In the next 1-2 years, Vietnam will still be listed among the poorest countries in the world. But the Director of a global market research firm based in HCM City said he is observing the establishment of a luxury market in Hanoi and HCM City, where one can buy the most expensive and latest products from around the globe, without having to visit Paris or London but at prices several times higher. 

A view from the street 

“Some of the most popular products in Vietnam are home entertainment technologies. Vietnamese people are willing to pay between $3,000 and $10,000 for equipment like high-quality speakers or a flat screen TV,” said the aforementioned Director.

Apple will introduce its iPhone to Asia in 2008, but in the second half of 2007 they had already appeared in several luxury cafes in Hanoi and HCM City.

Driving around the two economic hubs, luxury autos like the BMW X5, Mercedes S550, Porches Cayenne, Audi Q7, Nissan Infinity, Murano, Lexus, Hummer H3, etc. The number is higher than even Bangkok, where residents have incomes several times higher than in Vietnam.

Tet will come in the next three weeks and bonuses are the popular watercooler topic and clearly reflect socio-economic disparity. According to the Ministry of Labor, War Invalids and Social Affairs (MoLISA), foreign-invested companies and joint stock firms plan to give Tet bonuses between several tens of millions VND to over VND100 million.

The highest Tet bonus announced so far is VND120 million/person, paid by a group of joint stock companies in District 3, HCM City. But an expert from the Wage Department under MoLISA said this number will be surely exceeded. Real estate companies Tet bonuses, reported to MoLISA, average around VND40-50 million per person.

At the same time, up to five strikes were held on January 11 in HCM City because of low Tet bonuses (only a few hundred thousand VND) and salaries.  

Socio-economic divide 

GINI, a socio-economic indicator, of Vietnam is 36.2, higher than the richest countries in the world, i.e. Norway 25.8, Japan 24.9, lower than China 40.3 and Russia 45.6, which are also in the transformation process.

The gap between the rich and the poor is expanding. Those considered wealthy made, on average, in 1996 7.31 times what the poor were making, 8.10 times in 2001-2002, and 8.34 times in 2003-2004. The gap between the richest region of Vietnam, the Southeast and the poorest region, the Northwest, was 2.18 fold in 1996, 3.15 in 2001-2002, and 3.14 in 2003-2004.

Vietnam’s accession to the World Trade Organisation (WTO) is expected to further and faster increase the gap.

According to the BBC, the number of those in the upper class able to buy the most expensive luxury goods accounts for 2% of the population of Hanoi and HCM City. Around 20-30% of the people in the two above cities spend $20,000-30,000/year on shopping. Meanwhile, under Vietnam’s standards, 14.8% of families were defined as poor in late 2007 (families that have monthly average income under VND230,000 in cities and less than VND200,000/month in rural areas).

Poverty has been reduced in nearly every region but is different in different areas. According to Minister of Labor, War Invalids and Social Affairs Nguyen Thi Kim Ngan, in late 2006, there were 58 districts where over 50% of households were defined as in poverty. The figure was over 60% in 27 districts, over 70% in 10 districts and over 80% in one district.

David Dapice, an economic development expert in Southeast Asia and lecturer at the US-based Tufts University and the Fulbright School in HCM City, said investment in infrastructure has not been carefully considered nor implemented. Current investments may not have positive influences on the economy or on poverty reduction compared to private investments. With the same volume of capital, private investors can create more long-term jobs.

Big state-funded projects are said to only modestly help poverty reduction or economic growth. It is a fact that most projects benefit everyone, but while the poor might be benefited to a certain degree, the rich are sure to reap most of the rewards.

A reasonable socio-economic gap is necessary to a competitive society. However, an income regulating policy is needed, social instability is often the result of too much disparity. Tariffs are a major tool to this end but a senior economist, Dr. Le Dang Doanh, said in Vietnam, much of the new wealth has unclear sources. These people don’t want to let the public know they are rich and don’t want to pay taxes. Dr. Doanh said a great political determination is needed to ensure income transparency in Vietnam.

He said rapid growth and the development of labor-intensive industries will benefit the poor. However, to accomplish this, the private and foreign-invested sectors must be encouraged to grow and create jobs while the State-owned sector must focus on industries the private sector can’t enter.

Price-subsidy credit should be provided to social services for the poor, not for industries which ought to be competing on their own. Finally, experts say it is necessary to create equal opportunities for everybody to achieve their goals and their dreams.

 

Source: NLD