Economic Development & Global Integration: Vietnam

Globalization, Governance, & Security in Southeast Asia: Perspectives from Malaysia & Indonesia

Wednesday, June 13, 2012

On The Hunt for Investment

One of the most common sights in Vietnam (along with motorcycles, of course) is construction.  It's "build baby build" for the Vietnamese - a high-speed train through the Mekong, airports and deep-sea ports for every province, and lots of skyscrapers.  Infrastructure, after all, invites investment, and Vietnam's noteworthy growth (and accompanying poverty reduction) has been dependent on foreign investment.  It's not just the U.S. and East Asia getting involved either - the "international city" of Ciputra Hanoi, the scary-looking gates to which are seen below, is being built by an Indonesian company.

It's not as simple as "if you build it, they will come," however.  Ciputra Hanoi looks pretty empty, and Dr. Jandl told us about a premier skyscraper with 86 floors, only two of which have been leased out.  Looking to attract investment that typically goes to southern Vietnam (with its longer history of openness to capitalism), the central government has made sure Hanoi has the best highways, but it hasn't helped.  Investment consulting firms are still telling their clients to stick to the industrial parks in south Vietnam. 

Saigon Hi-Tech Park just wants to be loved

 The industrial parks still compete with each other - everyone does, in newly capitalist Vietnam.  They strive to offer expats the best housing and international schools, the "most loyal" and "most disciplined" workers (if there's one thing I've learned on this trip, it's to expect a whole lot of broad cultural generalizations - the Vietnamese are X, the Indonesians are Y, the Filipinos are Z, yes, all of them), the smoothest roads, the most intellectual property rights protection... and the provincial governments, meanwhile, compete through the improbable Provincial Competitiveness Index, a project run by the USAID of all things, which measures ease-of-doing-business.  I always felt bad for Lao Cai, an impoverished province in the northwest.  They do everything right according to the PCI - all those things that are supposed to draw investment according to the Washington Consensus, like transparency and low entry costs, and they'll never get investment because of their location and available resources. 

Construction, as seen from the roof of Reunification Palace in Ho Chi Minh City

One of our speakers from the Fulbright Economics Teaching Program joked that the Vietnamese "love to speculate," when asked why the Vietnamese economy keeps getting into these boom-and-bust cycles of borrowing-and-bad-investment.  During the last boom everyone - firms and wealthy households - tried to break into the real estate market, because land is a precious commodity in this relatively tiny country.  But they don't want to buy up land from farmers and then immediately start building office buildings or shopping malls or amusement parks (really), supposedly so as not to hurt the farmers' feelings.  So they wait for the farmers to "forget about it" and move away, so the outskirts of Hanoi are filled with tracts of wild land, waiting for their extreme make-over.

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