Vietnam's economy loses its roar

Associated Press/Na Son Nguyen - In this photo taken Sunday, Sept. 9, 2012, a street vendor walks by the Trang Tien Plaza super mall which has been closed for a year for renovation in Hanoi, Vietnam. Once seen …more as an emerging Asian dynamo racing to catch up with its neighbors, Vietnam's economy is mired in malaise, dragged down by debt-hobbled banks, inefficient and corrupt state-owned enterprises and bouts of inflation. (AP Photo/Na Son Nguyen) less

By CHRIS BRUMMITT | Associated Press – 09/11/2012

BAT TRANG, Vietnam (AP) — Four years ago, Le Van Tho borrowed $200,000 to build a new ceramic factory on rice fields bordering Hanoi. But with the economy slowing, orders have slumped this year and she recently laid off almost half her workers.

It's also a grim picture down the road: bowls, statues and flower vases gather dust in export showrooms as shoppers in a recession-hit Europe and sluggish United States stop spending.

Once seen as an emerging Asian dynamo racing to catch up with its neighbors, Vietnam's economy is mired in malaise, dragged down by debt-hobbled banks, inefficient and corrupt state-owned enterprises and bouts of inflation.

Vietnam's one-party Communist government has promised reforms, but it appears unwilling to give up the reins of an economy that has delivered fortunes to top officials and their business partners.

Communist Viet economy not in a rosy state

Prime Minister Nguyen Tan Dung of Vietnam at the 20th Association of South East Asia Nations summit in Phnom Penh, Cambodia, on Tuesday.

April 3, 2012
By JAMES HOOKWAY
The Wall Street Journal

PHNOM PENH—Vietnam Prime Minister Nguyen Tan Dung said he is stepping up plans to revamp the Communist-led country's bloated state sector that have led to a series of debilitating credit-rating downgrades and pressured Vietnam's fragile currency.

In written responses to questions posed by The Wall Street Journal on the sidelines of a regional summit in Cambodia, Mr. Dung said he plans to push Vietnam's state-owned enterprises into closer competition with the private sector to make them more efficient, and to revive a stalled series of partial privatizations, a process known in Vietnam as "equitization." Creating a more level playing field between the private and state sectors, Mr. Dung said, "is one of the key components of economic restructuring."

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Vietnam's once-booming economy has foundered in recent years, thrown off balance in part by burgeoning debts at some of its sprawling state-owned enterprises. Mr. Dung's government previously had adopted a policy of encouraging Vietnam's big state-owned firms—which control about 40% of the country's economic output—to diversify into new industries and provide a powerful counterweight to a deluge of foreign investment into the nation.

Vietnam economic reform faces crisis of confidence

Sunday, Oct 30, 2011
AFP

HO-CHI-MINH CITY - As Vietnam battles galloping inflation and a plummeting currency, a new challenge has emerged - a general collapse of confidence in the state's ability to heal the ailing economy.

With an eye on the brash success of neighbouring China, Vietnam's obsessive pursuit of growth lasted for two decades until economic threats forced it to shift attention to stability this year.

The ruling Communist Party, which has total control in the one-party nation, announced an overhaul of its economic model during a five-yearly congress in January and a slew of monetary and tax austerity measures have followed.

But as pressure on the economy continues to mount, the political system itself has come into question from businesses and the Vietnamese people.

Vietnamese steelmakers scale back production as consumption falls

Monday, 18 Jul 2011
Sourced from Vietnam News

Vietnam News reported that the domestic steel industry is cutting back on production in a big way as it faces unsold stockpiles and struggles to increase exports because it is not competitive enough. Its problems are compounded by increasing imports of cheaper steel products.

The construction season is nearing its peak, but instead of increasing capacity, steel factories nation wide are scaling back production, leading to fiercer competition.

The Pomina Steel Mill is among the companies which have been functioning at 50% of its production capacity for a few months due to low demand.

The Viet Nam Steel Corporation (VNSteel) is facing a similar situation with sales down 50% in the last few months, forcing it to decrease production and prevent excessive stockpiles. Smaller companies in the domestic market have also been experiencing dull business.

The bad news and then the really bad news in Vietnam

The inept Dung and Xen, his minion

Monday, 23 August 2010
Roger Mitton
The Phnom Penh Post

LET’s take the really bad news first, because not only did it stink, but the Western governments that would normally lambast this kind of thing held their noses and moved on.

Last Tuesday, at the 65th anniversary of Vietnam’s public security forces, Prime Minister Nguyen Tan Dung urged the country’s police to continue to crush any fledgling political bodies that might threaten the ruling Communist Party regime.

He told the security services to fight the “cunning plots of hostile forces and to prevent political opposition parties setting up to threaten our government.”

Vietnam’s constitution forbids the existence of any political party except the Communist Party of Vietnam. Keep that in mind when you castigate Myanmar, which may horribly oppress opposition parties, but at least allows them to exist.

Days before Dung’s odious exhortation, its effects were demonstrated when the police arrested Professor Pham Minh Hoang, a lecturer in applied mathematics at the Ho Chi Minh City Institute of Technology.

Hoang was charged with belonging to an opposition group, and while he was being arrested, the police read out Article 79 of Vietnam’s penal code, which bars “activities aimed at overthrowing the government”.

Under this provision, the authorities have detained dozens of pro-democracy activists and independent bloggers and sentenced them to years in jail.

An American diplomat in Hanoi informed me that public security officials have claimed quite aggressively that political dissidents were criminals.

“That is stupid and offensive,” he said.

But there was a deafening silence from the United States and Europe.

Indeed, last month, on the 15th anniversary of the normalisation of ties between Washington and Hanoi, the US senate foreign relations chairman, Senator John Kerry, said: “Vietnam’s domestic politics are gradually changing, becoming more open and transparent.”

Of course, they are. That’s why they arrested Hoang. That’s why they ban other political parties. That’s why they censor the internet.

That’s why, every Tuesday, the nation’s editors in chief troop over to the information ministry to be told what they can and can’t write.

Sure, Senator Kerry, things are getting more open and transparent in Vietnam. And pigs are flying higher too, you know.

Memo to Hanoi: There is nothing wrong with people getting involved in politics. As former US President John F Kennedy said: “Political action is the highest responsibility of a citizen.”

And now the bad news.

Vietnam has a collapsing currency. Last Tuesday, the same day that Hoang was arrested, Prime Minister Dung’s government devalued the dong for the third time since last November.

After the official 2.1 percent devaluation, the dong plummetted further and was not helped when a government adviser let slip that Vietnam risked a foreign-currency liquidity “shock”.

Its currency has now slumped 5.2 percent this year – the worst performance among 17 monitored Asian currencies.

Vietnam has racked up a catastrophic trade deficit this year that has nearly doubled to US$7.4 billion in the seven months to July.

It also has the world’s worst-performing stock market. The benchmark VN Index has dropped 8.4 percent this month, the most of 93 markets tracked by Bloomberg globally.

Dung’s communist regime is not only throwing innocent pro-democracy advocates into jail, but has proved utterly inept at running an economy.

Second memo to the dinosaurs: Consider why, despite social unrest, Thailand’s economy is booming.

The answer lies in last week’s comment by Thai Industry Minister Chaiwuti Bannawat, who said: “The government has a role to play in supporting the private sector, but not leading it. I don’t believe the government is more capable than the private sector.”

That last sentence should be blown up and hung over the desk of every Vietnamese official involved in leading its still largely state-run economy into bankruptcy.

And bureaucrats in Cambodia, which is becoming more and more economically tied to Vietnam, would be strongly advised to do the same.
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Roger Mitton is a former senior correspondent for Asiaweek and former bureau chief in Washington and Hanoi for The Straits Times.

Vietnam has key access to a vast and cheap labor pool ... in its colony of Cambodia and Laos

Vietnam: The new China?

June 9, 2010
CNN

It’s been more than a decade since I was last in Ho Chi Minh City. The city then was dusty, noisy, frantic and, well, disorganized – a lot of energy but not a lot of focus.

But there are very few cities in Asia that you can return to after 10-year absence and expect things to be the same (except, perhaps, for Yangon and Colombo). Ho Chi Minh in 2010 is booming. The familiar landmarks are still there but this city is spreading - upwards and outwards.

This is what 10 years of an average annual growth of 7 percent looks like: The streets are even more clogged with motorbikes but now compete with a stream of Toyotas, Kias and Fords. The city center is clean - the dust in the air now is from building sites rather than badly-paved roads. (From my hotel room looking across the bustling Saigon River I can see perhaps 20 cranes perched on top of semi-completed high-rises.)

The brand name stores are starting to appear although still – some would say thankfully –no sign of McDonald’s.

To say Vietnam is open for business is an understatement – and this Southeast Asian growing powerhouse is deadly serious about drawing foreign business.

The World Economic Forum’s East Asia meeting chose Ho Chi Minh City (or Saigon, if you prefer) for its first event in a true emerging market. Organizers were expecting about 250 to 300 business people this week, but more than 400 came from across the world.

The government is out in force too. Prime Minister Nguyen Tan Dung is everywhere, chatting up the opportunities. He wants Vietnam to be Asia’s manufacturing base of choice after China.

It’s a tall order, and at the moment Vietnam is seen as a production base for lower value-added goods like textiles, furniture or footwear.

But times are changing. Samsung and Canon are both investing heavily in electronics manufacturing and service bases. Most of the big Asian carmakers as well as Ford are producing for the local market with an eye on exports later down the line.

I met Tom Schneider, a German businessman who has just outlaid $12 million to build a tanning factory at an industrial park on the outskirts of Ho Chi Minh City.

Forthright and ebullient, Schneider’s built eight factories in Asia in the past 16 years. In Vietnam it took him just 22 months, from finding the land, building the factory, and training the workforce – his fastest project anywhere.

He now produces 80,000 hides a month, enough for about 1.5 million pairs of shoes. Timberland is his biggest customer.

And he’s quick to point out that although tanning is “environmentally hostile” his new plant is greener than his existing plant in China, which has received a silver medal standard for environmental protection from Timberland.

So why move to Vietnam? It’s cheaper. Labor costs are about 60 percent of China’s although senior management is still more expensive. The country is close to many of his key customers, and there’s little state intervention, as long he observes workplace and environmental standards.

And in the long run, Vietnam has key access to a vast and cheap labor pool across the borders of Cambodia and Laos.

It’s not all upside. Transport links are still – as Tom describes – at the same level as China in 1988. And the law is still open to interpretation (nearly all big foreign investors insist in any contract on having litigation settled in an offshore court).

Foreign investment is coming. In 2008 about $70 billion was committed to Vietnam, up more than threefold from five years year. It’s fallen back to $20 billion last year. Not surprising, though, given the global economic picture.

I asked the Prime Minister how he would describe Vietnam’s economic model.

Vietnam, he replied, is a socialist system embracing capitalism. Helping the poor get out of poverty through foreign investment is key to his planning, he says.

Like China, Vietnam’s government looks long-term. And like China, it appears to be achieving its economic goals.

Dung devaluates Dong for the 2nd time in 3 months

Vietnam devalues Dong currency for 2nd time in 3 months

February 12, 2010
The Nation

Vietnam's central bank devalued its Dong for the second time in three months on Thursday amid widespread concerns over a high trade deficit and inflation.

The average interbank rate on Thursday was 18,544 dong per US dollar, against 17,941 the previous day, a fall of 3.4 percent, the State Bank of Vietnam said.

Neighbours uneasy with cheaper dong

But measures seen as only temporary relief

28/11/2009
Umesh Pandey
Bangkok Post

Vietnam's decision to devalue its currency by 5% this week is likely to have a major impact on neighbouring countries, an expert on the country said.

"It is very attractive destination for investments and now it has just made itself more attractive," noted Wittaya Supatanakul, a retired general manager of Bangkok Bank's Vietnam office and now adviser to the Board of Investment's CLMV (Cambodia, Laos, Myanmar, Vietnam) projects.

Vietnam, one of the main competitors of Thailand, on Wednesday announced that it was devaluing its currency and raising interest rates.

Vietnam's central bank said the devaluation and the increase in the policy interest rate by 100 basis points to 8% was necessary to relieve the pressure on the dong and protect foreign reserves.

The State Bank of Vietnam devalued the dong by 5.4%, effective on Thursday, resetting the US dollar reference rate to 17,961 dong from its current level of 17,034 dong.

"This is not good news for Thailand, as there are various sectors in which Thailand is a direct competitor to Vietnam; namely, the garment, textile and footwear industries," Mr Wittaya said.

Other sectors such as agriculture and food processing could be hurt as well because Thailand and Vietnam compete in the global market for exports.

Santi Vilassakdanont, chairman of the Federation of Thai Industries (FTI), said Thailand's exports could be hurt, especially rice, in which Vietnam is running neck-and-neck with Thailand to become the world's largest exporter.

He said that foreign investors may also turn to Vietnam instead of Thailand since costs would be cheaper, he said.

Finance Minister Korn Chatikavanij, however, disagreed, saying that the dong devaluation would not lead to Thailand changing its monetary policy as the impacts were going to be very limited.

He explained that Thai goods were of higher quality and are therefore less susceptible to potential impacts. Citing a similar move by the Vietnamese authorities in 2008, Mr Korn said Thai exports were barely affected.

Mr Wittaya said the impacts on rice and marine products would be very limited as rice prices are now determined by global demand and the marine products Vietnam is exporting serve the lower end of the market, although some of the Thai exports compete in this segment.

Despite the devaluation news, latest reports suggest that the dong was trading at between 19,600 and 19,800 to the US dollar.

The central bank also narrowed the trading band of the dollar against the dong to 3% from 5%. The move is Vietnam's third devaluation in two years.

Apart from this, the central bank will lift its benchmark interest rate to 8% from 7% from Dec 1.

"This move to raise the rates is going to have an impact on Vietnam but not too much as businesses there are already enjoying a 4% interest-rate subsidy from the government. This simply means the subsidy falls to 3%, and therefore the overall impact is minimal," Mr Wittaya said.

He added that the 4% subsidy was set to be halved to 2% next year.

Hanoi is offering the subsidy as part of the stimulus package to keep the economic growth going during the recent global financial crisis.

Yet economists pointed out that the new measures are likely to be only a temporary relief for the country.

"The SBV's (State Bank of Vietnam) moves may work temporarily, but as we have noted previously, inflation and the trade deficit are on the rise again, and the fiscal deficit and lack of institutional capacity are serious concerns," Matt Hildebrandt, an economist for JP Morgan said in a note to clients.

"Thus, even if these moves bring the official and unofficial dong rates closer together temporarily over the medium term, they will likely diverge again unless the government can effectively address the deterioration in the macroeconomic environment."

This move reflects the central bank's continued attempt to balance several economic objectives at once amid a weak policy framework and deteriorating economic fundamentals. The devaluation is aimed at making exports cheaper to support growth, reduce the trade deficit, and slow the pace of foreign exchange reserve losses, now reportedly down to US$16 billion from around $23 billion at the beginning of the year, he said.

The rise in the policy rate is aimed at restraining inflation, which just rose to 4.4% year-on-year in November, and slowing credit growth, which was already up 33% year-to-date in October compared to the full-year target of 30% in 2009.

The SBV seems to believe that by weakening the dong to a level closer to the unofficial rate, a more market-determined rate of around 20,000, tightening the band to 3% from 5% to show commitment to this new midpoint, and increasing domestic rates to support the currency at its new level, pressure on the dong to depreciate will diminish.

The interest-rate increase was its first move since lowering the base rate to 7% (from 8.5%) in January, and it makes the SBV the first central bank in emerging market Asia to lift interest rates.

"We expect inflation to rise further to around 10% year-on-year by mid-year, which will likely provoke further monetary tightening by the SBV in the first half of next year," Mr Hildebrandt said.

Vietnamese economy poses no threat to Thailand

Vietnam said it would put in a high-speed train, similar to the bullet train in Japan, running from Hanoi to Ho Chi Minh City. The news excited Thai readers but most did not realise that work on the railway won’t start until 2036, or nearly 30 years into the future.

Hanoi ensures existence of political stability and cheap labour

21/11/2009
Kamol Hengkietisak
Bangkok Post

The Vietnamese economy poses no immediate threat to Thailand, which has healthy investments in that country, says the Thai ambassador in Hanoi.

Pisanu Chanvitan says Thailand's economy is still far more advanced than Vietnam's.

However, the ambassador told Thai Rath newspaper, Vietnam has certain advantages including political stability, thanks to its one-party rule and cheap labour.

Last year, Vietnam's economy grew 3%.

Mr Pisanu said that medical advances in Vietnam lag far behind Thailand. For difficult cases, well-to-do patients still travel to Thailand for treatment because Vietnam's health care expertise is lacking.

Nor was Thailand's status as the world's top rice exporter under threat from Vietnam.

Mr Pisanu said Vietnam exported about 5 million tonnes of rice last year while Thailand exported 8-9 million tonnes.

Thai rice is more expensive because of its higher quality especially the world famous Hom Mali, while Vietnam exports cheaper varieties.

Vietnam can face typhoons several times a year, causing extensive damage to rice fields.

Vietnam's rice cultivation area is similar to Thailand's, but Vietnam has a growing population. As its population grows, Vietnam will probably export less rice.

Vietnam's rulers like to talk about their plans for the economy, but sometimes these projects can be many years off.

Vietnam said it would put in a high-speed train, similar to the bullet train in Japan, running from Hanoi to Ho Chi Minh City.

The news excited Thai readers but most did not realise that work on the railway won't start until 2036, or nearly 30 years into the future.

In 1990, Vietnam began to open the country to foreign direct investment, creating special industrial zones and expanding the economic zone in Ho Chi Minh City.

Thailand is ranked 9th among foreign investors in Vietnam. Investment is concentrated in agri-business, cement, real estate, and motorcycle parts.

Mr Pisanu said Thailand exported more than 10,000 tonnes of fruit to Vietnam last year, including longan, mangosteen, durian and mango.

Food processing including canned fish is another bright prospect for Thai exporters. Several Thai canneries have set up operations in Vietnam and are doing good business.

Vietnam economic boom hits high-speed wobbles

HANOI (AFP) — Vietnam's economy, until recently a darling of foreign investors, has overheated and may be sliding into a boom-and-bust cycle that could require IMF-style assistance, analysts say.

The economy widely hailed last year as Asia's next tiger has been battered by double-digit inflation, a ballooning trade gap, a tanked stock market and worries about the currency and banking sector.

Credit rating agencies Standard & Poor's, Fitch and Moody's and several investment banks have revised downward their outlooks for Vietnam at a time when the spectre of a US recession could spell global trouble.

Aseambankers Research said "the worst-case scenario would be for Vietnam to suffer massive capital flight, triggering a balance of payment crisis and forcing the country to go to the International Monetary Fund for help."

Analyst Adam Le Mesurier wrote for consultancy DSG Asia that "an 'IMF programme' style policy response will be needed within six months," including monetary and fiscal tightening and a dong currency devaluation."

Many investors and donors in Vietnam remain upbeat about the market of 86 million, pointing to strong exports -- including of food and oil -- investment inflows, growing tourism, and the potential of its young workforce.

"It's too easy to get excited and claim that Vietnam has gone from poster child to problem child," said EU chief country representative Sean Doyle.

"But I'm not sure it's very wise and very balanced ... Vietnam, if it can keep steady, stick with the right policies, will be attractive."

Nonetheless, the turnaround in investor perception has been stunning.

Communist Vietnam's 2007 entry into the World Trade Organisation fuelled enthusiasm for the low-wage "mini-China," bringing an influx of foreign cash.

Domestic investors gambled on a sky-rocketing stock exchange, the government went on a spending spree, and banks lent freely, fuelling rapid credit growth.

The wheels started to come off about half a year ago, when inflation hit double digits as the economy tried to digest six billion dollars in foreign direct investment (FDI) disbursed last year, or 8.4 percent of GDP.

Since the start of the year prices have galloped, driven by global food and energy costs, to 25 percent year-on-year inflation in May. Wage demands sparked 300 labour strikes in the first quarter alone.

"The wage-price spiral that appears to be beginning, if it becomes embedded, could make matters much worse," said an HSBC report that predicted a rise to 30 percent inflation amid hoarding of commodities.

Another alarm bell sounded when surging imports drove the trade deficit to 14.4 billion dollars in May, compared to 12 billion dollars for all of 2007.

The stock market has tumbled amid tighter credit and falling investor confidence, turning from the world's best to worst performing bourse. Last week it crashed below 400 points, from its high of over 1,100 in March 2007.

Many investors have bought gold or offloaded their value-losing dong for greenbacks, briefly sending the black market rate in Vietnam to 18,500 to the dollar last week, against the official rate of around 16,000.

Standard Chartered Bank said recently that the "Vietnamese dong has come under downward pressure, and such pressure is likely to persist until solid improvement is seen in the trade balance."

Some observers now fear a banking crisis amid tighter liquidity, depositor-flight and non-performing loans.

"Urgent action is required in the financial sector," said Michael Pease, chairman of the Vietnam Business Forum. "Vulnerability of some financial institutions threatens not just the domestic financial sector but also the confidence of foreign investors."

Vietnam's government -- which has adopted a fight-inflation-first strategy and pledged other economic fixes -- has lowered its 2008 economic growth target to 7 percent from last year's blistering 8.5 percent.

IMF country chief Benedict Bingham has suggested Vietnam cool its "overheated" economy with higher interest rates and public spending cuts, freeing up of the exchange rate and accelerated reforms of its state-owned enterprises.

While Bingham said the IMF was "encouraged" by government plans to fix the economy, he called for "a concrete and convincing policy package that will bolster investor confidence and restore macroeconomic stability."

Inflation a drag on Vietnam's economy

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.

Vietnamese gamble on Cambodian town Border town casinos show gap between Vietnam's rich and poor since economic reforms

Feb. 2, 2008
Makoto Ota
Yomiuri Shimbun Correspondent (Japan)

The crowds of Vietnamese trying their luck at the casinos that have sprung up in the southeastern border town of Bavet are a tangible example of the widening social divisions in their home country.

While some of the people crossing the border for the casinos in Cambodia (gambling is illegal in Vietnam) are betting millions of dollars, others stay there for the free food-- a mixture of haves and have-nots that has become more evident since Vietnam introduced its "doi moi" policies of economic liberalization in the 1980s.

Seven years ago, Bavet, an hour by car from Ho Chi Minh City, was surrounded by rice paddies. But it now has seven casinos, and is illuminated round-the-clock by neon lights.

A man from Ho Chi Minh City, identifying himself as Quon, was playing baccarat at a table lit by chandeliers.

"I never keep track of how much I bet," he said as he placed another 500 dollars bet after having just lost 500 dollars. "Probably several thousand dollars a day," the 45-year-old Quon said.

More than 90 percent of the 7,000 visitors the casinos receive each day are Vietnamese. Food and drink is free, while complimentary accommodation is available next door for those placing a certain amount in bets.

The average monthly income in Vietnam is about 150 dollars, though some of the guests clearly earn far more than this. The 32-year-old Vietnamese assistant manager of the Le Macau casino, the oldest casino in the area, said: "Betting tens of thousands of dollars is nothing special here. I know one customer who spent 2 million dollars."

The casinos have benefited from the money flowing out of Ho Chi Minh City.

"I made a fortune thanks to my connections with the [Vietnamese] government," one patron said. "I bought some real estate after obtaining some useful information and sold it on. With the surging property market, I knew I'd make money."

As there is no private land ownership in Vietnam, trade in land-use rights is roaring, creating a housing bubble in the country.

The assessed value of the land per square meter in front of the Ben Thanh Market, in the center of Ho Chi Minh City, was 200,000 dollars, or 21.7 million yen, in 2006--more than the 19 million yen the same-sized piece of land would cost in Tokyo's ritzy Ginza 2-chome.

But while some Vietnamese have benefited from the emerging market economy, many have been left behind, and have even abandoned their hometowns altogether for Bavet.

A 50-year-old man identifying himself as Tieng came to Bavet with his wife from the southern province of Tay Ninh in Vietnam eight months ago. Tieng said that back home he worked irregularly as a day-laborer, earning about 37 dollars in a good month.

But he said that he now earns enough to make a reasonable living through gambling, having three meals a day at the casinos and sleeping on a sofa.

"I can earn 10 dollars a day," Tieng said. "Everything I earn is profit, because we don't need to pay for food."

Tieng said about 20 Vietnamese have left their hometown because of poverty and settled in the casinos, adding the number of "settlers" has been growing as rumors of easy money spread.

Income disparities in Vietnam have been widening steadily under the doi moi policy. According to statistics from the United Nations, 29.9 percent of the gross national income is held by rich people, who account for just 10 percent of the population.

The figure is comparable to that in China, a country facing its own problems with inequality, where about 33 percent of the country's wealth is held by the rich.