Thu 22 May 2008
I reached Vietnam today for a conference. Thanks to Shubinoy Mustofi, I loaded up on my reading on Vietnam for my long arduous 15 hour plane ride from London. The story of Vietnam is a story of resurgence and the story of fighting against all odds. But ever since coming here I couldn’t help but just sigh deeply, thinking about how this could also have been the story of Bangladesh.
Don’t get me wrong, as a human rights activist, I don’t envy the fact that there is no freedom of speech or politics in Vietnam. But I also believe living a life of dignity with basic rights to food, shelter and security is every person’s most fundamental human rights. That is where Vietnam is a success story. With growths averaging to 7 percent every year, Vietnam is now the darling of investors, multi-lateral donors and every Tom, Dick and Harry. So how does this Vietnam look? A bustling capital city with eye popping sky scrapers, hotels and every signs of fancy globalization? Hardly.
The airport in Hanoi looks like the ones we have in Tejgaon — our old airport from 30 years ago. One small luggage belt, one terminal, three floors. It had 12 immigration officers on the immigration area. I was out of the airport in 10 minutes after I landed with no queue. I remember the millionaire garments factory owner who is now the leader of our business community gloating over the fact how much better the hotels are in Dhaka than London and that to him was an indicator of how Bangladesh was progressing. I wonder what he would say seeing the airports in Vietnam. He is not the only one who looks at the improvement of urban service sector as the sign of growth in Bangladesh. Look at our focus. I can only think of multi-billion dollar plane purchase by our government, and the fancy satellite cities outside Dhaka. But hardly anything for the rest of the country. This goes back to the original question that Farid Bakht asked a few days ago — we need to fundamentally change the debate in our country — quickly.
But how did Vietnam get it right and we didn’t? I am not an economist and neither am I a development expert. But from what I gather from my reading is that a big key to Vietnam’s success is because of the success of its agricultural sector. Economist says: “In the mid-1980s, with farm collectivization going horribly wrong, the country was on the brink of famine. But by the early 2000s Brazil, the world’s largest exporter of robusta coffee, was astounded to find itself being overtaken by a country most of its people had barely heard of. More recently, Vietnam has surpassed India as the world’s second-largest rice exporter after Thailand. Vietnam’s farmers have become important competitors in all sorts of agricultural produce, from nuts to peppers to rubber. They are even selling tea to the Indians.” And that did not happen out of thin air. Starting from the mid eighties specific policies regarding the farm sector paved the way for this boom. How much effort has gone in Bangladesh to prop up our farm sector? I can’t think of any recent initiatives. We need to shift back the focus from the urban areas back to the rural economy.
The car that came to pick up was not a shabby one though — it was a fancy Beamer jeep. That pretty much is the tone of today’s Vietnam — a peaceful coexistence of the opulence of the private sector and individual entrepreneurs and state’s control over providing the basic services to the average citizen. On my way to the city, I see paddy fields — one after another. Closely followed by manufacturing plants of all brand name international companies you can think of — Panasonic, Nike, Canon and the list goes on and on. Intel is starting its 1 billion dollar plant this year.

I see Krishnachura and Bougainvillea on the street and I think of the similarities with Bangladesh. The delta, the fertile land, 90 million people, situated right next to an emerging economic giant, getting liberated around the same time after a bloody war — the similarities go well beyond the Krishnachura trees. Yet, Vietnam has left us behind and is going at full steam. By 2010, it will reach the status of a middle income country and by 2020 its targeting the status of a rich country.
The story of its growth is also not of disparity like our country. The middle class is growing and the gap between the rich and the poor is slowly but steadily decreasing.
Where will Bangladesh be in 2020? I don’t know. But when I look at the hundreds of women riding the motor bikes returning from work and compare the situation with our country where Government bows down to Islamists’ threat for announcing women’s policy for equal rights of women, I can not be hopeful. Of course, we have our garments workers. But that’s another story of deprivation than inspiration. We need to get our house in order and we need to do it fast. Let’s get the election — a free, fair and a credible one — quickly, so that we can switch back our debate to the real issues. Enough of this suspending state. The world has outpaced us long ago. We can still catch them but the second chances won’t be there for long.

May 22nd, 2008 at 1:10 pm
Asif Bhai,
I hear it took Tata less than a year to hold talks with the Vietnamese govt and set up operations for their steel plant set up/acquisition.
http://vietnamnews.vnagency.com.vn/showarticle.php?num=01TAS220508
And here we are, trying to second guess which one from the League Of Extra Ordinary Gentleman is going behind bars next.
May 22nd, 2008 at 6:21 pm
The KEY to rising economy of any nation is its attack on govt and public corruption.
Before any agreement with Tata, Bangladesh must enforce anti-corruption and tighten ALL accountability & transparency. Otherwise Tata/BD will end-up in serious DRAINAGE of revenue from Bangladesh to India and Swiss Banks, thru Tata and thru corrupt officials. If Bangladesh does not seriously tighten its belts against corruption, then BENEFIT will only be Tata’s, India’s and govt contacts - and BIG LOSSES will be Bangladesh’s.
Having foreign investments, just like electoral governance, are totally counter-productive if accountability & transparency are cloudy. So, I am glad that TATA has been delayed in BD, where a 3$Billion investment with Tata could easily be losing at least $3Billion every year, unless agreements are made with anti-corruption and financial regulations in mind, and accountability & transparency procedures are active.
A quick google reveals Vietnam started targetting on anti-corruption, at least 5 years ago - the good results of which are blossoming today, the same will also come to Bangladesh after restricting corruption.
http://www.fva.org/200209/story03.htm
May 22nd, 2008 at 11:40 pm
Nothing will count for anything in our country unless we stop reproducing like rats.
Vietnam is looking at high income status by 2020. We’re looking at famine and misery caused by population pressure in 2020 if AL/BNP come back to power with the same old setup.
Definitely the first step is good governance.
May 23rd, 2008 at 7:04 am
The Vietnam war has taught them a lot of things. But I don’t think we got a lot of lessons from our war.
May 23rd, 2008 at 9:33 am
After a Long time I am making some comments. Thanks Asif for this great write Up. While I visit Ho Chi Min and other places , some times I forget was it the same war effected country?
May 23rd, 2008 at 5:42 pm
[...] author from Unheard Voices visits Vietnam and is impressed with the progress made in the country, which has a lot in common [...]
May 23rd, 2008 at 6:00 pm
Great writing, a true realisation but not enough hope - I see. I may disagree with Asif on the issue of measuring development with the inflow of FDI (if I am not misunderstood), but no doubt Vietnam is rising. I myself have been curious about Vietnam’s development, more precisely about its tricks. I can now list a number of reasons and you may find many more in a number of writings (“academic” or not) carried out in recent time. Emphasising on agriculture (Asif mentioned it very clearly), large investments in infrastructure (not only building roads and culverts!!!), benevolent planning (may be that includes good governance), strong social safety net system and encouraging SMEs are most obvious in that list. But is that all? I got an opportunity to come across with a Vietnamese economist (even though he spent long part of his life in US) and did not miss the opportunity. When I asked him about….. like any professional magician he smiled and said, “you won’t understand.” Frankly speaking, I was offended. On next day, I asked him again. Then he started to explain. “You see, Vietnam is very different from your country and all these developed countries. We manage to reduce poverty faster. We find poverty as a bad thing, a sin. We can’t really afford it. You won’t understand. Vietnamese are different”. Well I am sure you can’t explain this with theories. I never had a chance to cross-check this strange explanation, never had a chance to have look at the place. I am sharing this ONE more cause with you, may be you can think about it.
May 24th, 2008 at 5:15 am
The basic debate that can come out of this post is whether the brand of communism, which was smart enough to modify itself to adjust with global economics, has failed or not. China or Vietnam, as well as kerala, west Bengal of India can be good examples of viable communism. In 3rd world societies where we are locked in a relentless debate between democracy and civil-society militraycracy, China-Vietnam style communism may be considered as an alternative. [ Disclaimer: By no means I am promoting communism].
On a different note, here are some FYI,
1. Bangladesh is 4th highest rice producer of the world, just after China, India and Indonesia. Bangladesh produces more rice than Vietnam or Thailand.
2. By projected growth, in 2040, Bangladesh will sill remain the 4th largest rice producer.
3. However, in rice yield, ( MT/Hact), Bnagladesh is ranked lower, however still higher than world mean, and better than any other SAARC nations.
4. India uses three times more land than China to produce nearly half that of China. China has accomplished its high yield by using hybrid seeds.
5. Please don’t blame Bangladesh for nothing. Bangladeshi farmers have achieved a lot with all limitations.
6. A main theme of Sheikh mujib government was ” Shobuj Biplob– Green revolution”. And Zia govt’s main focus was on better land irrigation for agriculture. First ruler who deviated our national attention from agriculture was scoundrel Ershad. A lot of attention have been regained by the last democratic governments. So please refrain from blaming Hasina-Khaleda for every problem of ours.
7. In recent years we have seen an information revolution over agriculture. Shykh Siraj is one person who deserves special mention. If this revolution go on, we will soon pass Vietnam/China in MT/Hact yield.
May 24th, 2008 at 2:45 pm
Food crisis in BD has made headlines in today’s Washington Post:
http://www.washingtonpost.com/wp-dyn/content/article/2008/05/23/AR2008052303160.html?hpid=topnews&sid=ST2008052400139
May 24th, 2008 at 5:28 pm
Rumi - this thread not for reform communism in Vietnam, nor attack on SH-KZ, but HOW poor nation can U-turn into a GROWTH nation.
What you listed in #9 are promising results of the AGRI/FOOD sector - we praise govt for agri success. But BD was already an agri-based nation, positioned in the most fertile plain in the world.
Nations like Brazil, Thailand and malaysia have unbelievable MOUNTAINS of agri growth, while BD still IMPORTS majority of its agri/food from other places (eg from Pakistan!)
But agri/food is not the only sector in BD, and to be a Dubai or Vietnam - sucess in one sector (like food) is not enough - especially when all other sectors are abysmal failures.
What exceptional results (besides failure) can we claim in education, health, transport, housing, slums, power, infrastructure, and basic quality of life - which we can compare with a booming nation? None.
To be successful - the govt MUST SHOW a POLICY of nationwide sucess targetted at development sectors - not just a one-sector survival-level crop. All growth sectors must go through those phenomenal policies incrementally to be showable - especially as poulation, GW, crime etc are constantly expanding.
May 25th, 2008 at 7:37 pm
Rumi bhai,
I agree with you that something different must be tried and I hope through this dialogues and our participation, we will eventually be able to change the debate. Yes, indeed, there is a lot of good things to say about Bangladesh. The one you missed is that Bangladesh is the only country which is likely to meet the millenium development goals. A society thrives on openness. While you and I both agree that there were certain things wrong before, you and I also agree that there is no alternative to going back to that openness of democracy we had. That’s why the shifting of the debate can only happen after we get that freedom back. But for that we also need to engage the parties in these conversations. Its not enough to say I don’t want this or that. They also need to articulate what they want. They will ignore the general mass at their own peril. They won’t be able to because they are accountable to the people.
I got a chance to speak to some local vietnamese people and they all say corruption exists in their society in all spheres and it also is quite visible. But there is a national pride in them and also they believe at the very top, they have the right ideas and they are honest. With the flow of FDI and a vibrant economy and solid infrastructure on education and science, corruption is not standing in the way for their growth. But the rulers seem to acknowledge that the corruption has increased and they are visibly trying to do something about it (based on some newspaper headlines).
More to say on this at a latter post.
May 28th, 2008 at 4:15 pm
Good piece. Couple of points though: When you look at the ratio of area to population of the two countries ~.96 for Bangladesh to 3.86 for Vietnam, one of the only ways out for Bangladesh would be to increase literacy rate. We may be the 4th largest producer of rice, it means nothing if we are still a net importer. Massive investment in education is possibly the only way out for us.
June 18th, 2008 at 9:19 am
A more ominous view.
Fear of new meltdownFont Size: Decrease Increase Print Page: Print Alan Wood, Economics editor | June 18, 2008
IS Asia again heading towards an exchange rate and financial crisis of the kind it experienced in 1997? Then the trigger was a collapse in Thailand’s exchange rate as foreign investors rushed for the exits.
A question increasingly being asked in the region and canvassed by investment banks in their client research is whether Vietnam could be the next Thailand.
There has been a remarkably rapid turnaround in perceptions of Vietnam in recent months, including by the International Monetary Fund and the Asian Development Bank, the speed and extent of which has not been picked up in the global media. The contrast with even six months ago is remarkable.
Despite a sharp dip at the time of the 1997 Asian crisis, Vietnam has enjoyed an average annual growth rate in real GDP of 7.5 per cent over the past decade, one of the fastest in Asia. In March Shogo Ishii of the IMF’s Asian and Pacific Department said that in recent years Vietnam was one of the world’s most attractive new investment destinations.
It has even been described as the new China and, particularly after its accession to the World Trade Organisation in 2007, money has been pouring in, with the world’s banks scrabbling for a piece of the action.
However, over the past three years its booming growth has increasingly outrun Vietnam’s growth potential. There are infrastructure bottlenecks, inflation has risen sharply - from just over 8 per cent last year to over 25 per cent in May - and there is escalating industrial action plus rising wage demands.
The country’s trade deficit has been widening rapidly as capital goods and other imports pour in to feed the boom and its current account deficit is about 10 per cent of GDP. Domestic credit has been growing at over 50 per cent a year.
In short, all the familiar signs of a dangerous economic overheating.
Not surprising then that the IMF warned in March that domestic and external imbalances were becoming a major concern for Vietnam.
Private sector assessments have since become much sharper.
For example, last week a research note to international clients from Goldman Sachs, the US global investment bank and securities firm, began: “Rising cyclical risks have aggravated investors’ fears that macroeconomic instability in Vietnam will soon translate into a balance of payments crisis or a significant currency devaluation.”
Goldman Sachs noted that forward currency markets were pricing in a depreciation of the Vietnamese dong of over 30 per cent in the next year.
Once currency markets start doing that, often it isn’t long before the forecast adjustment is telescoped into a much shorter period. According to Goldman Sachs, there are anecdotal reports of Vietnamese rushing to
buy gold or US dollars on the black market as a hedge against devaluation.
The price of Vietnam’s five-year sovereign debt credit default swaps, another measure of international confidence, has shot up by about a full percentage point from its end-of-May level and Vietnam’s share market has plunged some 60 per cent so far this year. There are other indicators; ratings agencies have lowered their ratings on Vietnam’s sovereign debt.
The Vietnamese Government and central bank have taken a series of actions aimed at cooling inflation and the economy. In late March the Government announced a seven-point plan that included a tightening of monetary policy, cutting government spending and public investment projects, promoting exports, encouraging saving, measures to stop speculation and prioritising agricultural production.
It has raised the reserve requirement ratio for banks, and increased the official interest rate three times since January, the latest increase - from 12 per cent to 14 per cent - on June 11. On the same day it announced a 2 per cent devaluation of the official exchange rate of the dong.
The Government has elevated control of inflation above economic growth as a policy objective, but has failed to take effective action to sterilise the impact of large capital inflows on money growth and inflation.
Goldman Sachs has so far concluded that the probability of a balance of payments crisis is not large enough to make it the bank’s baseline scenario.
However, it looks increasingly like Vietnam has not done enough to avoid a crisis.
Take interest rates. Although official rates have been raised to 14 per cent, with inflation running at 25 per cent this is nowhere near enough to squeeze it out of the system. And the rate of depreciation of the dong is much too slow to satisfy markets.
The odds are narrowing on a balance of payments crisis and a substantial devaluation which will send tremors through the region.
Vietnam has a huge current account deficit and lacks the international reserves to defend its currency. At the current rate of depletion they will run out by the end of the year.
With about 30 per cent of its bank deposits denominated in foreign currency it is highly vulnerable to an accelerated outflow of capital. As a communist country it can attempt to block it with controls, but the scope for leakages is considerable.
Would a run on Vietnam by global capital markets be enough to cause the second Asian financial crisis in just over a decade?
I don’t think so, although there might be some regional victims beyond Vietnam. The 1997 crisis led to some big behavioural changes by Asian governments to protect themselves from such a possibility.
The region’s foreign exchange reserves are several times larger than they were in April 1997: $US3 trillion ($3.2 trillion) now, compared with a bit over $US400 billion then. While the lion’s share - $US1.75 trillion - is in China, most countries have large enough reserves to handle a period of reduced capital inflows or even outflows.
However, Vietnam’s plight does send a useful warning to other Asian countries, including China, about the consequences of their current policies of holding down interest rates and pegging their currencies to the US dollar for inflation.
The risk for Australia is that whether Asia begins exporting high inflation or cuts back on growth to bring it under control, the fallout could be painful.