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Vietnam FDIB Participant Describes Experience (Part 1)
Twenty-two faculty members representing 17 institutions participated in the inaugural Vietnam FDIB program.
Ingo Holzinger, an assistant professor of organizational behavior at York University in Toronto who holds a Ph.D. from the Wisconsin School of Business at the University of Wisconsin-Madison, participated in the 2009 Vietnam FDIB. He sent a series of e-mails to his students while he was in Vietnam, including the following one from early in the trip.
Dear students,
Vietnam is a fascinating country with a rich history. Before preparing for this trip, I knew fairly little about Vietnam. Of course, I had some knowledge of the Vietnam War (or, as the Vietnamese call it, the American War). I knew about French colonialism in Vietnam. I knew that the Socialist Republic of Vietnam had a Communist government. And I knew that the Vietnamese economy was in transition, posting some very impressive growth rates over the past 10 years. Well, I found out quickly that I was not very well prepared for the richness and diversity of experiences I would encounter here.
The Vietnamese economy is in transition. Since introducing doi moi, or economic reform, in 1986, Vietnam has developed a system of market-oriented socialism, allowing for private business ownership and, eventually, foreign direct investment (FDI). After some growing pains, Vietnam posted very impressive economic growth rates of more than 8 percent on average for the past 10 years. Vietnam quickly developed into the new darling of foreign investors in Asia, leading to booming real estate and stock markets, and the growth of a plethora of high-tech, low-tech, and no-tech industries. Those developments accelerated dramatically in the past few years. For example, foreign cash inflow (FDI and portfolio investments) grew from US$4.5 billion in 2006 to US$15 billion in 2007. Can you say ”bubble?”
There has been much talk about real estate, consumption, and investment bubbles in the North American press lately. Yet, what the U.S. or Canada are experiencing is nothing compared to the developments here. According to Jonathan Pincus from the Harvard Kennedy School Vietnam Program who spoke to our group, the inflow of foreign capital created disproportionate credit growth which led to an inflation rate of more than 20 percent in 2008. Real estate prices throughout the country rose by between 145-200 percent in 2007 alone. Not surprisingly, Vietnamese and foreigners alike jumped onto the bandwagon, which lead to a wealth effect (an increase in spending that accompanies an increase or perceived increase in wealth) and ultimately the bursting of the bubble.
Vietnam experienced slowing growth (still 6.5 percent in 2008) for the first time in a decade— a shock for all. The economic outlook calls for even slower growth in 2009. And the slowdown is visible. There are many building projects in Ho Chi Minh City (Saigon) and Hanoi at a stand still because of the credit crunch and inflated prices. Businesses have laid off employees. Some store fronts, although not many, are closed. This is yet another transition which the Vietnamese have to get used to. From a management of change perspective, Vietnam is an absolutely fascinating country.
TO PART 2