Tuesday, April 28, 2020

FOUR TAKEAWAYS FROM A RECENT TRIP TO VIETNAM AND CAMBODIA



The Canadian Association of Former Parliamentarians in February of this year organized a 3-week study tour of Vietnam and Cambodia. It attracted 20 members of the Association, including my wife and me.

The group included former MPs from all political parties. We had some lively discussions about Canadian politics, but the atmosphere was always respectful and cordial. We enjoyed the normal travel experiences that were enriched by information from competent and friendly professional guides who also took excellent care of the trip’s logistics.

What made this trip different from normal tourist experiences were meetings with local politicians skillfully arranged by Leo Duguay, an Ottawa lobbyist, former MP and Prime Minister Joe Clark’s Chief of Staff. Thus, we spent a couple of hours with Canada’s Ambassador to Vietnam in Hanoi, which brought us up to date on the country’s relations with Canada and local economic and political conditions. We sponsored a dinner meeting with ten members of the Canadian Chamber of Commerce in Saigon, which provided much first-hand information about the opportunities and challenges of doing business in the country.

We also met with three members of Vietnam’s parliament in Hanoi who served as chairs of important legislative committees. These politicians gave us mainly boiler-plate information about the country’s economic and social conditions but responded with some spontaneous and interesting answers to our questions at the end of the session. This meeting ended with a privileged guided tour of the parliament building designed in grand communist style.

We were lucky with the timing of the trip, which started when the Covid-19 crisis affected primarily China and ended when the return flights were still on schedule. The crisis in China brought us some unexpected benefits through the virtual absence of Chinese tourists in airports, hotels, restaurants and tourist attractions. According to our guide, their absence meant that we were able to visit some attractions without lengthy queuing required just a short time earlier.

The visit to Vietnam and Cambodia increased my understanding and appreciation of the cultures and economies of these two countries in many ways, but the following narrative focuses on just four topics that involve important takeaways of interest to me as a free market economist and a person interested in the Vietnam War.

The first takeaway involves my memory of the tragedy of that war, which I had expected to be revived during this visit. To my surprise, our guides and other Vietnamese never mentioned it to us on their own initiative. Only once were we given information about a battle, but only after we asked for it. This happened when we wondered about the history of a large, barren space in the middle of the ancient Citadel of Hue. Our guide explained that the historic buildings that had previously occupied this space were destroyed when Vietcong troops infiltrated the area during the Tet Offensive and American forces launched a counterattack. Before this event, the Americans deliberately had kept their troops out the Citadel to protect its cultural heritage. The guide left the clear impression that he blamed the Vietcong more than the Americans for the tragic destruction of the historic buildings.

I was also surprised by the displays at the “Hanoi Hilton”, the prison where US downed pilots were kept. It is now a museum and contains very few displays and narratives about the horrors of the War. Instead, it holds many exhibits showing how well the American prisoners were treated and how many anti-war demonstrations had taken place around the world. The only disturbing images in the prison are of the French government’s treatment of Vietnam prisoners during the colonial period.

The second takeaway comes from numerous stories by our guides about the personal and economic problems caused by Ho Chi Minh’s government after the Americans had left in 1975. This government had imposed on the South economic and social policies its leaders had studied during visits to Moscow during the War.

The guides’ accounts of these policies revealed deep resentments over the hardships they caused their people, resentments allegedly shared by many in the country. Under these offending policies, many landowners, members of the middle class and others considered by the communist politicians to be the enemies of the working class, had their properties seized, were jailed of even executed. Many of these victims fled the country and became the boat people of history. Many of them lost their lives at the hands of pirates from the Philippines and Indonesia. Only few were accepted as refugees by Canada and other Western countries.

Very damaging also was the economic planning regime, which forced all production by individuals and companies to be delivered to the government, which transferred it to consumers such that everyone had a fair and equal income. One of our guides told us with some mirth that under this system his father was no longer able to pursue his traditional practice of trading fish for watermelon under pain of being imprisoned. It took Vietnam many years to end the communist planning regime and liberalize the economy.

The third takeaway involves the performance of the Vietnam economy after the liberalization. It was clearly evident during our visit but the following draws on some statistics found on the Internet to describe it.

The country’s population is 97 million, which makes it the 15th largest country in the world (Germany, Europe’s largest country has a population of 84 million). The communist-style planning after 1975 caused stagnation and by 1986 had made Vietnam one of the world’s poorest countries.
Conditions improved dramatically after the government in 1986 moved away from this model, imitating the successful 1978 reforms by Deng Xiaoping in China. This improvement was evident in numerous ways. The main airports were new and modern. Ubiquitous retail and artisan shops were fully stocked and busy. Restaurants of different quality were filled with customers. Traffic on all roads was very heavy. Construction of buildings and roads was everywhere. People were well dressed. I saw no homeless people or beggars.
   
Official statistics back these impressions of economic growth and prosperity. Between 2002 and 2018, per capita GDP increased 2.5 times, though it still has long way to go to make Vietnam a rich country. In 2018 its GDP had reached US$2,500 while in comparison, Canada’s was $46,000. The growth of GDP of 7 percent in 2018 is encouraging as is the statistic that the rate of poverty shrank dramatically from 70 percent in 1986 to 6 percent in 2019.

Theses results were created by free market policies. Producers no longer had to deliver their output to government agents but were free to sell it to the highest bidder. Lower tariffs resulted in the opening of trade with the rest of the world. Direct foreign investment was encouraged through low levels of regulation and taxes, low cost of labor, low inflation, secure property rights and a stable political environment. In December 2019 alone, direct investment worth $20 billion was made mainly by firms from Japan, South Korea and China.

Of particular interest to me is that the government allows the side-by-side circulation of US dollar notes in private markets. In the ubiquitous restaurants, retail stores selling clothing, shoes and other consumer products, payment is routinely expected to be made in dollars. Only change of less than one dollar is settled in Vietnamese Dong, the local currency. Credit card charges are in Dong but are converted to other currencies at rates that keep retail prices at a bargain level for Canadians. Many private employers pay their workers in dollars, government employees are paid in Dong, which can readily be converted into dollars.

The free market policies brought an interesting symbol of success. In 1986, Vietnam was unable to feed itself and had to import rice. Now it is once again the largest net exporter of rice in the world, taking advantage of outstanding growing conditions in the Mekong Delta, which we toured comfortably for a day on a boat. A bicycle trip of one the islands in the delta allowed us to see these fertile fields and the comfortable homes they support.

Another indicator of Vietnam’s economic success is the heavy traffic on its urban roads. In Saigon it is dominated by 7 million scooters and motorcycles owned by the city’s 11 million inhabitants. These two-wheeled vehicles compete with relatively small numbers of cars, trucks and buses. However, in spite of the crowding, the traffic moves smoothly. During many trips in our tour bus, we saw no traffic jams or accidents.

These results are almost a miracle as the traffic is, what someone called “organized chaos.” One of its causes motivated the writing on a t-shirt I saw: “Traffic rules in Saigon: Traffic light green: go; light yellow: still go; light red: continue to go. I believe that the smooth flow of traffic and the low incidence of accidents is due to the great maneuverability of two-wheeled vehicles. Observing scooters carrying a woman and two children miss hitting other vehicles by inches is heart-stopping, but we all seemed to get used to seeing such spectacle and no longer were amazed. Besides, wearing helmets was legally required and universally obeyed. A bit of trivia: according to one of our guides, the reason why women on scooters almost always wear long-sleeved shirts and gloves is to protect their skin from the sun.

However, the traffic in the Vietnamese cities raised in my own mind the question of how it will function in the future as the population and incomes continue to grow rapidly. I would not be surprised if, in a decade, there would be congestion just like that in other large urban areas of the world, especially since the greater prosperity will lead to the increasing replacement of two-wheeled vehicles by cars.

My fourth takeaway concerns Vietnam’s economic future. The growth in national income foreseen by the members of the Canada-Vietnam Chamber of Commerce in Saigon is likely to be realized. But I predict that it will be accompanied by problems that face all rapidly growing, low- and middle-income countries. One of these problems is traffic congestion. Another is that foreign investment continues to increase the demand for labor and drives up wages. As this happens, the attractiveness of foreign investment and volume will decrease and cause a reduction in the expansion of the economy along with a slowdown in the increase in wages, tax revenues and public spending on infrastructure and social benefits.

In their presentation to us, parliamentarians in Hanoi suggested that the government is aware of these problems and importantly, is ready to deal with them through more deregulation and free market policies. By coincidence, the day before our meeting with these officials, a newspaper reported that a parliamentary committee had announced plans for further deregulation.

However, as the government continues on this path, it faces a fundamental conflict, which I raised in a question posed to the parliamentarians in Hanoi: “How will your government deal with the conflict between the consequences of ever growing liberalization and the maintenance of income equality required by your communist ideology?”
 
My question brought a burst of laughter among the parliamentarian, which our group were delighted to join. The chair asked one of his colleagues to provide an answer to my question, which brought the standard line that the communist party remains committed to policies that create prosperity and income equality. At the reception after the meeting, the chairman of the group shook my hand and said, “good question.”

I wish the people of Vietnam that its politicians will be able to deal successfully with the inevitable conflict between free markets and income equality. It will require them to give up much of their power, status and income. Only time will tell whether they will do so.

In conclusion, a bit of information useful to climate change skeptics everywhere. During the period 900 to 1,100 AD, the people of Cambodia had built many temples. Ten of the largest and best-preserved are fine tourist attractions. They are so large and elaborate that their construction and maintenance took very many workers who were directed by a large elite of priests and politicians. Many peasants were needed to feed these workers and elites.

What caused this society to lose its ability to maintain these temples and turn them into today’s still spectacular ruins? A guide explained that it used to be believed that prolonged and destructive warfare with neighboring countries was to blame, but that recent research by respected archaeologists has discovered strong evidence that the main cause was climate change – a prolonged drought reducing agricultural output dramatically. If this explanation is correct, cosmic forces must have been responsible since green-house gases emissions by humans at the time were trivial. Might such forces also be the main driving force behind the current global warming?

The author is Emeritus Professor Economics, Simon Fraser University and a Senior Fellow at the Fraser Institute.
He was a member of the Reform Party caucus in the Canadian Parliament in 1993-97. His political experience and professional career are described in “A Professor in Parliament”, published in 2000. Copies of the book can be obtained from the author at the cost of postage by writing to herbert.grubel@shaw.ca.

1 comment:

  1. Thank you Herb fir this excellent writtenreport. I habe 3 observations: We westerners always thinj that history is important. Asians just do not think so, they concentrate on the future and di not want to burden themselves with the past. Second, you do not mention corruption in VN which is well known to be a big problem. Last, VN is at present the main target country in Asia to attract foreign investment which tries to get out of China because of encreasing labour and other costs in China and in order to diversify production locations. . If VN would be able to takkle corruption better, it could even profit more from this shift away from China.
    Keep going Herb, always since decades stimulating to read you!
    J├Ârg Al. R. former CH Amb to SIN and ROK

    ReplyDelete