HUE - Global economic gloom has taken the spending spirit out of Vietnam's
annual Tet festival, signaling a tough year ahead for the transitional economy.
Sales normally soar for Vietnam's entrepreneurs and larger retailers in the
weeks leading up the lunar new year, akin to the Christmas shopping season in
the West.
Domestic demand over Tet is normally four times higher than the rest of the
year as Vietnamese traditionally flock to markets to purchase extra food, peach
blossom decorations and special outfits to wear during the celebrations,
according to a representative of Metro Cash & Carry, one of the top modern
retailers in the country.
But not this year, say entrepreneurs and economists, as the
Vietnamese ring in the Year of the Ox with noticeably less flair and fanfare
than previous celebrations. While extravagant lights and decorations go up
around Hanoi and Ho Chi Minh City, the national economy is sputtering: gross
domestic product (GDP) grew a disappointing 6.2% last year, marking a 10-year
low. The International Monetary Fund forecasts a further slackening to 5% this
year.
"Last year, many people were out selling things - New Year flowers, chairs.
This year it's empty," said Trung Nguyen, a street-side merchant in the central
city of Hue. "The poor are poorer and the rich have less money."
The slowdown is already showing up in national consumption figures. Hanoi and
Ho Chi Minh City residents have spent 20% less on food supplies leading up to
Tet compared with the same period last year, according to the Information
Center for Agriculture and Rural Development.
"Certainly, many families are concerned about the prospects for the economy in
2009," said economist Jonathan Pincus, dean of the Fulbright Economics Teaching
Program in Ho Chi Minh City. " .. they are watching their spending a bit more
closely."
That's the case for 32-year-old hotel manager Pham Thi Thang. Last year she had
enough spare cash to repaint her house and purchase new clothing for the entire
family. This year, she said it's tougher to make ends meet since her husband
recently lost his job at a garment factory. Only her daughter will receive a
new outfit.
Her boss, meanwhile, said the hotel will not give Tet bonuses or raise salaries
this year, despite 20% year-on-year inflation last year. "This year the
celebrations will be smaller because of the economy," she said.
Business confidence reflects those sagging spirits. The 2009 Grant Thornton
International Business Report, which surveyed senior executives from more than
7,000 private Vietnam-based businesses, found optimism in the economy dropped
to 31% in 2008, down from the 87% recorded in 2007. "This shows that people
will be less likely to spend money," Grant Thornton's Vietnam spokesman Khuyen
Bu said in e-mail correspondence.
Bad economic news is front-page fare in nearly all domestic newspapers, despite
government control and censorship of the media. Half of Vietnam's 350,000
small- and medium-sized businesses must restructure to survive, the Vietnam
Investment Review reported this month in an issue in which nearly every page
contained bleak news, summed up by the page 10 headline: "A dark outlook for
2009."
To cushion the blow, the Communist Party announced a US$1 billion stimulus
package aimed at reducing interest burdens, lowering import taxes and handing
200,000 Vietnamese dong (US$12) to each member of households earning less than
$60 a month.
"The grant is designed to help disadvantaged families to welcome the upcoming
traditional lunar new year," the party announced on its web site. However, the
Tet bonus will total only about $200 million, according to the party's press
release, meaning that less than 4 million of the country's 86 million people
will receive the one-off payment.
"The proposal to provide cash grants to poor families is admirable but unlikely
to have a significant effect on the macro economy," said economist Pincus.
"Vietnam relies heavily on export demand, which was already falling off at the
end of 2008. The total value of exports in 2008 was close to $60 billion. It is
unlikely that a $200 million fiscal injection would do much to replace external
demand if exports falter."
Asked what she thought of the 200,000-dong bonus, the gift store manager in a
five-star hotel in Ho Chi Minh City wrinkled her nose and shook her head. The
amount might buy 10 kilograms of rice, she said, which might last 10 days when
split among herself, her husband and her two-year-old daughter. "It's a small
amount, only good for the spirit," she said.
The government is also resorting to economic nationalism. According to the
state-run Vietnam News Agency (VNA), the Communist Party has since this month
sought to boost demand for "Made in Vietnam" products. Either by choice or by
coercion, supermarkets added 5% to 10% more local products to their shelves in
the run-up to this year's Tet festival.
Foreign retailer Big C claimed to stock 90% of its inventory with Vietnam-made
goods, while Metro Cash & Carry grocery store "prioritized domestic
products with attractive positions in retail displays", according to VNA.
It's not clear those nationalistic measures will hit the mark, however. A wide
range of Vietnamese consumers told Asia Times Online that they're buying less
of everything, not just fewer international products, and that markets from
Hanoi to Ho Chi Minh City are visibly emptier than this time last year.
Tourism, a recent strong economic driver and foreign revenue generator, is also
showing signs of weakening. International arrivals to Vietnam increased by just
0.6% in 2008, down from the 14% growth seen in 2007, according to the General
Statistics Office.
Nguyen Thuy Ngoc Quynh, manager at Hue's La Residence Hotel & Spa, said,
"Normally this time is very good for us, because we see all our family members
and we see all of our friends." Total bookings at her hotel were down 20%
year-on-year, even as recent guests included Chelsea Clinton, daughter of
former US president Bill Clinton, and Greek President Karolos Papoulias.
Management is in turn withholding bonuses, dampening the season's usually
festive mood. "Last year, we had a big party. This year, we'll have a little
party," she said.
Nguyen Phuc Luu, an official with the state-run Vietnam Tourism Association,
said at the annual Association of Southeast Asian Nations (ASEAN) Trade Forum
hosted earlier this month in Hanoi: "Everyone is affected."
Rising prices are also making Vietnamese more cautious with their money, says
World Bank's country director Martin Rama, even as per capita income climbed to
$1,024 in 2008 from $833 the previous year.
"Very few Asian countries went above 20% inflation [in 2008], and Vietnam
reached 28%," Rama said in a recent telephone interview. "It affected the
purchasing power of people in wage earnings, particularly in cities. It
affected migrants working in industrial parks and sent many of them home."
With many unemployed migrants set to return to the countryside to celebrate
Tet, analysts wonder how many will opt to stay home rather than return to the
cities and struggle to find work. Some say that because the global financial
crisis has crimped demand for rural-produced products, including rice, and
reduced farmers' incomes, rural areas may not have the same absorptive capacity
seen in the aftermath of the 1997-98 Asian financial crisis.
"The real test is what will happen after Tet," Rama said.
Stephen Kurczy is a Cambodia-based journalist.
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