NEWS ANALYSIS: Focusing on the economy, not politics, catapults tiny Vietnam way ahead of SA
A country ravaged by years of war and considered to be one of the poorest in the world, ranks 50 out of 82 countries in the World Economic Forum’s (WEF’s) social mobility index. Vietnam in Southeast Asia, with a population of almost 95-million, far outranks SA (77th), which has battled the ravages of apartheid, but escaped a civil war when it made a peaceful transition to democracy in 1994.
The index identifies areas for improving social mobility and promoting equally shared opportunities in countries, regardless of their development. This is measured through access to health care, education, work opportunities and technology. Vietnam has been able to make a remarkable recovery, while SA with all the resources to become an African powerhouse, has fallen far behind.
Labour market developments that demand skills that the country’s poor currently lack is also part of SA’s problems, despite it spending more on education than anything else.
Vietnam has had a head start, in all fairness. It introduced a series of economic and political reforms in 1986 (referred to as Doi Moi), while SA was still in the claws of apartheid, only breaking free in the early 1990s. According to Peter Vanham, media strategist at the WEF, these reforms steered Vietnam to become a “socialist-orientated market economy”.
The World Bank, in its October overview of Vietnam, says the country’s development over the past 30 years has been “remarkable”. The economic and political reforms spurred rapid economic growth, transforming Vietnam into a lower middle-income country. Between 2002 and 2018 more than 45-million people were lifted out of poverty.
In its overview of SA, the World Bank notes that the country’s political transition is known as “one of the most remarkable political feats of the past century”. That says something. But then it adds: “SA has made considerable strides toward improving the wellbeing of its citizens since its transition to democracy in the mid-1990s, but progress is slowing.”
According to the World Bank, the slowdown in poverty reduction is partly due to “structural challenges” and weak growth since the global financial crisis of 2008. Labour market developments that demand skills that the country’s poor currently lack is also part of SA’s problems, despite it spending more on education than anything else.
The WEF social mobility index published earlier in January demonstrates where Vietnam got it right. The country is ranked 39th out of 82 in terms of access to education. SA is ranked 80th. In terms of the percentage of children who are “out-of-school” SA is ranked 63rd — Vietnam is at number 17. SA’s unemployment rate is one of the worst in the world and it ranks second-last in the world in terms of an unemployed labour force with basic education. Vietnam is 4th in that category.
Visiting Vietnam and its capital city Hanoi gives life to these statistics. The atmosphere is vibrant, the energy invigorating with young and old jostling to get buyers for mouth-watering street food, the latest smartphones and branded clothes, shoes and bags at jaw-dropping low prices.
The streets and sidewalks are filled with hawkers on bicycles, shoe-repairers and scooters picking up and delivering merchandise to the street stalls. It is the culture of haggling that fuels the energy of the city and the economy of the country. Cash seems to be king.
According to World Bank analysts, Vietnam’s economic rise can be explained by three main factors: it embraced trade liberalisation with “gusto”. This was complemented by domestic deregulation and lowering the cost of doing business. It has invested heavily in human and physical capital.
It is ranked first — with several other countries — in supplying electricity to rural areas. SA is ranked 77th. SA has increasingly raised import tariffs on anything from chicken to wheat and steel in a bid to protect its domestic market from imports — mainly from China and the EU.
Vietnam — armed with the necessary infrastructure and with “market-friendly policies” in place — became a hub for foreign investment and manufacturing in Southeast Asia. In 2017, according to a Financial Times article, Vietnam became the largest exporter of clothing in the region and the second-largest exporter of electronics. SA is a large importer of clothing from Vietnam.
In Hanoi, a pair of trousers from a well-known brand with the tag “Made in Vietnam” can cost anything from R215 down to R120 — depending on your negotiating skills. In SA, no matter what your negotiating skills are, the price is at least five times more.
The 2019 Research and Markets report on the clothing industry in SA states that our “formerly flourishing” industry has been decimated by international competition since 1994 — shedding thousands of jobs.
Vietnam outranks us on seven out of the 10 pillars measured in the social mobility index. This tiny country has had a 10-year average annual GDP growth of 5.4%. SA’s average was 1.6%. The World Bank forecasts economic growth of 6.5% for Vietnam in the next two years. SA’s growth rate has been slashed from an expected 1.5% to 0.9% for the current year.
Vietnam’s success is based on solid economic policy decisions. However, SA’s leaders appear to be more focused on political power games than on making brave policy decisions that can invigorate the economy.