years, has so far impressed foreign investors with his no-nonsense approach in implementing economic reform. Dung, 56, has notably taken a more forceful approach to rooting out government corruption – although media coverage of the most recent purges has been muted to avoid undermining the party’s public image.Dung graduated from a Vietnamese university with a bachelor’s degree in law and served in the army for 20 years before taking up provincial positions of authority. Then he was instrumental in defusing tensions in the northern heartland province of Thai Binh, where retired army officers had sparked unrest over corruption in the local leadership – one of the first signs of peasant unrest that is now spreading across Vietnam.Dung’s nine-year spell as a deputy prime minister came as Vietnam’s relations improved within the region and among Western countries, the country launched its stock market, and foreign investors started to return in droves. He also served as a temporary governor of the State Bank as it sought to loosen controls across Vietnam’s extensive state-owned banking sector.The premier has a strong and capable ally in President Nguyen Minh Triet, who is best known for leading a high-profile corruption-busting campaign in Ho Chi Minh City, which was aided by his intimate understanding of who’s who in the southern city’s commercial scene. He served as the secretary to the city’s Communist Party Committee, and for more than 20 years was involved with the party’s Youth Union before being appointed to leadership positions in the provinces.Dung and Triet have risen to prominence at a crucial juncture in Vietnam’s doi moi (renovation) reform drive, which started more than 20 years ago but throughout the 1990s was often hampered by backsliding. After 11 years of protracted negotiations, Vietnam’s petition to join the WTO was approved this month and the country is expected to join the global trade club formally in January.Strong credentialsVietnam’s economic-reform credentials are no longer in doubt. Over the past decade, economic opening has lifted tens of millions of people out of poverty, falling from 61% to 19% of the country’s 84 million people, according to multilateral-aid-agency statistics. Market reforms have ushered in booms in construction, manufacturing and tourism, and Vietnam’s new stock market is up 75% this year, distinguishing it as one of the world’s best performers.The country has come huge distances from 1975, when, after toppling the US-backed government in Saigon (now Ho Chi Minh City), it institutionalized political control and implemented an ill-fated communist-style command economy. Even the ruling Communist Party now refers to that low-growth era as a period of “inappropriate socio-economic management”.Now, Vietnam’s transformation from a command to a market economy is accelerating at a higher pace than most economic analysts fully comprehend, because of a paucity of reliable official data. Some economists compare today’s Vietnam to Thailand and Taiwan during the 1980s, a period when both of those consolidated their earlier economic-reform programs and catapulted on to a higher growth trajectory.Vietnam has recently passed laws that allow state-owned enterprises to hire foreign managers, including to the level of chief executive officer. The government recently hired a team of foreign consultants at its Tax Department to help it improve collections.”The main constraint on economic growth everywhere is the availability of human capital, the availability of talented and skilled people, particularly managers. I think this is a particularly important challenge for Vietnam,” said John Quelch, a professor at Harvard Business School, who recently visited the country.Ben Wilkinson, head of Harvard’s Fulbright program in Vietnam, contends that Vietnam needs to work on its “backward linkages” – meaning that local companies should start tapping the expertise at foreign firms to move up various value-added ladders and develop an indigenous class of skilled managers.There is arguably only one last hurdle blocking Vietnam from taking those important steps and entering the ranks of Asia’s externally oriented open economies. Apparently because of concerns about labor rights, the US Congress on Tuesday rejected a deal that would have allowed President George W Bush to grant Vietnam permanent normal trade relations (PNTR) status during his visit to Hanoi.At a November 7 meeting with Vietnamese and American business people – the same day the WTO made its long-awaited announcement – Dung openly called on the US to grant it PNTR status coincident with Bush’s visit. “The US will approve trade normalization for Vietnam sooner or later,” he said. “The approval of PNTR for Vietnam will conclude the long-standing eventful history between the two countries,” he added, a reference to the two countries’ history as war adversaries.With or without immediate US congressional blessing, all indications – including the extravaganza Vietnam’s Communist Party has unveiled for this week’s APEC meeting – are that Vietnam has left its sad war-torn past behind and is enthusiastically embracing a hopeful global future.Karl D John is chief executive officer of the TCK Group (www.tckgroup.org), a Vietnam-based investment consulting group. He has more than a decade of involvement with Vietnam and lives in Hanoi.