VietNamNet Bridge - Looking at the income per capita of Vietnam, it is incomprehensible for many foreigners when LV bags or Salvatore Ferragamo shoes priced at nearly $2,000 are sold well in Vietnam. But Vietnamese are familiar with this cryptic thing.

Six years with WTO and the dream of three bowls of pho

 

 

Despite many difficulties in the past few years, Vietnam is still quite attractive to foreign investors. One of the most appealing factors is the young population, with an average age of 28, who create the abundant labor resources and a promising market for mass consumer goods.

That market, in many countries, is represented by a group of people who are usually conceived as the middle class. They are skilled workers, main taxpayers, diverted spending in many sectors of the market and are often educated in the basic level or higher. This group accounts for a large proportion in developed societies. They have economic autonomy and a big voice in the policy-making process.

Like many capitalist countries, Vietnam has also formed an important population group, which is small but holds great economic resource, and, of course, is also quite active in making influence to policies. Notably, the "rich" group has significant growth rate in recent years, coincidentally with the period after Vietnam’s accession to the World Trade Organization (WTO).

Many rich countries, expressed in high-income and high prices, often have aged population. Vietnam still has a young population, but it has formed a fairly expensive price level, as it seems to have many people rich.

The tears of the middle class

When a bowl of pho (Vietnamese noodle) is maintained at the price of VND30,000 ($1.5) in the past two years, the main beneficiaries of that stable price is the middle-income group. Compared with the poor who are dreaming of eating pho, they are the ones who are able to eat pho every day.

It is difficult to define exactly, but in Vietnam they can put the public servants, office employees, intellectuals, skilled craftsmen, traders or small shopkeepers, small landowners ... into middle class.

A recent survey by TNS shows that the monthly income of the middle group ranged from approximately VND4.5 – to less than VND15 million ($220-700). This income allows them to cover most of the cost of essential (also depends on where they live), have certain cumulation and become a potential source of investment for the economy.

Thinking they are luckier than the low-income group for the opportunity to eat pho, the middle class in Vietnam is still in the stage of building its potential. Based on various studies, the number of people classified as the middle class in Vietnam ranges from 8 to 18 million people, accounting for an estimated maximum of 20 percent of the population. Above all, the middle class depends on economic growth and trade integration to improve its scale position, as it has been taking place for over 20 years.

However, the fact in the past few years shows challenges that make the quality of life of middle-class people are gradually more unstable than the appearance.

First, in terms of the assets and income, after a period of bubble burst of property, a lot of wealth held by the middle class lost value. The movement of trading securities and real estate has put many state officials and small traders into dilemma when they accidentally invested their income and savings into securities and land several years ago and now their assets is stuck.

The income of the middle class also fluctuates according to the economic downturn. Job opportunities are less together with the decline in foreign investment. Many loss-making state-owned businesses had to streamline their personnel while hundreds of private businesses went bankrupt.

But the biggest risk to the pockets of the middle-income group is constantly increasing spending, the result of hyperinflation in the period of 2006-2011. This is reflected in the specific expensive commodities derived from factors such as currency devaluation, the increase of the electricity prices, gas prices and housing prices.

When this group is exhausted by these costs, it will be a challenge if you want to make the middle class to create the resilience of product and service consumption to become a powerful engine of growth for the economy.

Another consequence in economic turmoil: more fakes. It is especially dangerous and common is food. Low quality chicken is smuggled rampantly and has become big problem. Regrettably, the middle class cannot afford to buy imported safe food.

The LV bag at the peak of income

After being repaired at the cost of VND300 billion ($15 million,) the Trang Tien Plaza shopping mall reopened in Hanoi on April 6, 2013. The land of history in the center Hanoi has been changed, from a department store of the subsidy period into the most luxurious shopping mall.

Looking at Vietnam’s per capita income of $1,600 in 2012, for many foreigners, it is difficult to understand that Vietnamese can buy LV bags or pairs of Salvatore Ferragamo shoes at the price of $1,600. But the Vietnamese are familiar with this crypticness.

An economic boom in twenty years has created a super-wealthy class and they should have confirmed their class. The luxury shops appear to serve that need. For example, pho for the wealthy people must be different from the pho that is priced at VND30,000/bowl, which is the dream of poor people.

Not long ago, a restaurant in Hanoi offered the so-called “Kobe beef” pho. The price for a bowl of that pho is nearly VND1 million ($50) because the price for 1kg of Kobe beef is $500/kilo. The restaurant was very crowded with the customers who wanted to prove their position. Then the story ended with a “scandal” when it was defined that Kobe beef was not exported so Vietnam could not have that beef. But, after all, people might not eat that pho just because of the Kobe steak.

It is heard that when the restaurant was questioned by the authorities, the restaurant owner said that it did not tell lie that its beef was Kobe beef. This is not Kobe but Co-be. “Co be” in Vietnamese means the aunt of calf or a female cow and in short it is “Co-be”, with the intention of assuring that the beef of the restaurant is the real beef.

Purchasing luxury brand products, tasting the dishes that are worth income in the whole month of the poor or weddings that use a Roll Royce to pick up the bride are so popular now.

Indeed, the rich can enjoy the fruits of labor. It is only matter if a part of the rich who enjoy and benefit from policies, such as from land acquisition which is the livelihood of low-income groups or speculation of exclusive goods that impoverishes the middle class.

In the overview of the different income groups, in the future policies, it is necessary to pay more attention to the two lower income groups, in order to balance the benefits to the highest income group.

TBKTSG