HANOI -- How many communists does it take to collect
a toll? Three: If you take the toll road that runs downtown from To Noi
Bai airport here, there is one apparatchik who collects your money, another
to stamp the ticket, a third to supervise. And have you heard the one
about the professor of Marxist-Leninist economics in Saigon (renamed Ho
Chi Minh City in 1975, in honor of its "liberator") who sends
her daughter to pursue a degree in business administration in the United
States? Don't laugh. Many a son and daughter of the Communist Party elite
have been educated in either the former colonial master, France, or the
former enemy, America. As for the toll takers, well, the state has many
mouths to feed -- a task it has performed dismally.Vietnam is today at
a crossroads.
After 25 years of communism, more than one-third of
all Vietnamese little girls and boys, age five and under, have stunted
growth because of malnutrition, the World Bank reports. Vietnam, with
an annual per capita income of around $300, is one of the poorest countries
in the world. Uncle Ho may have won the war, but his successors have not
yet won the peace.
So, which road to take, that of Adam Smith or Karl Marx?
You'd think that would be obvious. The evidence that communist economics
are what is holding Vietnam back is already in. When Vietnam launched
its doi moi economic reforms in the late 1980s -- very tentative market-oriented
liberalizations -- millions of Vietnamese entrepreneurs immediately displayed
their renowned resourcefulness. Vietnam's annual economic growth shot
up like bamboo shoots, to more than 8% a year. Investors, seeing the next
Asian tiger, rushed in.
But Vietnam's leaders got cold feet in the mid-1990s,
and backed off the reform process. Predictably, annual economic growth
immediately plunged by about half to near 4%. Investors rushed elsewhere:
Foreign investment, which had been running at more than $2 billion annually
from 1995-97, plummeted to about $600 million a year.
The bottom line: Vietnam will never defeat poverty as
long as its economic system stifles the creative energies of its citizens.
Investors will return only when the government demonstrates the necessary
seriousness of purpose to convince prudent executives to put their money
at risk.
If its economic fundamentals were put on sound footing, this country would
quickly get rich. This is because Vietnam's greatest natural resource
is its people, who are blessed in energy, intelligence, and possess a
proud culture. Just visit Saigon's central market. What a wonderful place.
You can see the vitality, the drive, the friendly and frenetic energy
in the eyes of the entrepreneurs.
Yet while Vietnamese society may not be naturally inclined to communism,
the Communist Party runs the country. And like all communist parties,
officials think in terms of controlling their people, not empowering them.
For instance, while the formerly culturally isolated Hanoi now boasts
several Internet cafes, authorities here are in the habit of blocking
their citizens' access to politically incorrect websites through "firewalls."
This is a killer for business. Vietnam is a country where access to accurate
market data is already notoriously difficult. These firewalls ensure that
Vietnamese businessmen are ignorant of information that is easily available
to their competitors in Singapore or Bangkok.
You need permission here to conduct any purposeful economic
activity. Every one of those two million Mom-and-Pop operations you see
-- the "micro enterprises" that drive economic growth -- is
supposed to have a piece of paper giving them permission to do business.
The same kind of noodle shop down the street might have a different set
of papers. It is a criminal offense not to have some official piece of
paper allowing one to do business.Getting your permission slip to begin
an enterprise is only the first step. Say you want to run a bus service
between Hanoi and Haiphong. You will get to know many bureaucrats from
many government agencies. These people will -- for a price -- give you
pieces of paper showing that you have permission to drive the buses, to
use the terminal, to collect tickets, to use the public-address system,
and perhaps 20 more permissions.
Consumer credit? Hah. Instead of GE Capital or GMAC,
Vietnam has loansharking. The state bank forbids loans guaranteed only
by salaries. The idea was to "protect" workers' earnings. But
as workers understandably resented the nannyism, there are plans afoot
to give consumer loans to people who can demonstrate that they have a
"viable and profitable" investment or business. If you don't
own your own profitable company and want a new refrigerator or motorbike,
better find a loanshark.Foreign investors have their own special miseries.
You can manufacture your widgets in Vietnam, but you aren't allowed to
set up your own retail network to distribute them. For that, you have
to find a local (inefficient) partner.
As for project finance, try financing a factory when
you aren't allowed to borrow against the land your building sits on, something
investors in other countries take for granted. Vietnam has every traditional
protectionist scheme in the book: high tariffs and taxes, special export
taxes, all sorts of licenses, plus the additional communist nasties like
state-owned enterprises that suck up already scarce credit and leave banks
saddled with bad loans. As a recent World Bank report candidly puts it,
if the government here doesn't soon show that it is serious about cleaning
up its cluttered economic house, Vietnam "faces the possibility of
becoming one of the slower performers in the region."
The good news is that Vietnam's leaders understand this,
at least in an intellectual sense. Due to an "enterprise law"
that went into effect on Jan. 1, for example, businesses will no longer
be forced to obtain approval from a dozen bureaucratic desks to get launched
-- if the law is implemented, which is a big if. The leaders talk the
free-market talk, but they are walking slowly.
Last year, Vietnam negotiated a liberalizing trade accord with the United
States. Hanoi is still sitting on it. Another year's hopes for increasing
prosperity dashed.
U.S. Ambassador Pete Peterson, a former prisoner of
war who has become a huge booster of Vietnam's potential, uses a basketball
metaphor to express his frustration over the slow pace of reform. Vietnam
has learned to dribble, to pass and shoot, says Mr. Peterson. "But
they haven't even gotten out on the floor yet." When they do -- and
this country has too much of what economists call "human capital"
to be a laggard forever -- the world will see some truly impressive economic
slam dunks.
