Report From Việt Nam -- Part IV

Today I’ll focus on some economic changes going on here in Việt Nam, many of which a visitor can observe personally at least in part.

When the Việt Nam War ended in 1975, this was a very, very poor country. A site called countryeconomy.com has some statistics for the period from then to 1986. I would not take these numbers as anything exact, but rather as a rough indication of the extent to which Việt Nam was completely isolated from the world economy at that time, under the strict Communist régime imposed at the end of the war. Country Economy has Việt Nam’s per capita GDP as a big $80 in 1975, increasing to $556 in 1986 (although that includes what I would consider highly dubious increases of 283% in the single year of 1980, and another 121% single-year increase in 1986). Even if you believe those increases, $556 annual per capital GDP represents rather extreme poverty for a country. (The current U.S. figure is about $60,000.)

Wikipedia has a summary here of the Việt Nam economy for the first decade after the war ended. Bottom line: “[T]he economy remained dominated by small-scale production, low labor productivity, unemployment, material and technological shortfalls, and insufficient food and consumer goods.” 1986 was the year that they decided this wasn’t working, and launched a “a political and economic renewal campaign” that involved the beginning of the privatization of the economy.

As reported in the first post in this series on January 12, Việt Nam’s annual per capita GDP today is about $2300 (World Bank figure), which would represent about a 4.5% CAGR since the economic reforms of 1986. That would be a great rate of increase for a highly developed country like the U.S., but not so great for a country starting from such a very poor base. Today, however, the country is obsessed with economic growth, and claims a growth rate of about 7% for last year, and the same expected again for this year. At 7% growth per year, if it can be achieved, things will be changing quite rapidly. What can we find?

Floating Markets. Near the city of Can Tho in the Mekong Delta (Việt Nam’s fourth largest city), we come upon a collection of some several dozen largish boats floating in the middle of the river. This is a “floating market.” Smaller, faster boats scoot about among the larger boats. The larger boats are owned by businesspeople who act as middlemen/wholesalers between farmers on the one hand, and retail markets and stores in the towns on the other. The boat owners go to farms in the area and buy up produce, typically enough to sell for a week or so. Each boat will typically have a cargo of one or a few agricultural products — pineapples, watermelons, carrots, onions, etc. The large boat owners then anchor their boats in the floating market, and sell to the people in the smaller boats until the cargo is gone. Here is a picture of a couple of the larger boats:

Many more (and better) pictures of the floating market are available on Mrs. MC’s Instagram at DenieDM.

It turns out that 20-30 years ago there were around 50 of these floating markets in the Mekong delta region, but today only about 8 remain; and those are expected to disappear over the next several years. The reason for floating markets was that the waterways were the only practical means of transport to get produce to market. Now, a road and bridge network is gradually developing. Once there are roads, it becomes less expensive and more convenient to have land-based wholesale markets for the farmers to sell their produce. Also, a land-based warehouse can now have refrigeration, so the produce will last longer in good condition.

Basket weaving. Here are a couple of older ladies at their home in a rural area in the Mekong delta, hand-weaving baskets made out of the stalks of the water hyacinth plant.

Photo by DenieDM.

Are they carrying on an ancient local tradition? Hardly. It turns out that this business has only existed for about 15-20 years, and it will be surprising if it is still around 15 years in the future.

The water hyacinth plant is not native to this area, but was introduced by the French colonists. Gradually, it behaved like an invasive species, and spread. By the 1990s it was clogging up waterways, particularly smaller bayous and canals. People searched for a use for the plants so that there would be an incentive to harvest them, and came up with the idea of baskets. Today, these ladies can make about 4-5 baskets per day per person, and they are paid the equivalent of about one dollar per basket. Businesspeople provide them with the dried hyacinth stalks, and then buy the finished baskets for resale into an international supply chain. The baskets are ultimately sold, among other places, at Ikea. As this country becomes more wealthy, it is unlikely that people will continue to be willing to do this kind of work for about $5 per day. Probably, the manufacturing process will then be automated.

Floor mats. The Vietnamese are not as obsessive as the Japanese in covering all interior spaces with woven floor mats, but they do use them in certain areas, such as sleeping areas. The mats are made of the sinewy grass called sedge that grows in delta areas with brackish groundwater. Here is a woman at a mechanical loom in her home making these mats. The raw material of sedge fibers, some dyed bright colors, is in the foreground.

The lady said (through a translator) that she has had the mechanical loom for 12 years. Prior to that, she made mats completely by hand, a very time-consuming process which also required another person, and the two of them could only make two mats per day. With this loom, the one lady can make 10-12 mats per day, and of substantially superior quality to the previous hand-made mats. She is paid about 50 cents per mat, so again it is about a $5 per day job. The mats sell for about $10 each at local markets.

Will this enterprise still be around 10 or 20 years from now? As with the basket-making business, my prediction would be that some combination of ongoing automation and availability of higher-paying jobs will transform how the mats are made before my life comes to an end.

Vingroup. At the other end of the economic spectrum, the richest guy in the country is named Pham Nhat Vuong, said to be worth around $8 billion. He has created a massive conglomerate called Vingroup, with interests seemingly in everything Vietnamese: supermarkets, amusement parks, real estate developments, and even a nascent automobile-manufacturing venture. Go to their website to get an idea of the size and scope of this operation. You will not be surprised to learn that Mr. Pham is a member of the Communist Party, and said to be very well connected.

UPDATE, January 20: Just attended a presentation on Vietnamese history post-1975. The presentation reminded me of several things about the time of the 1986 economic opening that I should have remembered. First, there was widespread malnutrition and even starvation in the country arising from the failure of collectivized agriculture. Second, there was a hyperinflation at that time. And third, hundreds of thousands of desperate people left the country in boats hoping for a rescue at sea, a phenomenon referred to as the “Vietnamese boat people.” Just the usual results of a period of strictly-enforced socialism. In light of these indisputable and well-known facts, it is highly unlikely that Việt Nam’s per capita GDP had actually increased from $80 to $556 per year in the period 1975-1986, as reported at Country Economics linked above. Most likely the purported increase just represented phony numbers put out by the government of the time. However, even $556 represents a very, very poor country.