The income disconnect

If you live in Vietnam or visit the country, particularly the major cities, have you ever wondered about the apparent level of disposable income relative to the reported average per capita income of US$ 2,200 per annum or less than US$ 200 per month. The average figures for Hanoi and HCMC are over US$ 5,000 per annum

Overseas remittances to Vietnam are running at a level of US$ 12-13 billion per annum or about 80-90% of the remitted foreign direct investment. This is also equivalent to more than 7% of GDP.  

The majority of this money goes to the urban population which only accounts for approximately 30% of the total population so the impact is much greater. It is estimated by the Central Institute of Economic Management that only 10% of these remittances are spent on daily needs and that approx. 70% goes into starting new businesses or expanding businesses and the remaining 20% into real estate investment,

In addition to these remittances there is still a huge pool of wealth which lies outside of the baking system held largely in gold and foreign currency. The amount of this hoarded wealth was estimated to be possibly as high as US$ 60 billion by Dominic Scriven, the founder of Dragon Capital, during the height of the global financial crisis when the gold price reached its peak. This is available for discretionary spending.

Many individuals have become wealthy through buying and selling real estate. I love to tell the story of my former maid who bought 1000 sq.m. of land on the outskirts of HCMC in 1999 for US$ 1 per sq.m. and sold it 5 years later for US$ 100 per sq.m, whilst I was struggling to build a professional service firm. So who was the smart one?!

Ken Atkinson