For the past few days, I saw some positive articles on the economic performance of Vietnam. First, the GDP growth rate in 2018 is the highest in 11 years, reaching 7.08%
Our trade surplus reached $7 billion in 2018
This is Vietnam’s GDP per capita compared to neighboring countries
Even though the GDP per capita is around $2,500, there is a wide gap in terms of income between cities in Vietnam. In big cities such as Ho Chi Minh (or Saigon) and Hanoi, the income level is much higher than the GDP per capita mark. When I was still working in the country back in 2014, my salary after tax was already around the $1,400/month. Granted, the living cost in Saigon and Hanoi is pretty expensive as well. In fact, students who study abroad usually complain about the high living cost in the two cities in Vietnam, given the low income in comparison with cities in Western countries. On the other hand, in other cities, an income of $300 – $400 can be considered very good. It goes to show the stark difference between cities in Vietnam.
The last time Vietnam’s GDP growth was below 5% was in 1999, almost 20 years ago. Hence, we have seen the growth rate in the region of 5-7% for almost two decades. Yet, I am not so confident in the future of the country. The infrastructure is abysmal. Here are a few photos of the infrastructure in Saigon and Hanoi that is terribly under-developed.
The country’s first metro project was started in 2007. 12 years later, the budget for the project increased by 300%, compared to the initial outlay. Yet, only 56% has been completed so far. The project can be halted in the near future if the bottlenecks are not settled.
At the time of approval in 2007, Metro Line 1 was projected to cost VND17.388 trillion. This ballooned to VND47 trillion over the years. The Japan International Cooperation Agency (JICA) shoulders 88.4% of the budget in the form of official development assistance loan (ODA).Source: saigoneer
As a Saigon native, I experienced first-hand for years the terrible infrastructure of my city. The streets were built several decades ago. Back then, there were not as many inhabitants in the city as there are now. Not even close. Fast forward, many people from poorer cities flock to the city for better career opportunities and income. More cars are bought and run. More big buses are operated. More houses are built. Yet, the drainage system and the streets in the city haven’t been upgraded accordingly. It usually took me 30 mins to commute over a distance of 10km with my scooter. The only time that the city doesn’t have traffic jam is probably before 7am and after 8pm.
From Saigon to Vungtau, a distance of 120km, it takes two hours and the travel can be pretty dangerous if you ride a scooter. In China, it takes 4.5 hours to travel from Shanghai to Beijing or vice versa, a distance of more than 1,300km. The difference cannot be bigger.
If you fly domestically in Vietnam, take my word. Either go extremely late or first flight in the morning. Any flight between 7AM and 10PM is almost guaranteed to be delayed. One of the reasons for the horrible delays is that the airports cannot accommodate the number of flights and aircrafts.
A country needs a robust infrastructure to grow. Right now, Vietnam doesn’t have that. I am not confident in the possibility that it will change any time soon in the future.
Furthermore, I am not a big fan of growing by being the source of cheap labor, being the factory of the world. It’s ok in the beginning, but it’s not sustainable in the long run. Vietnam needs to look at Singapore or Nordic countries to get some inspiration and lessons for using education and services to grow the economy. Plus, the infrastructure is amazing, at least in Finland.