Asia Time Online - Daily News
Asia Times Chinese
AT Chinese

    Southeast Asia
     Jan 27, 2009
Downcast Tet in Vietnam
By Stephen Kurczy

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.

(Copyright 2009 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

Vietnam tested on reform resolve
(Jan 9,'09)

Vietnam counts cost of development
(Dec 18,'08)

1. The temptation of dollar seigniorage

2. Fixing the bank crisis is the easy part

3. President Oxybarama

4. Obama adds diplomatic dynamite

5. Ivory tower nonsense

6. China's modern muscle on parade

7. Tearing up the US's Middle East playbook

8. Pakistan's shift alarms the US

9. Kabul's rift with the US widens

10. All hail to the ox

(Jan 23-25, 2009)

asia dive site

Asia Dive Site

All material on this website is copyright and may not be republished in any form without written permission.
© Copyright 1999 - 2009 Asia Times Online (Holdings), Ltd.
Head Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East, Central, Hong Kong
Thailand Bureau: 11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110