Vietnam's growth taxes the environment.

Vietnam's modest but growing consumer sector is benefiting from the fast pace of the country's economic expansion. Examples of conspicuous consumption are appearing in Vietnam's biggest cities, Ho Chi Minh City and Hanoi, in the form of motorcycle and scooter transport--which has notably replaced the prominent use of bicycles evident just a decade ago.

A report by the New York Times News Service, via the Taipei Times (Taipei City) on July 11, 2007, said, "Motorcycles have become the symbol of economic freedom in Vietnam, as its economy surges."

This would normally be a positive sign of burgeoning consumer activity were it not for the serious pollution problems caused by the surge in fossil fuel powered transportation estimated in the report at 1.8 million vehicles in Hanoi alone.

In Asia generally, the pattern has been to "grow first and clean up later." Environmental problems such as pollution can stress social services as health problems arise. Health problems, in turn, can reduce the size of a market's workforce initiating an unnecessary drag on economic progress.

The Times News Service report said that as rapid growth became a fact of life for Vietnam, the government took steps to reform its lax motorcycle/scooter emissions laws. But the reforms ran into trouble as environmental groups and various government ministries injected delays into the process.

Now pollution in Hanoi and Ho Chi Minh City is at dangerous levels for some of the more potent hazards.

The problem is chiefly the low grade fuel that Vietnam's newly enfranchised consumers are using in their vehicles. The Times News Service report said, "Vietnamese companies authorized to import fuel are resisting buying higher-quality fuel because it is more expensive."

What this means is that environmental problems are likely to get worse before they get better--especially with the economy continuing to grow at a high rate.

According to the International Monetary Fund (IMF), Vietnam's economy expanded 8.4 percent in 2005, and 8.2 percent in 2006. By the end of 2007, the IMF estimates Vietnam's GDP will grow another 8.0 percent, and in 2008 will expand again 7.8 percent.

On June 24, 2007 Bloomberg News distributed a story on its wires quoting Vietnam's Deputy Prime Minister as saying that the economy would double in size every 10 years. Appearing at a World Economic Forum conference in Singapore, the official said, "Every 10 years, you'll see a new Vietnam." One of the main drivers of the economy in 2007 is Vietnam's expected accession to the World Trade Organization (WTO) in January 2008.

Bloomberg said, too, that tax cuts for businesses in Vietnam would closely parallel the country's growth. Tax cuts will stimulate creation of additional jobs.

COUNTRY FOCUS: