Thursday, January 31, 2008

Why can't Latin American countries do this? 

Real estate in Florida might not be doing so great these days but it is roaring ahead in at least one other country according to yesterday's Wall Street Journal:

At the launch of closely held property developer Hoang Anh Gia Lai Group's new condo project in Ho Chi Minh City last month, 3,000 local investors lined up for the opportunity to buy one of the available 800 units. In the following days, 10,000 more people lined the sidewalk outside the company's offices, blocking traffic in the sweltering heat.

Foreign investors can also get in on the game. Individual foreigners can buy condo units as long as they are for their own residential use. Vietnam-based Indochina Capital Advisors Ltd. is launching a fund to enable foreign investors to get wider exposure to Vietnam's property market. Ho Chi Minh City-based VinaCapital Group manages a $633 million London-listed fund offered to global investors and which is dedicated to the real-estate market.

In Vietnam's capital, Hanoi, South Korean company Keangnam Enterprises Co. is building Pride Tower, a $1 billion, 72-story structure, reflecting how cash-rich global investors are still willing to gamble on up-and-coming markets. Keangnam will own the building when it is completed.

Another Korean concern, Posco Engineering & Construction Corp., is building a $3 billion satellite city outside Hanoi in a joint venture with a Vietnamese company on a site currently occupied by herds of grazing cows.

"Some people think this kind of development isn't appropriate for Vietnam at this early stage of its development," says Sohn Juk Weon, Posco's chief manager at its joint venture with Hanoi-based Vinaconex Corp. "But we aren't building a city for the next 10 years, but one for the next 100 or 150 years."

Yup, as crazy as it may sound to those of us old enough to remember the last time the U.S. military was getting its butt kicked by a rag tag guerilla army, Vietnam in the new real estate hot spot. Good for them. After the U.S. dropped more explosives on that country than were used by all participants in WWII, not to mention defoliating a good chunk of the country so it looked like the moon, its good to see the country being built up.

But of course this could all just be a speculative bubble - you know, like Miami.

But there is reason to think it is more than that. Reading on we learn why:

Vietnam, like most countries with open or partially open economies, is vulnerable to a global slowdown. Much of its economic progress in recent years has been built on exporting electrical goods and agricultural products to the U.S. and other developed countries that are now teetering on the brink of recession. Vietnam's exports to the U.S. alone grew 39% in 2007 to more than $10 billion. Trade and Industry Ministry officials say they expect exports to the U.S. to rise 30% this year to $13 billion. Total exports are forecast to rise to $58 billion this year from $48 billion in 2007.

Since eschewing Communist economic planning in the early 1990s, Vietnam has been moving toward becoming the next "Asian tiger." Global manufacturers -- particularly Asian companies such as Samsung Electronics Corp., Canon Inc. and Taiwan-based chip-producer Hon Hai Precision Industry Co. -- have chosen Vietnam as a low-cost production hub, just as Japanese and American companies built up Thailand, Malaysia and Mexico in the 1970s and 1980s.

As a result, Vietnam's economy has grown an average 7.5% a year since 2000; last year it grew 8.5%and officials predict similar growth this year, although economists say it won't fully escape the ill effects of a U.S. slowdown.

This is interesting, while Latin American countries can't seem to export much of anything besides natural resources Vietnam is seeing its exports grow more than 20% in ONE year based largely on exporting.... electrical goods.

Last year they had overall growth on a par with Venezuela's at about 8.5%. Yet while Venezuela's depended on you know what Vietnam is doing it without much in the way of natural resources. Can anyone say sustainable development.

(Full disclosure - Vietnam actually does export a significant amount of oil but it is their NON-OIL exports that are growing the fastest!)

Heck, even the New York Times couldn't help but notice:

In the three decades since Vietnam has gone from communism to a form of capitalism, it has begun surpassing many neighbors. It has Asia’s second-fastest-growing economy, with 8.4 percent growth last year, trailing only China’s, and the pace of exports to the United States is rising faster than even China’s.

American companies like Intel and Nike, and investors across the region, are pouring billions of dollars into the country; overseas Vietnamese are returning to run the ventures.

In the latest sign of Vietnam’s economic vitality, trade negotiators from around the world are preparing, after more than a decade of talks, to put the finishing touches on an agreement, possibly by Oct. 26, for Vietnam to join the World Trade Organization. President Bush, President Hu Jintao of China, President Vladimir V. Putin of Russia and other heads of state plan to come to Hanoi in mid-November for an Asia-Pacific Economic Cooperation summit meeting.

For Vietnam, the meeting will be a coming-out party, critical to its pride in much the way the 2008 Olympics in Beijing are for China.

“I think they are the next China,” said Michael R. P. Smith, chief executive of the Hongkong and Shanghai Banking Corporation. “It’s not the scale of China, but it’s a significant economy.”

Through the end of last year; Vietnam’s growth rate exceeded that of Thailand, Malaysia, Taiwan, South Korea and even India, its closest rival.

The latest Asian economic tiger, Vietnam now produces and uses more cement than France, its former colonial ruler. The main index for the Ho Chi Minh City stock market and a smaller exchange in Hanoi have nearly doubled in value this year. Vietnam has become the talk of investment bankers and investors across Asia.


In Vietnam, nearly double-digit growth is starting to produce the same shortages of skilled labor as in India and China. Executives at multinationals like Groupe Lafarge of France and Prudential of Britain say that local accountants, human relations managers and other professionals are so scarce that salaries are soaring 30 percent to 50 percent a year.

Many educated Vietnamese now are like Ha Nguyen, 34, a chemical engineer who is working at his third job in three years, having received big raises each time he changed companies. “Right now, it’s easy in Vietnam to find a job,” he said, pausing while doing a chemical analysis of cement quality at a corporate laboratory here.


Vietnam has reduced the percentage of its people living in abject poverty — less than $1 a day — to 8 percent from 51 percent in 1990, a greater advance than either China or India.

Interestingly the Economist notes that while Vietnam has widespread corruption (GASP!) and fairly high inflation (BIGGER GASP!!) it still expects the country to keep surging ahead. It probably helps that, as The Economist points out in another (and very good) article, that the Vietnamese government actively works to keep its currency from appreciating against the dollar, even if it means they have higher inflation as a result:

Rising inflows of foreign direct investment and speculative money have put Vietnam's currency, the dong, under strong upward pressure. Early last year the central bank responded by selling dong for dollars, building up foreign-exchange reserves and thus bolstering defences against speculative attack—but also stuffing the banks with excess liquidity and prompting the lending splurge.

In December the central bank switched tactics and increased the flexibility of its currency regime. The dong can now fluctuate within 0.75% of a central rate reset each day, supposedly in response to market pressures. However, the bank still seems to be managing the central rate, which has not moved far.

Now I don't want to keep boring you with article after article and statistic after statistic showing how Vietnam is like to be the next South Korea, or Tawain, or China or "Tiger". And I am no expert on the Vietnamese economy (though I did note they score very low on the Heritage Foundation's Index of Economic Freedom which probably means they are doing a lot of good things)

But I think we should consider what even a country like Vietnam being able to use this export led model of development means. After all, when it has been pointed out that on this blog that the Asian model might be a good one for Venezuela to follow we have run into a number of objections (largely from supporters of Chavez I might add):

"We can't develop because imperialism won't let us develop - they only let South Korea develop as an anti-communist measure"

Gee, do you think maybe Vietnam knows a thing or two about imperialism? I mean, they did spend most of the 20th Century fighting off the French, then fighting the Japanese, then kicking the French's butts again, and finally defeating the most powerful military in the world that sent a half million troops to try and subjugate it. In the process it probably had more bombs dropped on it than any country in history, had all sorts of chemicals sprayed on it (remember "Agent Orange"), and had millions, yes millions, killed.

Vietnam's experiences with "imperialism" make what Latin American countries have gone look like childs play.

Yet here they are in 2008 successfully developing their country.

Maybe its time people stop using the "imperialism" excuse? I think so.

"China has only been able to develop because it is so big that the U.S. and others can't avoid dealing with it".

Ok. But Vietnam is no China either. In fact, both Brazil and Mexico have larger populations than Vietnam. And even a country like Venezuela, while smaller, isn't an order of magnitude of smaller.

So that excuse doesn't seem to have any more basis in reality than the first one did.

"To develop you have to have access to the U.S. market and the U.S. won't give it to country's that are resisting imperialism"

Well, lets go back to the stats. Last year Vietnam exported $48 billion worth of goods. $10 billion went to the United States. That means the remaining almost 80% went to other countries. So the U.S. would hardly appear to make or break countries by allowing or denying access to its market. The reality is there are plenty of other markets for exports - Europe, Japan, Canada, China, South Korea, Australia, Russia, etc. etc.

Once again, what we see here is and EXCUSE, not a REASON.

"We can only develop if all (most) of Latin American is united"

Well, unity is a good thing. But unity doesn't in itself lead to development.

Hell, historically speaking Vietnam and China can't stand each other. They've been in shooting wars with each other. But it sure doesn't seem to have any adverse effect on their growth.

So until someone can show me that Vietnam's president is hopscotching across Asia the way Chavez pops up all over Latin America this excuse would seem not to mean much either.

"Yeah, some of those measures would be good - but we have to stamp out inflation first".

Vietnam has inflation. In fact, at 12% last year and headed higher it is pretty much on a par with Venezuela. Sure, Vietnam is concerned about it. But are they going to make their currency uncompetative just to cut inflation? Nope. Are they going to reduce investment to try to reign it in? Nope. Do they really even plan to eliminate inflation? Nope. They would be happy if they just got it to be less than their rate of growth!!

So much for that all purpose excuse Venezuela's government and its supporters like to throw around. If inflation doesn't keep Vietnam from doing what it needs to do why should it stop Venezuela from doing the same?

"We can't develop because everything is sabatoged - there is just too much corruption"


Read the articles linked to above and you'll note Vietnam has lots of corruption. Just like China does. And just like South Korea did.

Sure maybe it delays a public works project or two but when you have the fundamentals right - high levels of investment, consumption kept low, private industry fostered and oriented towards exporting, and a competative exchange rate - your economy will grow so fast even the crooks can't slow it down.

I could go on debunking the excuses but I think you get the point.

From this exercise it would seem there are two types of countries in the world. One type finds spouting excuses is a lot easier than actually busting your butt trying to accomplish something and another type that just plows through obstacles to accomplish goals it is determined to accomplish.

Clearly much of Latin America belongs to the former group while much of Asia belongs to the latter.


Anyone with an answer to that, please be sure to leave it in the comments section.


This page is powered by Blogger. Isn't yours?