The following article provides some perspectives and insights on Vietnam and its people from a recent summer trip to this frontier market. Exploring Vietnam provided some insights on East Asian cultures and some of the cultural reasons behind Asia's global resurgence.
Vietnam is considered a frontier market or the next generation of emerging markets. Vietnam was included in Goldman Sach's Next 11 or N-11 as the next tier of emerging economies after the BRICs (a term also coined by Goldman Sachs that includes Brazil, Russia, India and China) that have the potential to be a source of sustained global demand and economic growth. Not to be outdone, The Economist came up with their own term to describe six small and growing markets that they believe are flying under investors' radars and present compelling investment opportunities. This bloc is known as "CIVETS" and includes Columbia, Indonesia, Vietnam, Egypt, Turkey and South Africa. Vietnam, Indonesia, Egypt and Turkey, or "VIET" (pun intended), were proudly included on both the N-11 and CIVETS lists.
From an economic standpoint, Vietnam is a relatively poor, frontier country. Most Vietnamese live in what the Western culture would consider economically depressed conditions in rural areas. The median Gross Domestic Product (GDP) per person (on a purchase price parity basis) is only $3k. This compares to per capita GDP of the BRIC's of Brazil $11k, Russia $16k, India $4k and China $8k.
Despite its GDP per capita coming in a lowly 130th place globally, Vietnam has a number positive developments working in its favor. (Source: CIA World Factbook, Insight Guides Vietnam and Wikipedia)
- Strong, consistent economic growth from a low base.
- Estimated 2010 GDP growth of 6.8% compared to a more modest 3% for the developed world.
- Its land mass of 331 square kilometers is about three-quarters the size of California
- Population of 90 million compared to 37 million in California.
- Vietnam's 2010 GDP was $277 million; about the same size as California's economy in 1978.
- California's GDP was $1.9 trillion in 2008.
- If California was an independent country, its economy would be ranked between seventh and tenth in the world.
- Highly stable one party political system (Communist).
- Broad economic and market reforms since 2000.
- Membership in World Trade Organization in 2007
- Bilateral trade agreement with USA.
- Member of ASEAN (Association of South East Asian Nations) Free Trade Treaty.
- Attractively located to provide basic goods and resources to large prospering neighbors.
- Indochina Peninsula, roughly east of India and south of China.
- Major trading partner with China, Japan, USA and South Korea.
- Well-educated, low cost labor force.
- Literacy rate 94% (India 61%; China 92%).
- Labor approximately 30% cheaper than China.
- Powerful Demographics.
- Youngest nation in emerging Asia (World Bank).
- More than two-thirds of the population under 35 years.
The spiritual aspects of Vietnam are those qualities regarded as forming the typical elements of the character of a nation. These traits are far more subjective than the economic characteristics but no less important in the competitive long run. The culture of Vietnam is an agricultural civilization based on the cultivation of wet rice. It is one of the oldest cultures in East Asia. Some elements generally considered to be characteristic of Vietnamese culture include respect for community and family values, ancestor veneration, handicrafts and manual labor, and devotion to study.
Vietnamese culture has been heavily influenced by the Chinese, who colonized Vietnam over 2,000 years ago. Chinese administrators and teachers introduced religion, philosophies, organizational skills and a written language.
In Vietnam, the family is the fundamental center of economic and cultural activities. Deeply influenced by Confucian principles, children are taught the importance of filial piety or respect for one’s parents and elders. The family in turn is duty bound to pay homage to its ancestors. Ancestor veneration is one of the most unifying aspects of Vietnamese culture, as practically all Vietnamese regardless of religious affiliation (Buddhist or Christian) have an ancestor altar in their home or business, a practice shared with Chinese and most other Asian cultures. A traditional Vietnamese home would typically have as many as three or four generations under one roof: grandparents, parents, married sons with wives and children and unmarried children. In the event that one family member needs money for university studies or medical care, the entire family will generally chip in to help.
The peasant farm is a pervasive element of the Vietnamese culture. In 2005, approximately 60 percent of Vietnam's employed labor force was engaged in agriculture, forestry, and fishing. Agricultural products accounted for 30 percent of 2005 exports. The relaxation of the state monopoly on rice exports transformed the country into the world’s third largest rice exporter. What is truly amazing about this statistic is that 97% of the Vietnamese rice paddies are less than 2 hectares in size or roughly equivalent to 5 acres. That's a lot of small, subsistence farms, rather than large scale, efficient farms which are prevalent in the West.
On the return flight from Vietnam I read Malcolm Gladwell's book Outliers. The chapter entitled Rice Paddies and Math Tests provided the following valuable insights about the wet rice civilizations of Vietnam, China and other East Asian cultures.
As the anthropologist Francesca Bray puts it, rice agriculture is "skill oriented": if you are willing to weed a bit more diligently, and become more adept at fertilizing, and spend a little more time monitoring water levels, and do a better job of keeping the claypans absolutely level, and make use of every square inch of your rice paddy, you'll harvest a bigger crop. Throughout history, not surprisingly, the people who grow rice have always worked harder than almost any other kind of farmer.
Working really hard is what successful people do, and the genius of the culture formed in the rice paddies is that hard work gave those in the fields a way to find meaning in the midst of great uncertainty and poverty.
Example of Vietnamese Rice Paddies
Gladwell goes on to discuss researchers at the University of Pennsylvania who can predict the order in which a country would finish in a Math Olympics test simply by giving students a task that measures how hard they are willing to work. The top five countries on the Trends in International Mathematics and Science Study test (TIMSS) given every four years to school children were all cultures shaped by the tradition of wet rice agricultural. (Vietnam was not on the list likely for the same reason as China. Communist China does not take part in TIMSS.)
The winning countries of Singapore, South Korea, Taiwan, Hong Kong, and Japan, like Vietnam are "the kinds of places where for hundreds of years, penniless peasants, slaving away at rice paddies three thousand hours a year said things to one another like "No one who can rise before dawn three hundred sixty days a year fails to make his family rich."
Throughout its history Vietnam has triumphed over adversity. Since winning independence and reunification, Vietnam has battled long and hard to overcome its painful legacy of war, economic and political isolation, and abject poverty. The Vietnamese still face many obstacles to their continued economic development - high inflation, a general lack of infrastructure, and the endemic corruption common to emerging markets. However, the Vietnamese spirit is strong. Driven by its centuries old culture of hard work and perseverance formed in the rice paddies, Vietnam will inevitably sustain its strong economic growth and development.
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