Thursday, May 12, 2005

HO CHI MINH CITY, Vietnam — In the final days of the Vietnam War, Ly Ngoc Minh watched his friends pack their bags to flee. On April 30, 1975, as North Vietnamese tanks barreled into Saigon, he and his family agonized and decided they would stay.

The ceramics manufacturer was looking ahead to peacetime reconstruction, thinking he could be part of it. But in a new world of victorious communists, the capitalist soon found himself alone.

As the postwar climate worsened, thousands took to the seas in rickety vessels, giving the world a riveting new image of displacement: boat people. Private industry largely was nationalized. Then came the 1979 border war with China, and life became even tougher for Vietnam’s ethnic Chinese such as Mr. Minh.

But he stayed through it all. And three decades later, as Vietnam emerges from war, poverty and isolation, and replaces crumbling communist doctrines with market reforms, it turns out he stayed long enough.

His new $5 million showroom of marble and glass, an hour’s drive from Ho Chi Minh City, formerly Saigon, says a lot. So do the multitudes of newly prosperous Vietnamese with their cell phones, imported motorcycles and Internet cafes. So do the former refugees, who are being welcomed back as investors. And so does $5 billion a year in exports to the United States, Vietnam’s biggest customer.

“Vietnam,” said the soft-spoken Mr. Minh, 55, “is like a new land.”

In this reinvigorated nation of 82 million people, communist dogma blared daily over public loudspeakers has become background noise to the bustle of an army of new entrepreneurs. Vietnam’s 7.7 percent annual growth rate is second only to China’s among Asian countries.

Ruling Communist Party leaders still struggle to define what economic model they are using — “socialism with a market orientation” is borrowed from neighboring China. But the capitalist creed isn’t waiting for party approval. It’s on full display as Vietnam churns out IKEA housewares, Victoria’s Secret lingerie, Gap clothing and Nike tennis shoes for world consumption.

Nowhere is the country’s leap forward more apparent than in what was the wartime capitalist south. The country’s economic engine, Ho Chi Minh City and neighboring provinces, account for 40 percent of the gross domestic product (GDP), 58 percent of the industrial output and 70 percent of exports.

High-rises mushroom across the cityscape. Citibank, HSBC, Prudential and other multinationals have moved in. BMWs and Mercedes-Benzes weave through noisy streets clogged with bicycles and motorcycles.

In gleaming Diamond Plaza, the country’s first upscale department store, exploding consumerism meets growing prosperity, and an emerging middle class buys $400 Nokia cell phones and $7,000 Honda motorcycles.

Rising from former swampland and rice fields, the city’s newest residential area — Saigon South — is taking shape. Its pastel-colored villas and avenues look like an American suburb, with condos starting at about $75,000 and villas fetching more than $1 million. The homes were snapped up even before construction began.

All this is happening in a largely agrarian nation where the average annual per capita income hovers at about $550 — less than $2 a day — though daily income is double or triple that in urban areas.

“I remember a time when Vietnam felt like a poor country and a dollar went a long way,” said Phil Tran, 42, a Vietnamese-American entrepreneur. “That’s not the feeling I get now. I’m just an ‘average Joe’ here, and that’s a good thing.”

The changes under way are driven less by political principles than economic necessity. Competition from China and the rest of the region is making Vietnam hasten its economic reforms, clean up its banking system and root out corruption.

Vietnam gave itself a big boost by passing an enterprise law in 2000 to make it easier to start individual businesses. It also allowed the Communist Party to acknowledge the role of businesses, though party members are still banned from running their own.

That’s not to say Vietnam’s rulers have entirely abandoned their ways. Like their giant communist neighbor, China, they encourage private enterprise but discourage civil liberties. They still run a one-party state, lock up dissidents and curb unapproved religious practices.

Daunting problems remain. Some are homegrown, such as AIDS and drug addiction. Others are legacies of the war — the U.S. land mines that still claim victims and the lingering contamination of Agent Orange used by the Americans to defoliate Viet Cong hiding places.

The big change is in the attitude to capitalism. In the past five years, an estimated 140,000 private businesses have been registered in Vietnam. Private companies account for one-fifth of the GDP, and are virtually the only job creators in a country where 1 million young people join the work force each year.

Drawn to Vietnam a decade ago, Nike, the country’s single largest private employer with about 130,000 workers, produces about $700 million worth of footwear, making Vietnam the No. 3 supplier after China and Indonesia.

“Our business has expanded here. Consistent quality product says something about the quality of the work force,” said Amanda Tucker, the general manager.

The key to Vietnam’s future will be the relationships it forges with its diaspora, the so-called “Viet kieu.” Once treated as traitors for having fled the country, the estimated 2 million Vietnamese living overseas are being courted back for their capital, tourism dollars, business expertise and connections.

Money sent to Vietnamese by relatives abroad reached a record $3.8 billion last year, rivaling foreign investment and foreign aid.

This year, the government threw a glittering Lunar New Year party for overseas Vietnamese at a five-star hotel in Hanoi. In a chandelier-lit ballroom, several hundred Viet kieu were feted with canapes and wine, and were promised “a role in bridging the gap between home and abroad.”

Indeed, Vietnamese-Americans sit on the board of the American Chamber of Commerce here, representing companies such as FedEx Corp. And as Hanoi seeks to nurture a software industry, it is looking to Viet kieu such as Mr. Tran, the American entrepreneur and founder of Glass Egg Digital Media, a multimedia company whose clients include Microsoft Corp. and Electronic Arts.

As Vietnam gets richer and better educated, its rulers see the Viet kieu as less of a threat, he said. “If they can reconcile with the U.S., they can reconcile with Viet kieu. It’s better for the older generation to teach us to be one instead of being divided.”

It was for the sake of a reunified nation that Mr. Minh, the ceramics maker, stayed behind.

In the early days after the war, sheer survival was difficult. His two younger brothers fled on boats and ended up in Switzerland. Other ceramics factories, abandoned by their owners, were taken over by the government. Mr. Minh was allowed to keep his, but had to produce only low-quality pottery and sell it exclusively to the government.

In 1977, the hostility to private enterprise became too much for him, and he tried farming fruit. He grew calluses but not much else, and local officials advised him to return to ceramics.

In 1980, Mr. Minh started a new factory with 170 workers. After a decade, he became the first private businessman to be granted an export license. Since then, his fortunes have risen with Vietnam’s.

The Binh Duong province where he lives has become a magnet for foreign investment, transforming a poor, peanut-farming area into a modern town with four-lane highways ringed by industrial parks financed by Singaporean, Taiwanese and Korean money.

“Yes, Vietnamese are poor, but their mentality is: I they have money, they want good quality,” he said.

Part of the emerging elite, Mr. Minh owns a glossy midnight blue BMW and has sent his four children to Canada for their studies. His oldest son is back from Vancouver with a master’s degree in business administration and is the company’s vice director.

In retrospect, Mr. Minh thinks he too might have fled had his property been confiscated. “But looking back, I think my decision to stay in Vietnam was the right one. Look at Vietnam now.”

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