An investor in Hanoi watches as inflation fears shoved share prices down nearly 400 points on June 2, 2008. (Hoang Dinh Nam/AFP/Getty Images)Thursday, June 5, 2008
Marketplace
National Public Radio (USA)
Sky-high inflation and a slew of labor strikes have brought the Vietnamese economy to its knees. Host Bob Moon speaks with Marketplace's Scott Tong in Beijing about Vietnam's economic future.
TEXT OF INTERVIEW
Bob Moon: Vietnam has all the makings for a great investment -- good resources, lots of people, low labor costs -- but Vietnam's stock market has taken a huge tumble in the last year, falling below 400 points yesterday, its lowest level in two years.
And inflation is on the rise: from 7 percent to 25 percent in just one year.
Investors are paying attention.
Marketplace's man in Shanghai Scott Tong has been following the economic developments going on in China's neighbor to the south.
Hi Scott.
Scott Tong: Hello Bob.
Moon: Where is this inflation that we're hearing about in Vietnam coming from? I mean, I presume that there are food price problems and energy price problems, but 25 percent?
Tong: Well, that's right. All over Asia, there is a fair amount of imported inflation from elsewhere in the world, but in Vietnam, some of it is clearly seen as homemade. This is an economy that a lot of people say is overheating. It has been growing at an 8 percent clip for several years and the worry now is that perhaps the party's gotten out of control. A lot of economists are worried there's been too much lending, there's been too much government spending, basically, too much cash sloshing around in the system. And in my house, when there's too much cash sloshing around in the system, we buy stuff, and there's a sense in Vietnam that maybe there's been too much of that going on and when so many people are doing that, prices tend to go up.
Moon: Well, you speak of a party out of control. Let's kind of extend on that metaphor and borrow a little bit from Alan Greenspan. Is it time for the government over there take the punch bowl away?
Tong: The government has been trying, or it's been warning that it's going to do so. Just a couple days ago, some top officials said for the third or the fourth time that we're going to raise interest rates and we're going to have the banks try to calm this down, but there's a sense among a lot of people that they're hitting the breaks a little too late and they may not be doing enough. The World Bank and the Fitch Ratings agency and Morgan Stanley have already issued warnings about the Vietnam economy and we've seen investors starting to pull out a little bit. They're betting the currency is going to go down. The stock market has been down 50, 60 percent in the last year. So the arrows, for now anyway, are going in the wrong direction.
Moon: Let's make a comparison to China. It's labor and manufacturing costs have been on the rise and a lot of people have said that Vietnam is the next place to go. Is that still the case now?
Tong: There's a lot of excitement in a lot of sectors. One example is bedroom and dining room furniture. Bob, have you bought any lately?
Moon: Not recently.
Tong: Alright, well, just asking, because a lot of furniture makers, who almost all used to be in China, have moved in a hurry to Vietnam, or else set up their next factory in Vietnam and here's a picture of the labor costs: a Vietnamese worker in a furniture factory makes about $45 U.S. a month. That's less than half of what it is in China. The other excitement is the Vietnam retail market. Their research and consulting firm AT Kearney just ranked Vietnam their number one retail investment destination.
Moon: So dare we say that Vietnam could be the next China?
Tong: Well, a lot of self-proclaimed smart people are daring to go there, but most people aren't. Vietnam is cheap right now as far as labor, but for these giant manufacturing industries, it doesn't take long to go through a population of 80 million people or so and then they move on to the next cheaper place in the global economy. As far as the consumer market, well, China is 17 times the size of Vietnam, so that's the place where the big, big multinational companies who want to sell stuff to people... I mean, they're in China for 50 years or so. They don't exactly look at Vietnam the same way.
Moon: Marketplace's Scott Tong, joining us today from Beijing. Thank you Scott.
Tong: You're welcome Bob. Nice to talk to you.
TEXT OF INTERVIEW
Bob Moon: Vietnam has all the makings for a great investment -- good resources, lots of people, low labor costs -- but Vietnam's stock market has taken a huge tumble in the last year, falling below 400 points yesterday, its lowest level in two years.
And inflation is on the rise: from 7 percent to 25 percent in just one year.
Investors are paying attention.
Marketplace's man in Shanghai Scott Tong has been following the economic developments going on in China's neighbor to the south.
Hi Scott.
Scott Tong: Hello Bob.
Moon: Where is this inflation that we're hearing about in Vietnam coming from? I mean, I presume that there are food price problems and energy price problems, but 25 percent?
Tong: Well, that's right. All over Asia, there is a fair amount of imported inflation from elsewhere in the world, but in Vietnam, some of it is clearly seen as homemade. This is an economy that a lot of people say is overheating. It has been growing at an 8 percent clip for several years and the worry now is that perhaps the party's gotten out of control. A lot of economists are worried there's been too much lending, there's been too much government spending, basically, too much cash sloshing around in the system. And in my house, when there's too much cash sloshing around in the system, we buy stuff, and there's a sense in Vietnam that maybe there's been too much of that going on and when so many people are doing that, prices tend to go up.
Moon: Well, you speak of a party out of control. Let's kind of extend on that metaphor and borrow a little bit from Alan Greenspan. Is it time for the government over there take the punch bowl away?
Tong: The government has been trying, or it's been warning that it's going to do so. Just a couple days ago, some top officials said for the third or the fourth time that we're going to raise interest rates and we're going to have the banks try to calm this down, but there's a sense among a lot of people that they're hitting the breaks a little too late and they may not be doing enough. The World Bank and the Fitch Ratings agency and Morgan Stanley have already issued warnings about the Vietnam economy and we've seen investors starting to pull out a little bit. They're betting the currency is going to go down. The stock market has been down 50, 60 percent in the last year. So the arrows, for now anyway, are going in the wrong direction.
Moon: Let's make a comparison to China. It's labor and manufacturing costs have been on the rise and a lot of people have said that Vietnam is the next place to go. Is that still the case now?
Tong: There's a lot of excitement in a lot of sectors. One example is bedroom and dining room furniture. Bob, have you bought any lately?
Moon: Not recently.
Tong: Alright, well, just asking, because a lot of furniture makers, who almost all used to be in China, have moved in a hurry to Vietnam, or else set up their next factory in Vietnam and here's a picture of the labor costs: a Vietnamese worker in a furniture factory makes about $45 U.S. a month. That's less than half of what it is in China. The other excitement is the Vietnam retail market. Their research and consulting firm AT Kearney just ranked Vietnam their number one retail investment destination.
Moon: So dare we say that Vietnam could be the next China?
Tong: Well, a lot of self-proclaimed smart people are daring to go there, but most people aren't. Vietnam is cheap right now as far as labor, but for these giant manufacturing industries, it doesn't take long to go through a population of 80 million people or so and then they move on to the next cheaper place in the global economy. As far as the consumer market, well, China is 17 times the size of Vietnam, so that's the place where the big, big multinational companies who want to sell stuff to people... I mean, they're in China for 50 years or so. They don't exactly look at Vietnam the same way.
Moon: Marketplace's Scott Tong, joining us today from Beijing. Thank you Scott.
Tong: You're welcome Bob. Nice to talk to you.
7 comments:
Stocks always go up and down. Shouldn't be worried about it.
Not just VN, but all other developing countries are facing downturn. Particularly, VN uses floating exchange rate system and its economy rely largely on trade. World demand is shooting down cos economic crisis in US and Eu plus the rising price of oil and food, domestic firms are facing deficit. While less selling abroad in US dollar, firms need to exhange to local currency to pay off the rising labour and other costs of production. So stock market changes as result of chaning volume of trade and exchange rate..! It happens! Sic..!
Well then, I hope we can help out our neighbor by increasing trade between the two country.
VN can't exactly be compared to Cambodia but there are similarities. The economy is overheated, real estate prices are inflated, inflation is running high, exports have dwindled, and new investments is down 40% or so. The signs are all there. It's going to cool down, actually it has started already. But that's when the good times for real investors are beginning. They can take advantage of a more realistic economic environment.
KJE
Inflation in Cambodia is extremely high. The gasoline and others foods and fruits...
usually for westerners, inflation higher 4 or 5 percents per year is already high. But in Cambodia, just take the gasoline, last year it was 3800 riels..now the price is 5800 riels. It's more than 50%.
Chicken from 3.5 dollars to 5.5 dollars per kilo.
We can add mangos, rambuttans... etc
So what gonna happen next...
Khmer Canadian
Good hearth and good idea 12:46PM but tell your mother not to accepted DONG (Vietnamese currancy) in the trade because it not woth as toilet peper!
Be smart boy do not accept a pice of less than shit like PHD from Hanoi!
Hahhaaaahahahajaak! Goat face get you!
Bullshit, money is money.
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