So I just got back from the Saigon Market where apparently my business negotiation skills are not as polished as I thought... Not to mention the taxi driver tried to rip us off royally (I blame Kathryn’s blonde hair). Pretty ridiculous but oh well. Let me backtrack and tell you about Vietnam so far...
We arrived in Saigon (Ho Chi Minh) last night and have already had a very busy Monday. We had a very interesting panel this morning with speakers from the U.S. Consulate, Citibank Vietnam, E&Y, and The Mesa Group (P&G’s largest distributor in Vietnam). The panel provided an overview of business dynamics in the country.
Vietnam is a young country. War, suffering, and starvation have wiped out much of the middle and aging demographics. Vietnam’s economy is also young. After two decades of disastrous economic policies, the Doi Moi Policy was enacted in 1986, opening up markets in Vietnam. The U.S. did not reestablish relations with Vietnam until 1995. The official stock exchange (HOSE) did not function until 2007.
From 1995 to 2008, there was a drastic reduction in poverty (from 55-70% to 13% in 2008). Per capita GDP also increased significantly during this time period. In 1995 GDP per capita was approximately $230, and in 2008 it was estimated at over $1200. However, these GDP estimates do not accurately reflect the current economic situation in Vietnam. The urban vs. rural divide is significant as 70% live outside major cities. Most of the wealth is held in the cities; for example Saigon accounts for 25% of GDP but only 7% of population. This urban/rural divide is similar to Indonesia’s landscape.
Here are a list of Vietnam’s Current and Future Challenges that I gathered from the panel this morning:
- Infrastructure (including power generation/electricity)
- Depreciating currency
- Inflation (estimated at 20% in Q3 this year)
- Trade Deficit
- Foreign Exchange Reserves
- Economy driven by domestic consumption
- Stock market (off 67% from all-time high)
- Human Resource Management and Education (pressure to employ)
- Bureaucracy, government red tape, and corruption
Let’s take a closer look at the capital flows in Vietnam. Vietnam is a cash based society. One big takeaway from this morning is the fact that is more money held in gold (an estimated $44 billion USD) than invested in the stock market. Much of the country’s wealth is held in US dollars as well. The rapidly depreciating Vietnamese Dong (VND) contributes to this, and also causes massive inflation. Another tidbit, only 30% of Vietnamese have a bank account (similar to Indonesia). Recall that in Indonesia, it is estimated that only 5 million (out of 89 million people) have credit cards. While I do not have the exact figure for Vietnam, I would imagine it to be a similar situation here.
Okay, enough business jargon for now, but I thought some of you might find this stuff interesting. I gotta go get ready for the UVA Alumni Reception that is being hosted at the Temple Club, owned by a McIntire Alum turned Vietnamese entrepreneur. Should be interesting to see how this social gathering stacks up compared to the events in Singapore and Jakarta. We are hoping to check out a rooftop bar afterwards called Saigon Saigon. Dean Z said it is pretty classy, and the servers are dressed like they are on an old Hollywood movie set. Tomorrow we have a full day sponsored by Pier 1 Imports. We met with the CFO back in Charlottesville three weeks ago, and now we are going to see some of their suppliers (Johnson Wood) as well as visit the Cai Mep Port. It will be really interesting to take a look at their supply chain from end to end. Finally tomorrow night, they are hosting a dinner and a riverboat cruise. Stay tuned for more pics, but for now, here are some pictures that I had the lovely Steve Le take for me out the window of the plane yesterday :)
