Tuesday, June 14, 2005

what does Vietnam mean to you?

To many North American folk, especially the 2 million war veterans, the word “Vietnam” signifies civil breakdown, shootings on campuses, GI casualties, conscription, military defeat and a loss of international prestige and blow to confidence. Today, to the Chinese, Vietnam may stand for “industrial competitor”. If you are a retired colonel in an Indian think-tank, you might look on Vietnam as a strategic ally to contain China. An American businessman going to Da Nang today may know that it was a huge military base in the sixties but is now more interested in it being the hottest East Asian hub for investment. He would be aware that in peacetime, one in five export dollars comes from American consumers.
A few weeks ago, April 30 to be precise, we may have noticed that it was the 30th anniversary of the ignominious retreat from Saigon. Who hasn’t seen the footage of the last helicopter on the last day of that long-running war starting from the forties? Two million dead, a devastated countryside strewn with mines, two generations who had known nothing but war, an infrastructure not worth mentioning and the usual post-conflict mess of liberators versus collaborators to come.

What is the view from Dhaka?
1975 was also an eventful year in relatively new Bangladesh. A flawed, non-performing democracy was shot to pieces in August starting off a fifteen year period of military rule, punctuated by over a score of coup attempts, economic stagnation and utter dependence on the aid consortium to keep the country barely ticking over. Last month, a Prime Ministerial delegation visited Vietnam, bringing the subject into focus. Comparisons have been made. They are not flattering. It would be instructive if we could look how the Vietnamese are progressing and find out where we are better or worse.

The record so far
For those first ten years, Vietnam was boycotted for political reasons. Hardly any foreign investment came in. Unfortunately, hardly came this way either. One would not be too wrong to say we were suffering an economic boycott of sorts, even though we seemed to have geo-political support.
There are 83 million Vietnamese to our 147 million, both historically belonging to rice-growing societies.
Vietnam’s per capita income stands at $542, compared to ours at just over $400. Their economic growth rate was 7.7% in 2004 and they are hoping to reach 8.5% this year. We hover just over 5% on average, looking like we could get to 5.7%. So they are go pull further ahead.
While we are finding it impossible to reach anywhere near $10 billion in exports, they are on $32billion and rising.
In 2004, Vietnam attracted $4.2 billion in foreign investment and expect to reach nearly $5 billion this year. They are gunning for another $20billion over the next five years. Bangladesh has received barely $2 billion in its entire history, the bulk of that for gas exploration in 1997. However, things may be changing.
TATA is going ahead with a $2billion investment in Bangladesh. Proposals are being made by an American energy firm – supposedly $1.5 billion, and there are hints of Arab investment of similar amounts. But in concrete terms, we have less signed and sealed foreign deals and it is not clear yet whether Bangladesh will be a “destination”.

How are we competing?
In industrial terms, we have always preferred to be a one-leg economy. For twenty years, we sang about the virtues of jute, immortalised in the phrase ”Golden Fibre”. Neglecting that sector, letting it rot in corruption and starving it of investment, we “celebrated” the closure of the largest such factory in Asia. We were not too bothered because we had replaced that leg with the one centred on garments. Now that leg looks a little wobbly (at least to foreign observers). Not to us. Even the Finance Minister was proudly recounting on TV his faith about the sector post MFA while the media was exaggerating the threats from China and India. And Vietnam. The threat is real and when the restriction on China is removed in 2008, all hell will break loose. But even if it doesn’t, for the sake of argument, how can we be so complacent? Have we not heard about the concept of diversification? Spreading the risk. And positively, one could say more “legs” mean more profits, economic growth and prosperity.
The Vietnamese have been late starters in many sectors. But they are catching up or overtaking us in every field. Why? Ignoring the political exodus of the ‘boat people’ post 1975, they had comparatively few people working abroad as economic migrants till 1999. They then got on the bandwagon of “manpower exports” and now have remittances of $2.5 billion annually. Admittedly, with economic realignment, the older Diaspora is also reinvesting in the country, especially property. The Vietnamese of Chinese origin have returned to take over the reins of business (we never had that type of entrepreneurial Diaspora). We receive double that amount, but we have had this going since 1976 and they have targeted remittances to reach $4 billion by 2010.
A similar story can be told in ready-made-garments. Starting late, they have already reached $5.2 billion exports per year, very close behind us.
Their export basket also consists of $1 billion for rice, $650 million for coffee, $1.6 billion for wood, $3 billion in footwear, $1.5 billion in electronics, $610 million in rubber. They are also looking to expand their exports of fruit and vegetables, and bicycles.
In other words, if their garments industry suffers, they have other sources of foreign exchange. If the same happens to us, we will only have our probashis to rely upon, which effectively means relying upon the stability of Saudi Arabia!
They are embarking on becoming a world-class manufacturer of motorcycles too.
Vietnam does have lots of problems. Not least environmental damage from industry, factory farming of poultry, leading to avian flu and also a sharp urban-rural divide in terms of income. They are also mired in corruption and have a massive black economy. Their state-owned enterprises lose money hand over fist.
Our clueless “civil society leaders” might ponder on this. All they can advocate is that they will or “rid us of corruption” and ensure the rule of law. What nonsense. No one wants corruption but we have to stop pretending we are going to get rid of it just like that.
Vietnam shows that an undemocratic political set up allied to a corrupt business system can still produce the goods. We are supposedly at the top of the corruption league and have an undemocratic democracy.
So what is the missing ingredient?
It is an elite that has a strategic vision and strong political will, which is then used to mobilise society. That is what is driving economic growth.
We like to spout hand-me-down prescriptions from donor agencies in endless seminars. However, if the donors and the elite in Bangladesh really want business to flourish here, our leaders are going to have to do some new thinking, open their eyes to what is happening in the region and talk some sense with their donor masters.
The donors know all this surely. So why are we still in this masquerade?

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