In Vietnam, socialist ideals fading as world's businesses rush in

K. Oanh Ha
San Jose Mercury News
Buildings forming part of the skyline of Hanoi, Vietnam, are seen from the National Convention Centre. (Nhat V. Meyer/San Jose Mercury News/MCT)

HO CHI MINH CITY, Vietnam - With neatly gelled hair, a crisp lime-green shirt and a $1,000 Longines watch from America, Hoang Duc Trung is the new face of Vietnam.

The 35-year-old and his wife, an entrepreneur who sells medical equipment, vacation in Thailand and Singapore and drive to outings in a new $20,000 Ford sedan. On business trips abroad, his wife shops for Chanel and Versace couture.

"Everybody here likes Western things," said Trung, who works for a local venture-capital firm and sprinkles his slightly accented English with "Oh my God."

When President Bush and regional leaders gathered in Hanoi last week for the Asia Pacific Economic Cooperation summit, they saw a country in transition. Trung and his wife represent a new and growing class of Vietnamese - more educated, business-minded and Westernized than previous generations in this country of 84 million.

As the communist country opens the doors to a market economy and foreign investment, it's also giving rise to a new bourgeoisie, a class that was once anathema to the country's socialist ideals. In this vibrant southern city that's considered the economic engine of Vietnam and the capital of consumption, evidence of the emerging middle and elite classes are everywhere.

Despite the country's official per capita income of $750, Prada and Gucci have come to town, as well as mall culture and the demand for luxury goods. At Zenta and many other coffeehouses around town, patrons with laptops sip espressos while surfing on the Internet, free and wireless.

From the rice paddies and fields that were a hide-out for communist guerrillas during the war, a new suburban community of luxurious, Western-style homes and high-rise apartments has sprung up. Bicycles, a mark of poverty, are less common. Now roads are clogged with sedans, sport-utility vehicles and zippy, locally made scooters. The Honda Dream, a local favorite, costs nearly $3,000.

Vietnam's elite tee off at various golf clubs that have sprouted around the country, build swimming pools for their villas and send their preschoolers to international schools charging close to $10,000 a year.

When Steve Cook first began doing business more than a decade ago in Ho Chi Minh City, which most still refer to by its colonial name, Saigon, he recalls "it was like stepping into a Kafka novel."

"You could sense the fear in people's eyes," said Cook, originally from California, who lives in Vietnam permanently. "There was so much poverty and very little business activity at all. Now, it's electric here."

Through the 1990s, the most coveted jobs were at state-owned firms, while "capitalist" was a dirty word, Trung recalled. "You didn't get recognition or support from society for being a businessman," he said. "The perception was that if you opened a factory, you were exploiting workers."

Today, many of the celebrities adorning the society pages are entrepreneurs. More than 38,000 private enterprises started up in 2005, a 41 percent spike from the previous year. For the past decade, the private sector has been the major source of jobs. It helped pump up overall economic growth to 8.4 percent last year - second only to China.

Although overseas Vietnamese entrepreneurs and visitors from the United States were among the big spenders a few years ago, they're now eclipsed by local millionaires. Kim Nguyen, a local furniture designer and manufacturer, found success catering to the Asian aesthetics of foreign expatriates and overseas Vietnamese. She wants to add another line of modern, sleek furniture - favored by local Vietnamese.

"They are the ones getting richer and richer," Nguyen said. "One of my Vietnamese customers owns 100 homes. There's many people like her nowadays."

During the early 1980s, Vietnam's Soviet-style central planning led to a comatose economy that put many of its citizens on the brink of starvation. Economic restructuring, the lifting of restrictions on private enterprise and an opening market paved the way for foreign investments estimated to reach $7 billion this year - on track to beat India. Vietnam's betting that its entry into the World Trade Organization in coming months and the spotlight of being host to the Asia Pacific Economic Cooperation summit will spur more investments.

Foreign investments have created opportunities for many Vietnamese, particularly the younger generation. College graduates who speak fluent English and studied in the United States, Australia and other Western countries earn $1,500 or more a month working for a foreign firm - a fortune compared to laborers who toil in factories for less than $100.

Just five years ago, only 9 percent of the population earned more than $500 annually. That group soared to 35 percent last year, according to research by VinaCapital, a venture firm that invests in Vietnamese companies. The firm this year teamed up with Tim Draper of California's Silicon Valley to establish a Vietnam tech fund. It estimates that income levels are actually much higher than reported.

VinaCapital has a large stake in the construction of the largest shopping mall in the country, in the old quarters of Cho Lon, Saigon's Chinatown. The mall will feature a bowling alley and one of the largest movie theaters in Vietnam. An entire floor is devoted to restaurants that cater wedding banquets. The bridal industry is booming, given that two-thirds of the population is younger than 30.

The new wealth has created a widening gap between rich and poor. The three- and four-story homes in the city give way to wood and palm-leaf shacks and unpaved dirt roads just 15 miles away in Hoc Mon district. Most of Vietnam remains rural and impoverished. The government has seized the homes and land of thousands of farmers to feed a building and development boom. Hundreds of farmers held public protests in Hanoi and Ho Chi Minh City in recent months to demand fair compensation - a rare spectacle in Vietnam.

But for most in the city, this is a season of hope. Bui Ngoc Xuan, 51, makes more money than she's ever earned - $218 a month as a cook at an international school. Years earlier, her government-paid salary as a kindergarten teacher was so meager that her two oldest children dropped out of high school to work and support the family. She intends to send her youngest child to college.

"Vietnam is changing, and he will have a brighter future than any of us," she said.

Trung, who works for venture firm VinaCapital, sees a bright future in Vietnam. That wasn't always the case. When he graduated from college more than a decade ago, he, like most of his classmates, yearned to seek fortunes abroad. He eventually worked as an engineer for Microsoft in Cleveland in 2000. But he made his way back to Vietnam and plans to stay put.

"Ten years ago, many people wanted to be anywhere but Vietnam," he said. "Now the world is coming to Vietnam."






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