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(c) 1998-2014 Vietnam Venture Group, Inc. All rights reserved. Updated  March 3, 2004

Globalization: Starbucks mutates to Starblacks

Article Reprinted with the kind permission of Bloomberg
Copyright © 2004 Bloomberg

Coffee drinkers are surprised when they see a familiar circular green-and-black logo only to discover they are not in Starbucks!

Starblacks is a Starbucks clone popular with Hanoiís young hipsters. And there are no Starbucks outlets in the country.  Reportedly the kids like Vietnamese coffee the way it is, but we wonder as theyíve never tried the stuff served up by the Seattle-based company.

Vietnam has seen its share of pirated Western clones. There had been the chain of fake 7-Eleven stores came and went, no doubt due to some severe Japanese pressure on the State. As for the Pizza Hut you entered, look closely Ė itís a rip-off of the local Pizza Inn signage. Itís easy to purchase at a steep discount from locals a Hard Rock Hanoi T-shirts because Vietnam doesn't have a Hard Rock Cafe.

All this says much about how this nation of 80 million is embracing globalization on its own terms. Walking through Vietnam's cacophonous cities leaves little doubt folks are hungry for their share of global prosperity. They want the benefits that come from the increased movement of capital, goods and people.

They just don't want a McDonald's on every corner.

Investors should pay close attention to how things pan out here. Vietnam is an unlikely vanguard of the next phase of globalization, offering a fascinating test case of the phenomenon's pros and cons.

Love it or hate it, the trend toward globalization is here to stay. But the events of the past few years - like the recent breakdown of trade talks in Cancun - have shown it can be more of a temptress than a panacea for the developing world. It's not the floats-all-boats trend advertised and many are being left behind.

Yet much good can come from globalization, and the question is how to find a more inclusive kind of modern capitalism. That's necessary if the trend is to win universal credibility. The steady removal of barriers means every form of capital - human, social and financial - will be on the move. It also means rabid competition for the capital flowing between nations isn't going away.

What seems clear is that Vietnam's economy needs more globalization. Things are booming here. Vietnam grew 7 percent last year and similar growth is expected this year. That means Vietnam is Asia's fastest-growing economy after China.

Yet Vietnam isn't winning the foreign direct investment needed to boost living standards. The fact that China is sucking up most of the capital flowing to Asia is one explanation; Hanoi's go-slow approach to globalization is another.

The tension between those who want to open the economy faster and officials urging caution puts Vietnam on the frontline of the globalization debate.

To the pro-globalization crowd, Vietnam will be a success story as it lets in a world anxious to tap its middle class.

There's still plenty of poverty. And with per-capita income of roughly $400, Vietnam has a way to go before it offers a vibrant consumer market to compete with South Korea or Thailand.

But exponential growth in the number of new motorbikes, cell phones and raw commerce augurs well for an economy that until 1986 was largely closed to the outside world.

The anti-globalization crowd also claims Vietnam as its own, pointing to the social and political tensions bubbling up here. That's why steps taken by the government - or not taken - may be so pivotal for the global economy.

Vietnam is at the epicenter of the open economy debate for two reasons. First, one could argue Vietnam has gone as far as it can relying on domestic forces alone and it's still much too reliant on agricultural industries.

Second, it's been there before. Like many Asian nations, Vietnam exposed itself to the whims of capital markets. Money flowed in as profit-hungry investors rushed to get a leg up in one of Asia's next tigers. In the decade after 1986, gross domestic product doubled to $30 billion. Then the roof caved in and investors fled.

If Vietnam steps up the opening of its economy and living standards rise, pro-globalization forces will have their argument to keep the trend alive. If not, trends towards opening the market could slow down.

Yet there's nothing wrong with Vietnam's go-slow approach to all this. Many developing-world governments were encouraged to move too hastily towards opening their economies.

Recent years have offered myriad cautionary tales in nations that took the free-market plunge and ended up chastened by the markets. Many countries - Indonesia and Argentina - rushed the process and went from growth stars to basket cases.

wants to avoid that, and investors should observe this. Folks are sipping coffee at Starblacks, not Starbucks, and that's just fine for now. - Bloomberg

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