ââ‚¬Å“Las Vegas in Hanoi.ââ‚¬
That sign greeted 800 people at a Vietnam investment forum this week, and it was a head-turner. It was impossible to miss the irony of a gambling lounge next to the hotel ballroom where very earnest discussions took place about an economy thatââ‚¬â„¢s become too casino-like for comfort.
Yet I met no shortage of investors still willing to gamble on Vietnam, and thatââ‚¬â„¢s a good thing. Bubbles and uncertainty aside, donââ‚¬â„¢t lose sight of Vietnamââ‚¬â„¢s vast potential ââ‚¬" including joining Brazil, Russia, India and China as one of Goldman Sachs Group Inc.ââ‚¬â„¢s ââ‚¬Å“BRIC nations.ââ‚¬
To me, Vietnam is very much a long-term buy. Vietnam will be rich someday, an argument you canââ‚¬â„¢t make about many emerging nations. The only question is whether it will take 10 years or 20 years, and whether you are in on the dynamic.
Thatââ‚¬â„¢s not the story one reads in the international media. There, itââ‚¬â„¢s a tale of woe, missed opportunities and another 1997-like financial crisis. That also goes for how investorsââ‚¬â„¢ views have evolved ââ‚¬" or devolved.
Take Mark Mobius, Templeton Asset Managementââ‚¬â„¢s chairman. In December 2008, he said, ââ‚¬Å“if you look at Vietnam, the market has really come down substantially, and it looks very, very interesting.ââ‚¬ More recently he said that among Asian stock markets, ââ‚¬Å“the biggest risk now is Vietnam.ââ‚¬
Such worries are overdone, even with stocks up almost 60 percent this year. Recent volatility is worrying those who flocked to Vietnam in recent years. Those capital inflows turned the $91 billion economy into hot-money central. Its relatively open financial system and flexible currency made Vietnam a hotbed of speculation.
Government policies havenââ‚¬â„¢t always helped, and last week was a case in point. The government both raised interest rates and devalued the dong to cool inflation, confusing many. Bad infrastructure is also limiting growth.
Yet 30 minutes with officials like Nguyen Huu Tu restores oneââ‚¬â„¢s faith that the government gets it. As deputy chief of the Central Communist Party Committee Office, Tu is anything but shy about frankly listing Vietnamââ‚¬â„¢s challenges.
ââ‚¬Å“Vietnam has faced the bubble threat,ââ‚¬ Tu says. He points out that the solution is creating a more balanced economy, deeper and more liquid debt markets and increased corporate transparency. Far from panicking, he sees Vietnamââ‚¬â„¢s latest bout with capital flight as an opportunity to learn and recalibrate policies to make the economy more predictable.
Itââ‚¬â„¢s a sign Vietnam is dreaming with the BRICs. Sure, one can argue itââ‚¬â„¢s a hollow marketing slogan that has little bearing on an economyââ‚¬â„¢s prospects. The grouping has still captured the imagination of investors the world over.
Itââ‚¬â„¢s no small thing that Vietnam has been named by Goldman among the 11 contenders for the next wave of BRICs. The others are Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philippines, South Korea and Turkey. This nation of 86 million people thoroughly deserves a place on Goldmanââ‚¬â„¢s list.
In a world of economic gloom, Vietnam is holding its own. It will probably grow well above 5 percent this year ââ‚¬" OK, not exactly China-like growth, but the kind of performance of which the US, Europe and Japan can only dream.
Itââ‚¬â„¢s better to think of Vietnam not as hot-money central, but lingerie central. The reason some foreign investors refer to Vietnam as such is its key role in manufacturing womenââ‚¬â„¢s underwear for companies like Victoriaââ‚¬â„¢s Secret and Wacoal Corp. Textile and apparel jobs are helping to raise Vietnamââ‚¬â„¢s living standards.
Such industries will thrive only if the macro story remains intact.
That will require big tweaks to the micro-economy. Itââ‚¬â„¢s about keeping bubbles and hot-money flows from derailing the economyââ‚¬â„¢s broader evolution.
Success would win Goldmanââ‚¬â„¢s blessing, bestowing a seal of approval that could pay huge dividends. Wall Streetââ‚¬â„¢s premier securities firm has bought stakes in companies like napkin and diaper maker Diana Joint-Stock Co., yet it hasnââ‚¬â„¢t opened an office in the country.
Of course, given Goldmanââ‚¬â„¢s public-relations problems, some Vietnamese may have reservations about it hanging a shingle in Hanoi or Ho Chi Minh City.
The thing about Vietnam is it likes to pursue globalization at its own pace.
Walking the streets of Hanoi leaves no doubt Vietnamese are hungry for their share of global prosperity. Vietnamese want the good that comes from the increased movement of capital, goods and people. They just donââ‚¬â„¢t want a McDonaldââ‚¬â„¢s or a Starbucks on every street.
Vietnamââ‚¬â„¢s steady yet slower pace of opening to the world makes sense. It wonââ‚¬â„¢t become a financial center anytime soon ââ‚¬" not with the head start enjoyed by Singapore and Hong Kong. Given Vietnamââ‚¬â„¢s level of development, adding manufacturing jobs is more important. It provides a base from which Vietnam can move up the value chain.
Developing the financial sector is vital. Itââ‚¬â„¢s just better right now to be a hotbed of lingerie production than speculation. Even Goldman might agree.
By William Pesek*
*William Pesek is a Bloomberg News columnist.