Article / 08 March 2016 at 14:00 GMT

Fast-growing Vietnam looks to Thailand

Former managing editor, / Saxo Bank
  • Vietnam emerging as one of the fastest-growing economies in north Asia
  • Tourism fueling Vietnamese GDP growth of 6.7%/year
  • Thailand offers Vietnam the benchmark for tourism development
  • Professionalisation of sector still lagging as Da Lat tragedy in February shows
  • Hanoi needs to keep pushing free-market reform programme
  • War legacy impossible to downplay in Vietnam's identity and development


To boldly go where no foreign tourist boat has gone before: Photo: Martin O'Rourke

By Martin O'Rourke

Courtesy of the rigidly adhered-to work/life balance philosophy that, along with clean air, bright summers and smørrebrød, comes as one of the major pluses of life in Scandinavia, I've just had the good fortune to spend the best part of February in Vietnam. 

Of course, I was there as a tourist but at the same time, I wanted to get a feel for one of Asia's faster-growing economies and to get a sense of where this 90-million strong country might go now that it has truly thrown off the shadow of the Vietnamese war (more of that later) and made its way towards a free-market economy.

Now, let's get this straight from the off. The Vietnamese dong is unlikely to cause a flutter on global forex markets anytime soon. One US dollar does after all come in at a quite ridiculous VND 22,291.

Likewise, the Ho Chi Minh stock exchange established in 2000 is hardly yet a darling of global investors with rules governing the access of foreign invested joint venture companies a significant bar to entry. 

Nevertheless, foreign direct investment stood at a record-high $14.7 billion for 2015, according to official statistics, up from $9.2bn in 2014. 

The ruling communist party is also treading with ever more confidence towards throwing off the shackles of a controlled economy even if the process is laborious and frequently involves a two-steps forward, one-step back approach.

Despite this cautious progress, Vietnam's star is on the climb. While GDP growth is admittedly from a low base, it rose 6.7% in 2015 and that figure is likely to be replicated this year. Over the next five years, Vietnam could hit the kind of GDP growth rates that had the market fawning over China some 10-15 years ago. 

Such figures are, in the context of a general global macro slowdown led by an ailing China, not something to be sniffed at.


 Vietnam's youth have spurned the humble bicycle in favour of mopeds as levels of income rise, but that is also contributing towards a pollution issue that might one day rival China's woes. 
Photo: Martin O'Rourke

Hello 2020

The ruling party in late January unveiled a new five-year plan that aims to lift GDP/capita from $2,171 in 2015 to as high as $3,500 in 2020 while keeping strict tabs on inflation at a maximum of 5% and a 4% cap on the budget deficit.

The plan released on January 25 helped lift the VN Index to a 4% rise and its biggest one-day surge in nearly four years with investors turned on in particular by a pledge for greater support of private business.

At the time, party general secretary Nguyen Phu Trong said "the private sector is an important engine of the economy", underlining a desire to take Vietnam's development to the next level and increase private consumption.

Of course, much of the growth in private consumption in the last decade or so has been driven by tourism. Vietnam as a tourist destination has much to recommend it with stunning landscapes and buzzing metropolises like Ho Chi Minh, capital Hanoi and Da Nang offering visitors a wealth of attractions and exotic food to savour.

The World Travel & Tourism Council cited 7.7% of Vietnam's workforce owed their jobs to tourism in 2014 with more than 4 million working in the sector in some form or other. 

The council slates that to rise just shy of 5 million jobs by 2025.


An enterprising vendor drifts in and out of the floating market flotilla near the city of Can
Tho on the Mekong Delta 
to sell iced-coffee to customers. Photo: Martin O'Rourke
The Thai example

Similarly, the contribution of tourism towards GDP is expected to near double from 2015's $17.8 billion to $32.5 billion in 2025, a little shy of 10% of overall GDP. Tourism near quadrupled from just over 2 million in 2000 to 8 million last year, according to the Ministry of Culture, Sport & Tourism, and a similar leap in numbers could be on the cards as Vietnam cements its reputation as a must-see destination.

To put that in context, Thailand, the benchmark for tourism in southeast Asia, took in 30 million tourists last year for a return of $66 billion and by 2025, will almost double that to $127 billion. Tourism in Thailand currently makes up 19.2% of GDP, according to the council, and that will rise to 25% by 2025.

By that measure, Vietnam has a long way to go and that might be exactly why it is beginning to look like such an attractive investment opportunity. Having spent the best part of four weeks travelling the length and breadth of the country, it is most definitely not Thailand in terms of tourism infrastructure as the sad death of three British tourists at Da Lat last month testifies to.

Da Lat has been taken off the tourist itinerary in the aftermath of that tragedy as the country begins its probe into the health and safety lapses that led to the tourists' demise.

Despite that (and such a tragedy should never be belittled), the sector has been slowly maturing with a professionalisation of the industry clearly underway via a number of university-run catering and tourism degrees. 

Perhaps the greatest selling point the Vietnamese enjoy is the people themselves. Friendly and helpful to a tee, they have something in common with their Thai neighbours and will no doubt come to match them in service quality (they are not quite there yet) over the course of the next decade or so.

They've also got terrific coffee and perhaps have the only really genuine coffee culture in southeast Asia or, to put it more correctly, the most entrenched one. Vietnam's robusta coffee has become highly sought after on global markets with overall coffee exports set to rise 30% to 28.7 million bags in 2015-16, according to the Financial Times.


Vietnamese coffee and condensed milk.
Sounds disgusting — tastes lovely. Photo: Martin O'Rourke

The war legacy

There is also another point that this is difficult to ignore with Vietnam. 

While there is something of a cultural divide between north and south — no doubt exacerbated by the war — but also owing something to the north's closeness to China and the legacy left behind in the south by the French, there is also a universal pride in Vietnam's astonishing war effort against the US that binds the nation together.

The war cost some 3 million lives including those of 58,000 Americans, although estimates do vary. The US spent some $168bn on the war effort and propping up the regime in Saigon (as it was then known) with total costs estimated to have risen to as high as $900bn, according to the Asia Resource Center, once payouts to veterans and ongoing costs are factored in.

For an assessment of its impact on the Vietnamese side, an hour or two inside the War Museum in Ho Chi Minh is an awe-inspiring experience although not necessarily for the faint-hearted as the section on the fallout from Agent Orange demonstrates.

The museum demonstrates that costs to Vietnam are probably incalculable. The less said about the use of chemcical warfare the better, but the healing of relations between the US and Vietnam exemplified by the re-establishment of diplomatic ties in 1995 has helped bring some end to the pain.

It may well be that this fiercely proud identity forged in war could be the key to Vietnam's development over the next few decades. 

Nationalism is an intangible and when unbridled, can be deeply unpleasant. In Vietnam's case, however, the balance looks right. 

If there is resentment towards foreign invaders, it is extremely well hidden. French and US tourists are welcomed with open arms (they do have money to spend after all) and the country clearly seems to have taken a collective decision to look forward.

Expect big things from this corner of southeast Asia over the next 20 years or so. Vietnam's coming.

The 250 km-long network of tunnels at Cu Chi outside Ho Chi Minh were the staging ground for Vietnam's astonishing resistance and is now a major tourist tick-off box. Photo: Martin O'Rourke

Martin O'Rourke is managing director at


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