THE BLOG

Vietnam Becomes an Asian Tiger

03/13/2013 05:17 EDT | Updated 05/13/2013 05:12 EDT
Alamy

While in Hanoi last week, I attended mass at Saint Joseph's (Hanoi), a beautiful neo-gothic Cathedral built by the French in 1886. I was reminded that for the better part of 2,000 years, the Vietnamese people have been fighting to free themselves from occupying foreign powers. Less than 40 years ago, Vietnam was ending a devastating war with the United States that obliterated much of the national infrastructure and cost millions of lives.

The Vietnamese are a profoundly resilient and fiercely independent people. Scars are fading away and are being replaced by a sense of possibility and optimism.

Home to 88-million souls and roughly the total area of the State of New Mexico, Vietnam has become an energetic source of economic and political progress. Change has been quick and spectacular. According to the World Bank, Vietnam's poverty rate fell from 58 per cent in 1993 to 14 per cent in 2008. A staggering 35-million Vietnamese have been lifted out of poverty.

In 2007, Vietnam became a member of the World Trade Organization. Since then, foreign direct investment has been on a steady upward trajectory and a tireless entrepreneurial class is making its mark. This month, Pham Nhat Vuong, 44, who heads real estate developer Vingroup, made the Forbes billionaires list with a net worth put at $1.5 billion. That news was met with cheers throughout Vietnam.

World leaders have taken notice and are beating a path to Vietnam's door. With an average annual GDP growth rate of 7.2 per cent in the 10 years before the 2008-2009 financial meltdown, Vietnam has been one of the fastest growing economies in the world. It has a rapidly expanding middle class and the market for consumer goods is strong and getting stronger. Since the '80s, Vietnam has adopted market-oriented policy reforms that have accelerated since 2007. Vietnam has achieved middle-income status, with a per capita income of $1,200, an unimaginable threshold a few decades ago.

At the heart of Vietnam's astonishing transformation has been Nguyen Tan Dung, elected by the National Assembly to serve as the prime minister. When Dung took office in 2006, GDP was $52 billion. Despite the seemingly impenetrable obstacles, it hit $124 billion last year, a whopping 138 per cent increase in six years.

Inflation has been a consequence of exponential growth. Dung and his colleagues moved decisively to stabilize the Dong and wrestle inflation to the ground. In 2011, inflation hit 19 per cent. Politically bold but painful monetary tightening resulted in a dramatic improvement of macro-economic conditions last year when inflation stood at 9.2 per cent.

Prime Minister Dung and his colleagues have held the line on public spending. Total public debt was 48 per cent of GDP. That's a pretty impressive accomplishment when one considers that Japan's public debt, for example, is 219 per cent of GDP. The United States is 105 per cent, France 89 per cent, United Kingdom 89 per cent, and Canada 84 per cent.

The Government led by Dung has done all of this while keeping unemployment down to 4 per cent, improving health care, education, and modernizing national infrastructure. It is easy to underestimate the gargantuan complexity of rebuilding the country and ushering it into the 21st century. The political skill and managerial discipline of underpinning Vietnam's steady recovery has been nothing short of miraculous.

In a new report, "Growing Beyond Asia," Ernst & Young economists forecast a return to robust growth by 2014-2015, with Vietnam's GDP climbing to 7.1 per cent.

E&Y says stability of the banking system and streamlining foreign direct investment rules is key. Vietnam's political leadership strongly concurs with these observations. Last December, Victoria Kwakwa of the World Bank congratulated Hanoi for stabilizing the Dong, which took "strong political commitment and resolve, which has allowed the needed bold actions."

However, problems are inevitable in any country in the midst of such remarkable growth and transformation. Complications arising from poor management of certain state-owned enterprises, a weak banking and financial sector, and some inefficiency in public investments necessitate restructuring. Here too, Dung has confronted the issues head-on by instituting reform and accountability measures.

Of course, none of this is unique to Vietnam. Yet the self-righteous criticize the Vietnamese Government and Communist Party for SOE's that functioned beyond their mandate and became overextended.

Effective governance is a major test of national leadership everywhere in the world, including all western democracies. The financial meltdown had its genesis in the United States. It cost the world economy tens of trillions of dollars and their state-owned or controlled organizations are no better.

According to ProPublica, the cost of the fix of mortgage insurers, Fannie May and Freddie Mac was $142 billion. The banks received hundreds of billions for taxpayer-funded bailouts. Meanwhile, their executives received pay packages in the hundreds of millions.

In Vietnam, executives were fired, and some sent to prison. And some have the nerve to give lectures to these people?

Vietnam's miraculous advancement in the past 15 years has been remarkable. Still, no one in the country -- much less its leaders such as Dung and his colleagues -- is satisfied or smug about the arduous task that remains.

Yet, skeptics persevere. What far too many observers of Vietnam fail to understand is that at the root of its struggles is an unquenched thirst for national independence and self-determination.

Fredrick Logevall chronicles that fight in his wonderful book, Embers of War. He describes the attempts made by the remarkable Ho Chi Minh to reach out to various U.S. Presidents.

Ho was a great admirer of the ideals embodied in the Declaration of Independence and was inspired by the American Revolution. He believed that Americans would innately grasp the resoluteness of the Vietnamese anti-colonial mentality. Ho naturally thought that he would find a kindred spirit in the United States. It was not to be. While Franklin Roosevelt and Dwight Eisenhower resisted U.S. intervention in Indochina and encouraged France to let go of its colonial ambitions, a fragile and treacherous post-war geostrategic environment trumped all else. Vietnam became a battlefield of the Cold War.

As has been the case throughout its long and rich history, Vietnam is intent on securing the peace while fiercely protecting its sovereignty. This and strengthening economic ties is the heart of Prime Minister Dung's aggressive foreign policy outreach strategy.

It is unmanageable for those of us born and raised in a prosperous western society to conceive how infinitely more complex the task of leadership is in Vietnam. An uncommon finesse and statesmanship was needed to navigate Vietnam from the Third World debacle it was to the thriving "Asian Tiger" it is.

Our instant gratification culture is too often an impediment to reasoned perspective. It blinds us to the formidable feats of leaders like Nguyen Tan Dung of Vietnam and the immensity of the contributions of this new Vietnam on the regional and global stage. It is in our interest to notice. Our economic self-interest depends on active engagement, and steadfast support for the transformative work underway.

Clinton Visits Laos