Of all the countries I visit each year, Vietnam always stands out as the place where the most change occurs in the least amount of time. The skylines of both Hanoi and Ho Chi Minh City (HCMC) are under rapid development (see nearby photos). Yet for all the change, I was also struck by how both cities – especially Hanoi – seem to be doing a remarkably good job of preserving the quality of life for average citizens. I was so pleased to see multi-generation families gathered in various parks in the evening, or sitting by the banks of “Sword Lake” in downtown Hanoi. One of my favorite discoveries in Hanoi was what the painted squares on the sidewalk were for: pop-up public badminton courts. In the hours between dusk and dark, citizens set up nets spanning these makeshift courts, and played with family and friends – usually multiple generations surrounding one court.
I am also always impressed with the sheer entrepreneurial drive of the Vietnamese: pop-up stores for goods and services were everywhere along the roadside. Individuals bring fresh produce to the market, fix shoes, repair scooters, make keys, or outfit your wardrobe, all from the back of a bicycle.
Contrasted against that honest, entrepreneurial drive, I saw signs of hubris among a handful of corporate entities. In particular, I visited one formerly sleepy, government-run company that had been transformed under new private ownership. The new managers – formerly investment bankers, I understand – were pushing their new subsidiary to boost production capacity to an absolutely shocking extent. The management at the parent company told the subsidiary not to worry about the prospect for excess capacity, as they would find new markets for their wares, mainly overseas. On one hand I could not help but admire the ambition this represented; but on the other, the drive for expansion seemed so extreme as to be irresponsible. There is a chance this will work, but my best guess is that the expansion will end in financial disaster. Yet the managers of the parent company are astute when it comes to investor relations, and I am sure they will market their plans well among investors who are hungry for growth. I wonder how sustainable that growth will be in the end.
I am pleased to see that after several false starts, Vietnam has undertaken the first (and most critical) step to clean up its banking sector: the government has launched a special purpose company that will carve out the bad assets in the sector from the good. In the process, the scheme is designed to effectively re-capitalize and re-liquefy the banks. Details can be found in this news report from Bloomberg.1 I may be missing something, but personally I think this is the cleverest scheme to manage bad assets that I have seen in my career, for reasons too long to address here. In fact, I think the Eurozone could learn a thing or two from the Vietnamese about how to heal an insolvent banking sector. Though the road to reform in Vietnam is a bumpy one with many detours, this sort of clever plan illustrates why I am so hopeful for the country’s future.
Ho Chi Minh City
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- Bloomberg News, “Vietnam to Force Banks to Sell Bad Debt to Asset Company,” 16 May 2013.