WE FORESEE TO WIN
NOTHING IS PERMANENT EXCEPT CHANGE

THE POWER OF CHANGE
Vietnam Investment Review, June, 2004;
In 1971, at the height of American War, Vu Ly, then just 18 years old, left Vietnam for the former Soviet Union to study commerce in one of the most well-known universities of the cold war area, the Moscow Government Institute of International Relations, MGIMO (Under the Ministry of Foreign Affairs of the former Soviet Union);
After five years, he described as a “socialist heaven”, Ly returned from Moscow with a distinction pass in his commerce diploma, intent on doing goods for his country, reunited just two years before.
With their revolutionary heroism still flushed with the success of defeating the US, the Vietnamese communists announced they would lead the country’s advance to socialism, bypassing the stage of capitalist development.
“To do this, they need a well-trained, well-educated population”, Ly said.
Vietnam was in serious need of university lecturers and teachers and so Ly was able to find work at Hanoi University, where he taught international economics until he joined the army in 1981.
TOUGH TIMES
In late 1970s and early 1980s, Vietnam was hit with economic sanctions over its border conflicts with Cambodia and China, compounding the isolation that had begun with the US embargo in 1975.
Prolonged economic recession made the life of all Vietnamese people, including Ly’s family, extremely difficult.
“At that time, my family had to share a 12-square-metre room with my wife’s sister who had just got married”, Ly said.
There the families cooked their meals, ate, slept and parked their bicycles.
“We were all in one room”, Ly said. “It was a big step forward in terms of space for sleeping because before my three - member family lived in a 6sq storeroom of the college. However, it was a one kilometer step backwards for our sex life because our bed was only 20 centimeters from the young couple’s bed which was only separated from ours by a curtain.”
Ly earned a living for his family giving economics lessons, which he prepared on his bed and translating books.
He earned extra money buying fish and soya-sauce ration tickets and then queuing up at Hom market in Hanoi to collect the goods to sell back in his home village near Huong pagoda area, 50 km from Hanoi.
“It was illegal to do that then,” Ly said, “but I wasn’t scared. What did worry me was being seen by one of my students carrying full tanks of soya-sauce, sweating profusely- although I had disguised myself very carefully.”
HEAVYWEIGHT CHANCES
Economics contractions and an enormous drop in living standards, forced the Vietnamese government to reform by introducing the market economy model into the country.
In 1987, the government introduced its first Foreign Investment Law, hoping to lure money into the country to replace aid from the Soviet Union-led bloc, a supply of money that was shrinking fast as the bloc slipped further and further into political and economic chaos. The supply dried up completely two year later when the bloc – Vietnam’s sole political and economic ally – collapsed entirely.
The reforms presented a golden opportunity for business-minded people like Ly, who left Hanoi for Ho Chi Minh City, the country’s business center, where some of the population had gained experience of the capitalist economic model under the Americans in the 1960s.
Ly worked as a business advisor for various “companies, including Viet Tien Garment Company, Dai Thanh credit institution, Golden Desire and Tung Shing Companies from Hong Kong, who later developed the Hanoi Hotel and Viet Tien –Tung Shing Square in Hanoi. Ly also lectured at the International Economics School, an arm of the Ministry of Trade.
“In the early 1990s, there was no college at all, let alone university, that was teaching international trade in Ho Chi Minh City”.
Ly was one of the first people to teach marketing as a subject in Vietnam in the post – American period.
“Socialist economics do not pay any attention to marketing. In practice, a socialist style economy is not on the side of consumers. But doing business is like fishing. Before going fishing you must know what kind of fish you want to fish and what kind of bait it likes most so that you can work out the right method to catch it.”
Throughout the early 1990s, with the concept of a market economy still novel to most Vietnamese, there was strong debate among Vietnamese policy-makers and researchers about the virtues of this new economic model, particularly competition and marketing.
“Some even suggested the concept of competition should not be introduced in Vietnam in its fullest sense. Vietnamese people and particularly employees of state-owned enterprises were encouraged to work well, not to maximize profit or for themselves but for the “general ideals” of their community, work-place and the entire country. In Vietnamese we call this thi dua”.
“It was a compromise”, Ly explained. “At that time, my understanding of marketing was “no profit maximization, no marketing”.
“I preferred to let the term marketing keep that meaning, but others tried to construe more along the lines of a way of approaching the market”.
Ly was concerned about how to apply modern marketing theories in such an “agricultural, underdeveloped and inward-looking economy” such as Vietnam’s was at that time.
Foreign investors began showing an interest in Vietnam in the late 1980s. With only $1.5 billion committed between the introduction of the Law on Foreign Investment in 1987 and 1991, investment surged to $8.6 billion in 1996.
With a good command of English, and expertise in market economics and law, Ly abandoned the state sector in 1994 to set up his own consultancy firm specializing in advising foreign investors.
One of his first clients, Fujitsu, the only PC main board producer in Vietnam, has been described by the Vietnamese investment authorities as the most successful foreign-invested enterprise in the country.
Challenges ahead
When asked: “what was biggest hurdle for the development of the private sector in Vietnam”, Ly said it was the prejudice against the private sector held by most government officials.
“The state-owned firms are treated like the government’s own children, domestic private firms are treated as adopted children and foreign-invested companies are treated as half-castes.”
“The government favors the state sector even though it is ailing”. This government bias has meant the state sector has not developed in a healthy manner, despite its dominant position in the Vietnam economy. Last year, the state sector contributed 38.33 per cent of the nation’s gross domestic product.
When asked: “what was the biggest problem relating to the development of the state sector in Vietnam”, Ly said it was waste and corruption, “of which waste is much more dangerous”.
As an advocate for the government’s policy of leveling playing field for all market players and giving equal treatment to all economic sectors, Ly is fond of reciting a version of a famous statement made by former Chinese leader Deng Xiaoping.
Xiaoping said: “It doesn’t matter if a cat is black or white, as long as it catches the mouse”.
Ly prefers: “Whatever its color, the most important cat is the one that catches the most mice.”
“The role of any economic sectors should be assessed on the effectiveness of their use of resources”, Ly said.
“From an economic perspective, resources are limited but people’s needs are unlimited. How to satisfy such needs is a big headache for any government, and it is the true meaning of economics as a science”, Ly said.
As many senior Vietnamese Government officials favor the state sector, the waste of resources and ineffectiveness in the existing socioeconomic model are much more alarming than the corruption within the state apparatus.
“In the long run, bribes will just be transferred from one pocket to another. The money doesn’t disappear. In contrast, if resources are wasted, we lose those resources forever.”
To the policy makers and scholars from all over the world who were in Vietnam last week to exchange their experiences of transition economics and to discuss the application of gradualist or shock therapies in transition economies, Ly put it most simply “Gradualism and shock therapy are just different approaches to solving the same problem in different political, social or economic scenarios. What matters here is how to identify which problems would be solved step by step during the transition process”.
Ly’s wife and two children now live comfortably in a modern five-storey, 420 sqm home in the center of Ho Chi Minh City. Ly drives Mercedes. His oldest son has finished studying banking and finance in Australia and his second child is in the first-year of law school in Ho Chi Minh City and will eventually study for master overseas.
“As integration into the world market is now officially recognized by the Party and Government of Vietnam as inevitable, legal and financial services will be very useful for Vietnam’s businesses in the coming years.”
Asked what he has advised his children, Ly said: “I told them to follow the meaning of the logo of my company – Thao Ly Consultants: global expertise plus local experience. This is my wisdom for a vitality and development of any person or any business in Vietnamese market.”
Should you require any further assistance or clarification please feel free to contact us.
Tks and best rgds
LY,VAN VU (MR)

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