VIETNAM – Today

VIETMAN’S COMMUNIST PARTY
Economist Jan 16th 2016

The sign above the door at Cong Caphe, a hip coffee shop in downtown Hanoi, the Vietnamese capital, bears a bright-red communist star. Inside, the brick walls are covered in memorabilia from the era of the Vietnam war: rusty canteens, an old transistor radio and snapshots of Viet Cong soldiers trudging off to fight the Americans. Yet the aesthetic is not so much patriotic as a cheeky send-up of communist ideology. The 20- and 30-something Vietnamese who drink here, spending the fruits of an increasingly capitalist economy, feel far removed from the hardships suffered by their parents and grandparents, while they applaud ever-closer ties with America.

With its scooter-driving young and an economy growing at nearly 7% a year, Vietnam seems like a country in a hurry. In many ways, the ruling Communist Party is trying to keep up. Not far from the coffee shop, windows the size of a cathedral’s illuminate the new building housing the National Assembly, Vietnam’s parliament. Sunbeams pour from skylights into the marble foyer. In a one-party state where symbols matter, the building’s airiness suggests that the rulers are trying to project an image of modernity and transparency. Yet as Nguyen Vu Nam, a manager at Cong Caphe, points out, young Vietnamese do not pay much heed to who runs the party. Personnel changes among a generally grey and faceless collective leadership have never seemed to matter much.

This month party bigwigs will make a fresh bid for relevance. On January 20th they convene for a five-yearly congress, the highlight of Vietnam’s political calendar. More than half of the 16-member Politburo, the party’s ruling council, are meant to retire, to be replaced by younger officials. The country’s three most senior jobs—of state president, prime minister and party general secretary—are all up for grabs. That so much remains mysterious so close to the event suggests that this year’s negotiations are unusually tense.

The man to watch is Nguyen Tan Dung, Vietnam’s prime minister for ten years and probably its shrewdest and least uncharismatic politician. At 66, Mr Dung is past the party’s usual retirement age. But he is said to want to remain in high office by taking the role of party secretary, while perhaps relinquishing his current office to an ally. Mr Dung would doubtless reinvigorate a job which has lately begun to look dusty. He may wish to carve out an authority that begins to approach the dominance enjoyed by Xi Jinping in China. But such a move would be unusual. It would rattle a political system which, until now, has discouraged domineering personalities and has valued consensus.

Mr Dung’s backers say that Vietnam’s present challenges call for strong and consistent leadership. The economy is much mended after bad debts from cosseted state enterprises threatened the banking system. The country stands to gain from a sheaf of trade agreements negotiated in 2015, including the American-led Trans-Pacific Partnership. Yet progress towards many essential reforms, including the privatisation of state firms, has been slow. The economy is overdependent on commodities, especially coffee and rice, as well as on foreign investors. It will be essential to broaden and deepen Vietnam’s economy before its biggest present advantage, a young and cheap workforce, is spent.

As for politics, managing the country’s tricky relations with China is the biggest challenge. Vietnam is economically dependent on its northern neighbour, with which it has a big and growing trade deficit. At the same time, China’s assertive claims to islands and underwater resources in contested parts of the South China Sea have outraged even moderate Vietnamese. Those born since the country ditched its planned economy in the 1980s are growing more outspoken, for example on social media. Vietnam cannot afford to have bad relations with China, but at the same time its leaders must be seen to be defending Vietnamese territory.

Most intellectuals paying attention to the party congress would like to see Mr Dung retain some authority, since he has been the strongest voice against Chinese bullying. He is also the clear choice among local and foreign business folk, though for different reasons. They see Mr Dung as behind the flurry of trade deals and recent efforts to lift caps on foreign ownership. They say he is unusually knowledgeable about industry, well-advised by Western-educated staff and knows what investors want to hear.

Yet whiffs of cronyism taint the prime minister as much as they do other comrades. His son’s political career has seen suspiciously swift advancement, while a flashy Vietnamese-American son-in-law owns the country’s McDonald’s franchise. Scandals have sprouted at state enterprises that Mr Dung had championed. Nor do civil libertarians think that he is more inclined than other leaders to unshackle the censored press or end the thuggish treatment of dissidents.

As the party congress approaches, its outcome appears ever less certain. Mr Dung was once thought a shoo-in for party leader. Yet a loose-knit faction opposed to him may even manage to oust him entirely from the leadership.

The fighting springs partly from competing networks of patronage, and partly from modest ideological differences between conservatives and the prime minister’s relatively reformist pals. Some officials worry that Vietnam’s growing chumminess with America will only make China more confrontational. A handful of them even seem to fret that Mr Dung’s liberalising instincts could end up threatening the party’s hold on power. But that would be conjecture. For all the light streaming into the new parliament building, Vietnam’s Communist Party remains a dark sack full of ferrets.

ECONOMY The other Asian tiger
Economist Aug 6th 2016

Which Asian country has roared ahead over the past quarter-century, with millions of its people escaping poverty? And which Asian economy, still mainly rural, will be the continent’s next dynamo? Most would probably respond “China” to the first question and “India” to the second. But these answers would overlook a country that, in any other part of the world, would stand out for its past success and future promise.

Vietnam, with a population of more than 90m, has notched up the world’s second-fastest growth rate per person since 1990, behind only China. If it can maintain a 7% pace over the next decade, it will follow the same trajectory as erstwhile Asian tigers such as South Korea and Taiwan. Quite an achievement for a country that in the 1980s was emerging from decades of war and was as poor as Ethiopia (see article).

Unlike either China or India, Vietnam lacks the advantages of being a continent-sized economy, so the lessons of its rise are more applicable to other developing countries, especially those nearby. It is also a useful counter to techno-pessimism. The spread of automation in factories has fuelled concerns that poor countries will no longer be able to get a lift from labour-intensive manufacturing. Vietnam shows that tried-and-tested models of development can still work.

Most obviously, openness to the global economy pays off. Vietnam is lucky to be sitting on China’s doorstep as companies hunt for low-cost alternatives. But others in South-East Asia, equally well positioned, have done less. Vietnam dramatically simplified its trade rules in the 1990s. Trade now accounts for roughly 150% of GDP, more than any other country at its income level. The government barred officials from forcing foreigners to buy inputs domestically. Contrast that with local-content rules in Indonesia. Foreign firms have flocked to Vietnam and make about two-thirds of Vietnamese exports.

Allied to openness is flexibility. The government has encouraged competition among its 63 provinces. Ho Chi Minh City has forged ahead with industrial parks, Danang has gone high-tech and the north is scooping up manufacturers as they exit China. The result is a diversified economy able to withstand shocks, including a property bust in 2011.

At the same time Vietnam, like China, has been clear-minded about the direction it must take. Perhaps most important has been a focus on education. Vietnamese 15-year-olds do as well in maths and sciences as their German peers. Vietnam spends more on schools than most countries at a similar level of development, and focuses on the basics: boosting enrolment and training teachers. The investment is pivotal to making the most of trade opportunities. Factories may be more automated, but the machines still need operators. Workers must be literate, numerate and able to handle complex instructions. Vietnam is producing the right skills. Thailand, Indonesia and Malaysia lag behind, despite being wealthier.

Now a middle-income country, Vietnam faces a steep ascent to the high-income ranks. The Trans-Pacific Partnership, a 12-nation trade pact meant to be a boost, may well be blocked by America’s inward turn. State-owned enterprises (SOEs) are bloated. Competing provinces, long a benefit, are a liability when they duplicate infrastructure. Vietnam has struggled to build a domestic supply chain. Moving up in value will be hard when China’s grip on high-end output is tightening. The repressive, one-party system of government is brittle.

But Vietnam’s past quarter-century means that it has a decent chance of prevailing. It is at last starting on SOE reform. It is negotiating trade deals in Asia and with Europe. And it is drafting plans to increase its domestic share of manufacturing without scaring off foreigners. Vietnam is a model for countries trying to get a foot on the development ladder. With luck, it will also become a model for those trying to climb up it.

DRYING MEKONG DELTA
Bad weather and bad policy aggravate an awful drought
Economist Apr 30th 2016

Shaded by a tree, an elderly farmer gestures hopefully at the scrawny green shoots poking from his small plot in Vietnam’s Mekong river delta. The sugar crop he planted earlier in the year has already failed once, poisoned by dry and salty soil. Fresh growth from the cut-back plants now offers a second chance, but without rain it may go the same way. The farmer is lucky to have a pond full of fish, which he shares with his neighbours. But he says his family will have to find other work this year to make ends meet.

Tales such as this are common on the tiny island of Cu Lao Dung in the delta’s southern reaches (see map), five minutes from the mainland by scooter-crammed ferry. During the annual dry season surrounding waters always turn salty, as brine from the sea pushes up the delta’s channels. But this is an exceptionally dry year, with river levels at 90-year lows. The water has become unusually concentrated with salt, which is spreading more extensively. The salt is creeping through the farmland like damp up a wall.

Drought is plaguing much of mainland South-East Asia, including Myanmar, Laos and Cambodia. Thailand’s shortages are the worst for two decades (though urbanites still splashed around during Songkran, its annual water festival in mid-April). Vietnam has been hit as hard as any. The Mekong basin is home to one-fifth of the population. It produces about half of the country’s rice. The government says the amount available for export in the three months to June will be 11% less than originally forecast. Drought in the country’s Central Highlands has affected a third of coffee plantations there and now endangers the region’s supply of drinking water. These woes are weighing on the economy. Growth in the first quarter slowed by half a percent year-on-year to 5.5%.

The immediate cause is El Niño, a recurring weather phenomenon which causes downpours in the Americas but heat and drought in much of Asia. Scientists believe that El Niño’s effects are growing stronger as global temperatures rise. Last year it was blamed for exacerbating annual fires on farmland in Indonesia, which smothered much of the region in a noxious haze.
People living near the Mekong say there is another problem: hydroelectric dams built in China near the head of the river that are holding up its flow. Since March China has loosened some of the dam gates, ostensibly as a favour to its neighbours. But locals say the effect on water levels has been measly. The episode has only heightened fears that China (with which Vietnam has an enormous trade deficit and an intense territorial dispute) can use water flow to hold the country to ransom.
The dams are certainly stripping the Mekong of essential sediment. But many of Vietnam’s water woes are self-inflicted. In the delta, for example, a booming population has built more than 1m wells since the 1960s. These have made saline contamination worse, and are also causing subsidence. In 2014 an American study found that the delta, which mostly lies less than two metres above sea level, could be nearly a metre lower by 2050.

A related problem is the ruling Communist Party’s obsession with maximising rice production. Straining to hit absurd targets—inspired by memories of post-war food shortages—the government has pushed delta farmers to produce three rice crops per year.
This policy has caused the poisoning of paddies with pesticides and has discouraged farming of more profitable, less thirsty crops. It has also prompted the building of a massive network of dykes, canals and sluice gates, which spread pollution from fertilisers and pesticides and restrict the flow of sediment. Koos Neefjes, a climate-change expert in Hanoi, the capital, reckons all this infrastructure has done more to harm the delta than China’s dams.

Fixing this will mean taking on powerful state-owned rice traders and exporters, who benefit from intensive production. Nguyen Xuan Phuc, who took over as prime minister in early April, is said to be a competent technocrat. But he may not have the political strength to carry out difficult reforms. Some simple remedies would be useful, however. Giving farmers earlier warning of drought would help avoid pointless ploughing and planting, says Nguyen Huu Thien, an environmentalist. He says the authorities may soon be caught out by La Niña, a sodden period which often follows El Niño’s parching.

At a roadside café in Cu Lao Dung, young sugar farmers moan about their lot. Life would be easier if they could work at tea stalls, they say, with cooling banana-leaf roofs. Or perhaps on coconut farms, where trees need watering only every few days. Each year supplies of safe drinking water get a little tighter, says one. He worries that in ten years there will be no fresh water at all.