How the Vietnam tiger got stuck half way

On Route 9 in central Vietnam, police set up a checkpoint, and round the corner several old Renault buses stop and the passengers…

On Route 9 in central Vietnam, police set up a checkpoint, and round the corner several old Renault buses stop and the passengers disappear into the scrub-covered hills. They are impoverished Vietnamese peasants smuggling cigarettes from Laos bought at 2,000 dong (10p) a packet to sell for 6,000 dong in Vietnam. It happens every day. Contrast this with the scene at the village of Kim No among the paddy fields outside Hanoi. Here you can also see Vietnamese disappearing into the undergrowth, but only in search of errant golf balls.

They are among an elite group of 40 Vietnamese members of the 18-hole King's Island Golf Club who can afford to pay 200 million dong ($15,000) membership, and whose occupations the club professional, Mr Ian Fleming from Scotland, declined to reveal, saying: "Ask no questions and you will get no lies." It is a sensitive issue. Twenty-five years after reunification, new class divisions have emerged in Vietnam. A vibrant economic sector has developed as a result of the doi moi reforms launched in 1986, which legalised private enterprises and family businesses. A few Vietnamese have become rich. But it remains one of the poorest countries in the world.

For a while Vietnam looked like becoming the next Asian tiger. It enjoyed growth of 9 per cent in the mid-1990s. The cities came back to life. In Hanoi and Ho Chi Minh City, formerly Saigon, young people filled the streets with Suzukis and Honda Dreams. Private restaurants and small businesses flourished. Vendors crowded the pavements selling everything from sunglasses to pirated books.

But unlike China, Vietnam has not fulfilled its potential. Many reforms have stalled, and investors who rushed in during the 1990s have rushed out again, disillusioned by heavy taxes, corruption, inefficiency, red tape and the high cost of doing business. A quarter of a century after departing helicopters lifted off the US embassy roof in Saigon, a second American withdrawal is under way.

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US investment, once worth one billion dollars, has fallen 80 per cent since 1996. A US-Vietnam trade deal, which would allow Vietnam access to the world's richest market in return for opening up Vietnam to American companies, has fallen through, mainly because of opposition from vested interests in state firms.

The government also remains deeply suspicious of capitalism. It keeps putting off a decision to open a stock market. Moody's Investor Service concludes that Hanoi's reluctance to allow further foreign participation in the economy is a threat to progress. Many foreign investors say Vietnam is more like Cuba than market-oriented China.

The International Monetary Fund said on April 4th that the economy had begun to recover and should grow 4.5 per cent this year. But IMF representative Mr Dennis de Tray warned that the recovery would be fragile unless investment picked up. Mr Paddy Delaney, the Singapore-based Asia director of Enterprise Ireland, led a team of Irish consultants to Vietnam in 1988 to explore the potential of the aid-funded market, but nothing came of it.

"The results were disappointing," he said. "The biggest problem is bureaucracy and the length of time it takes to get decisions." Hanoi's King's Island Golf Club, in addition to its 40 local associates, has some 460 expatriate members. The course was constructed in 1996 by Daewoo at the height of high expectations for Vietnam's economy. But there are fewer foreigners to maintain the membership level than when the first fairways were laid. "The only social events I go to these days," said a European businessman, "are going away parties."