Vietnam: Emerging Problems for an Emerging Economy

Whenever starry−eyed investors knock on his door at the Vietnamese embassy in Washington, D.C., Tung Nguyen, the deputy chief of mission, is sure to inject a dose of reality into their sunny optimism.

“I have to cool them down, because things are not that rosy in Vietnam right now,” Mr. Nguyen told a roundtable at the Fletcher School of Law and Diplomacy last month.

Vietnam has certainly made great strides over the past few decades, digging itself out of the ravages of war, pushing for economic reforms and pulling an astonishing 40 percent of its population out of poverty. The Goldman Sachs and HSBCs of the world have boldly included Vietnam in their catchy lists of future emerging markets, citing its robust economic growth (7 percent per year on average), well−educated and young populace and stable political system.

Yet a gloomy shadow has recently descended upon the rising dragon. Vietnam has struggled to restore investor confidence amid stubbornly high inflation, ballooning trade and fiscal deficits and an ever−weakening dong. Its large, unwieldy, state−owned enterprises still have an iron grip on the economy despite their inefficiencies and abject recent failures. The government continues to round up dissidents and suppress media freedom, an authoritarian streak that manifested itself most recently when a U.S. official in Vietnam was roughed up while attempting to visit a dissident Roman Catholic priest. Most worryingly, the Communist Party elite appears to be turning Vietnamese capitalism into a family business through powerful, corrupt networks.

These problems are not intractable, particularly for a resilient nation like Vietnam, which has persevered through centuries of war and weathered several economic crises over the past few decades alone. But they are formidable nonetheless. Mr. Nguyen laments that there is “frankly speaking no political will” to battle corruption and that Vietnamese macroeconomic policy continues to be run by interest groups rather than intellectuals.

For years, Vietnam’s party elite has tried to set policy from behind the scenes and delegate implementation to the state, nudging and pushing where appropriate. Now some wonder whether the party will either be overwhelmed by corrupt forces or be underwhelmed about redistributing wealth from its wealthy supporters to the poor.

To their credit, Vietnamese leaders have recently hiked interest rates and slashed the dong to control inflation, which hit an alarming annual rate of 12.2 percent in January. Yet many believe that deeper changes are required with regard to corruption, government spending and the state sector in order to avert a financial crisis. They were disappointed when the Communist Party’s five−yearly congress concluded earlier this year with an unwavering commitment toward maintaining heavy state involvement in the economy and remain unconvinced that the government has decided to put tackling inflation ahead of stimulating growth.

In his declaration of independence speech in September 1945, Vietnam’s revolutionary hero, Ho Chi Minh, spoke colorfully about “mobilizing” all the “physical and mental strength” of the Vietnamese people. That may well be the kind of energy the Vietnamese government needs to confront the emerging problems that it faces en route to becoming a major economic power.

This article was originally published here for the Tufts Daily.

Malaysia: Not So Truly Asia

I’ve published a brief, basic piece for the Tufts Daily on Malaysia that is available here. I am also re-posting it below.

With the exception of a few blank stares, I get a pat on the back in the United States for being Malaysian.

Middle Eastern cab drivers silence their radios and begin re−enacting former Prime Minister Mahathir Mohamad’s thundering tirades against the West. American backpackers start a play−by−play account of the vibrant shopping scene and mouth−watering food. The melting pot over at the Fletcher School of Law and Diplomacy boils over with praise for the impressive interracial harmony Malaysia has achieved between a Muslim majority and sizable Chinese and Indian minorities. Even the less−informed manage their own rendition of the famous “Malaysia: Truly Asia” advertisement.

The reality is much more sobering. The headlines recently dominating Malaysian newspapers have hardly painted delicious, harmonious or melodious pictures of the country. A Muslim woman nearly caned for drinking a beer. Muslims offending Hindus by carrying a severed cow’s head in demonstrations. Churches attacked by Malay−Muslims following a court ruling over how the word “god” should be used. Hindu temples demolished and hundreds of government detentions following protests. Sodomy charges against opposition leader Anwar Ibrahim. And, most recently, a crackdown to stop Muslim youth from celebrating Valentine’s Day.

These are images one expects in Saudi Arabia or Pakistan, not “moderate Muslim” Malaysia. Yet the truth is that Malaysia has long been a racially and religiously exclusivist country, rather than the secular, harmonious society some make it out to be. Its constitution guarantees freedom of worship. In practice, though, all ethnic Malays are considered Muslim, Muslims are not allowed to convert and non−Muslims are forced to do so if they want to marry a Muslim. Some movies portraying God in other forms, like “The Prince of Egypt” (1998) and “Bruce Almighty” (2003) have been banned, and furor erupts sporadically over concerts by “immoral” groups like the Black Eyed Peas. And a decades−old rule grants exclusive privileges to Malay−Muslims in higher education, government and the economy at the expense of minorities.

Even if not all Malay−Muslims condone them, these policies and events raise serious doubts about whether a Muslim majority can coexist equally with non−Muslim minorities and if Islam can balance communal faith and individual rights. There are already growing signs of discontent. Many non−Malays have fled the country. After the 2008 elections, non−Malays and some moderate Malay−Muslims deserted the governing coalition led by Malaysia’s ruling United Malays National Organization, where it lost its two−thirds parliamentary majority for the first time. Investors have also been spooked by racial and religious tensions.

Yet with elections looming, few expect change. Prime Minister Najib Razak, sandwiched between disgruntled minorities calling for reform and conservative Malay−Muslims resisting it, has all but shelved his grandiose plans for changing the affirmative action system. With the opposition losing steam and oil prices rising, Mr. Najib may be tempted to make half−hearted changes to win just enough non−Malay votes to regain his party’s two−thirds majority or court more conservative Malays and campaign on economic growth. But neither of those options will address the structural problems that plague the country.

Outside observers will probably continue to marvel at Malaysia for its weather, food and shopping. But, as a Malaysian, I wish I could admire my country for more meaningful things like political leadership, equality and progress, rather than the corrupt, scandal−filled and stagnant politics that have kept it from becoming a truly modern, harmonious and prosperous republic. Truly Asia? I certainly hope not.