Global Policy Forum

by William Pesek Jr.

Duc Vu nurses his gourmet coffee at a trendy, downtown cafe. The 25-year-old bops his head to catchy pop music and surveys the scene as dozens of other hipsters file inside. "It's always like this — crowded," explains Vu, a computer programmer, as he taps away on his Dell laptop. "These coffee places have become quite the scene." Vu isn't hanging out at Starbucks, but a Trung Nguyen coffeehouse.

You won't find any Starbucks outlets in Vietnam, even though its seven-percent growth rate puts it among the world's liveliest economies. Vietnam's fast-growing middle class would seem to make this an ideal place for a slew of Starbucks or Tully's coffee franchises. That you also don't see such names like McDonald's, Gap or other cultural hints of Americanism here speaks volumes about Vietnam's go-slow approach to globalization.

The nation's 80 million want their piece of global prosperity and the benefits that come from the free movement of capital, goods and people. They just want it on their own terms, and other developing nations might want to pay attention. "This time, Vietnam is doing it in its own way," says Fred Burke, an attorney at US law firm Baker & McKenzie and deputy head of the local American Chamber of Commerce.

Opening Up

This communist nation is steadily opening its economy, even if critics charge it's going too slowly. Prime Minister Phan Van Khai wants lawmakers to accelerate the lowering of trade barriers and the cutting of production costs to boost competitiveness. The urgency comes amid tepid foreign investment, labor productivity and export growth. Khai is miffed Vietnam hasn't made more progress eliminating state subsidies or reducing protectionism, while the process of reforming state-owned enterprises and the financial-banking system is slow.

Critics aren't impressed. A US Commerce Department team recently labeled Vietnam a "non-market economy" as part of an anti-dumping investigation into Vietnamese catfish. Vietnam began moving away from traditional Marxist economic policies in 1986, and it has a lot further to go. The government remains too active in controlling prices and costs.

But while Vietnam hasn't fully made the transition to an American or British-style market economy, it's wrong to say the nation isn't embracing capitalism. A number of companies engaged in Vietnam — including Citigroup Inc., New York Life Insurance Co. and Cargill Inc. — want the Bush administration to give it market-economy status. Executives argue government intervention and regulatory burdens are declining, while there are fewer constraints on capital movement.

‘Washington Consensus'

What seems to irk critics is how Vietnam has blown off the "Washington Consensus," that package of policies long advocated by US officials and international institutions as a recipe for wealth. Few quibble with the consensus that opening markets, reducing government control and curbing inflation are good for economic growth. The problem, though, is that many developed-world governments were encouraged to move too hastily. The last five years offered myriad cautionary tales of nations that took the free-market plunge and ended up chastened by speculators. Many also found themselves disappointed by the dearth of long-term foreign investment. And when money did flow in, corruption often flourished as policy makers lined their pockets.

It's not that anti-globalization activists like Canadian journalist Naomi Klein are right. To Klein and her ilk, globalization is a disease that must be destroyed in order for poor nations to prosper. If free trade and globalization are problems, it's because the parts of the world that need them most aren't getting enough.

Still, globalization has turned out to be a lot harder than it seemed 10 years ago. Back then, nations figured if they opened economies, privatized industries and cut inflation they'd be rewarded by investors and never look back. Growth would boom, living standards would surge and life would be grand.

Things haven't quite turned out that way. Going slow with globalization Vietnam's example is instructive because it's already felt the dark side of globalization and didn't like it. In the mid-1990s hot money zoomed to Vietnam — in 1996 alone, it saw $8 billion of foreign direct investment. But investors left even faster than they had arrived, disappointed they wouldn't see returns overnight. Asia's financial crisis was another blow. The economy never quite recovered. Hence Vietnam's new go-slow approach to globalization.

There's little doubt about the direction, given how Hanoi is creating markets, promoting the private sector and lowering tariffs in hopes of joining the World Trade Organization within a few years. Vietnam's middle class also is pushing the government toward democracy, just as Taiwanese and South Koreans did. It's the pace of market opening that irks some — and that's just fine.

Officials here have seen how countries like Indonesia and Argentina listened dutifully to the Washington Consensus and rushed the process of opening economies. They've also seen those countries go from growth stars to basket cases. Vietnam wants to avoid that and stay, well, Vietnamese. Folks here want globalization, but they don't want to be overwhelmed by it. Someday investors may celebrate the strategy.

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