Vietnam Stocks Might Be Booming, but Hanoians Are Watching Their Wallets
February 6, 2013, 1:19 PM
Nguyen Anh Thu/The Wall Street Journal
Nguyen Thuy Linh in Hanoi shines shoes for free to try to attract customers. The days leading up to the Lunar New Year Holiday, or Tet, on Feb. 10, should be among the hottest for shopping of the year. But a sour mood among Vietnamese customers is challenging sellers.
HANOI – Vietnam’s stock index is up 16% so far this year. Exports of smart-phones are booming. Even Starbucks SBUX -0.27% has finally arrived in the country, opening its first coffee store in Ho Chi Minh City this month.
But for many of Vietnam’s 91 million people, signs of the improving sentiment toward the country are few and far between,
underscoring the challenge that the country’s communist leaders face as they try to revive its flagging economy.
In the run up to the annual Lunar New Year Holiday, or Tet, on Feb. 10, retailers complain that sales are sharply down during what usually is one of the hottest shopping periods of the year.
“Sales are down at least 30% from last year and I don’t know where all my customers have gone,” says Hoang Thi Tam, who runs a stall selling sets of traditional ingredients for New Year dishes, including dried bamboo shoots, shrimp, mushrooms and lotus seeds.
“Last year, we didn’t have enough to meet demand. Many people telephoned us to deliver to their homes. I just woke up after a long nap as [I had] no customer to bother me,” she added.
Sellers of nuts, noodles and other goods find themselves short of customers at a street market in downtown Hanoi.
A saleswoman at an ECCO shoe store here says she has been offering free shoe shines in order to persuade customers to buy the Danish-branded boots. “In order to sell, we have to offer better services and care,” Nguyen Thuy Linh said, adding that her strategy appears to work.
Taxi driver Nguyen Van Dung is also struggling during what should be one of the busiest times of year. He says fewer passengers are traveling around the city to deliver New Year gifts to clients, friends or family – a common sight in years past.
The slowdown is partly attributable to a shift in shopping patterns. More Vietnamese are turning to supermarkets and convenience stores for their daily needs. And people are still buying. The
inflation rate expanded 7.07% on year in January, up from 6.81% in December.
But after
the economy grew just 5.03% in 2012, the lowest growth rate in 13 years, many Vietnamese are struggling to adjust, and their government is warning more pain is coming. Conservative-leaning President Truong Tan Sang recently said the country should accept slower growth rates while the government recalibrates its troubled economy, stating that
any growth rate above 5% a year is acceptable. That’s a sharp turnaround from the strongly pro-growth tendencies of Prime Minister Nguyen Tan Dung, who for years encouraged heavy borrowing, especially among state-owned enterprises, to ramp up spending and expansion.
The newly renovated Trang Tien Plaza in downtown Hanoi would be expected to be bustling with customers wanting to buy its popular international brands in the runup to the Tet holiday.
Economists say Mr. Dung’s policies backfired, though, driving up inflation rates and leaving a mounting pile of bad debts that are weighing down the banking sector. The central bank calculates nonperforming loans at 8.82% of total lending, although independent observers such as Fitch Ratings estimate that the true figure could be as high as 15%.
As a result,
Mr. Dung’s influence is declining while President Sang’s is increasing. And many of the country’s troubled state-owned enterprises are undergoing a difficult reconstruction.
Targeting stability over growth, though, “should help sustain the recent recovery in perceptions regarding the government’s priorities, and, consequently, the longer-term economic outlook for Vietnam,” risk consultancy Eurasia Group said in a recent report.
The problem is that the benefits might take some time to trickle down to the street markets and bazaars of Hanoi.
The Year of the Snake might not be as prosperous as many Vietnamese might hope.
