Vietnam's Roaring Economy July 31, 2007 Three decades have passed since the end of the Vietnam war, nobody could predict Vietnam has gone from communism to a new form of capitalism. Vietnam has been through an extreme makeover that drastically changes the country beyond recognition. Nor could anyone imagined that after risking death to escape Vietnam, thousands of overseas Vietnamese with entrepreneurial experience and technical know-how are returning to setup business enterprises without much worrying about persecution. After a 12-year wait the country has become the 150th World Trade Organization member since Jan 2007. Overseas firms are increasing their presence in Vietnam and foreign direct investment (FDI) reached $US 9.5 billions in 2006. Billions of dollars are flowing into the country from investors across Asia and American companies like Intel and Nike. FDI this year, probaly doubles that of 2005, could exceed $US 12 billions. The largest US investment in Vietnam in 2006 is from Intel that is pouring of about $US1 billions in the construction of a 500,000 square-foot plant for semiconductor assembly and test. However, American businesses are still behind doing catch up, behind Taiwan and Singapore. Vietnam is one of South-East Asia's fastest growing economies. Trailing only China, the country has second-fastest-growing economy with 8-9% growth in 2005, 2006 and 2007. Vietnam's growth rate exceeded that of many countries in the region with red-hot economy such as Thailand, Malaysia, Taiwan, South Korea and even India. Surpassing many neighbors including China, the rate of exports to the United States is rising faster with impressive trade surplus - in the first eight months of 2005 while importing only $US 625 million from the US, Vietnam exported $US 5.5 billions worth of goods. Another attraction to investment bankers and investors across Asia are the main index for the Ho Chi Minh City stock market (and a smaller exchange in Hanoi). The Vietnam Index increased 146% in 2006. As happened in India and China, nearly double-digit growth is causing severe shortages of skilled labor. Right now, it's easy in Vietnam to find a job and skilled professionals change companies as a way to get fatter paychecks. As the result, local professionals are so in short supply that salaries are rocketing up to 50 percent a year. The country currently has 85 million people of which 60% is under 27. More than half of Vietnam's population still lives in villages in rural areas where abject poverty is chronic and making a decent living is almost impossible. They are moving to towns and cities where the economic boom creates new better-paid jobs. The past 20 years has seen an enormous numbers of people moved out of abject poverty. In 1990, about half of the country population were living in dismal poverty of about $US 1 a day. In 1998, 38% of the population still lived below poverty line, then reduced to 29% in 2002 and in the past few years have dropped even further to 8 percent, an impressive improvement in record time. Per-capita-income has risen significantly from $US 220 in 1994 to about $US 720 in 2006. Its young labor pool is one of many important factors that appeal to foreign companies. WTO membership should induce more FDI in Vietnam and create more job opportunities.