This is in response to the latest post on An International Educator in Vietnam about Vietnam’s role in the latest post-BRIC acronym, CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa). While I agree with CIVETS as a plan for investors and other people looking beyond BRICs, and also with Vietnam’s inclusion in this bloc, I had a long response to the reasons why Vietnam should be taken seriously.
I’m posting my comment in full here, but please read the original post for context as I am not going to repost that here:
Good introduction, and I’m sure lots more will be written about Vietnam/CIVETS in the years to come. Let me play devil’s advocate (while basically agreeing with Vietnam’s role as the V in civet). I would love to hear any responses.
Rapid growth was not sustainable, which we can see more clearly now. Growth is slow, and still lower than targets which had already been forecasted down. Yet inflation is still there in everybody’s face, and dealing with inflation will (necessarily, I think) lead to even slower growth. Currency instability is generally in favor of Vietnam relative to its competitors in the export market as the dong only gets weaker, meaning commodities, which don’t rely so much on imported costs, are cheaper. Even more so if other developing countries’ currencies appreciate relative to the dollar.
Other exports rely heavily on imported inputs, so Vietnamese companies simply see their costs rising and can either make no money or raise prices accordingly.
Vietnam’s domestic consumption of green technology is quite low. I’m not sure this is one of our strong points. I guess that can be seen as a reason for making Vietnam a destination for outside investors. Investment in the energy sector has been weak due to the price of electricity sold to consumers, which is fixed, and means it’s nearly impossible to make money.
Architecturally, I think Saigon’s new highrises are mostly not pretty, and outside of handful, unnoteworthy. Meanwhile, historically significant architecture is either not properly preserved or torn down outright. I think we can all expect that any further showpiece residential or commercial construction will be put on hold until the currently collapsed high-end residential market is revived, and current prime commercial real estate is absorbed.
E-commerce will grow, but what are the reasons for it being expected to grow at a rapid clip in the next 3 years? E-wallets are still not being adopted (somewhat due to an unlinked banking system), same with credit cards, and mobile providers aren’t pushing mobile payment without taking such a huge cut that merchants are successfully detered.
I may be cynical in thinking that a website created by the government will not have much impact, just as they have not had much success with their social network.
Overseas investment: This is more or less a sign of the willingness of state-owned companies to dabble in neighboring countries, isn’t it?
Finally, some comments about the key data.
Exports were $70b, but imports were $7b (10%) at $77b.
FDI was down 28%. I think that shows that many people were only interested in speculating in real estate.
Internet subscribers at 4.1m while the number of 30 million internet users was mentioned. Perhaps this means almost everybody is using the internet at cafes or on their phones? Are those users going to buy things online?