Lessons from Vietnam: Cheap internet, huge tax cuts and support to SMEs

At least 10 hours before our departure from Da Nang City, Vietnam, our taxi driver, Mr. Han, who had been very helpful for the last seven days took us for a drive out of Da Nang City.

“We go Hoi An market,” he said. “Good tailor. Good price.”

Outside of Da Nang City, the landscape is quickly transformed to wide open spaces.
“Very beautiful,” Mr. Han says. “They grow rai (rice).”

On both sides of the road leading to Hoi An Market are rice paddies that extend for miles. Water buffalos stand unattended at the edge of the paddies, grazing on the grass.
The roads are good. A significant amount of investment has gone into the building of the roads in this rapidly growing economy. A relatively accurate indication of an economy’s growth is in the number of cement bags being brought by building contractors.

Along the road to Hoi An Market, new hotels are being built. New houses are taking shape and land is being cleared for concrete skyscrapers. Yet, this is an economy that is SME based.

We stop for a few minutes at a small business that produces marble and rock statues and figurines. The manager tells me the larger marble Buddahs sell for an average of USD7000 or about K22,000. The workmanship is exceptional. All the pieces are handmade and produced in a backyard workshop.
This is one of the many SMEs that exports overseas.

Tourists line the road walking or cycling. No body guards. No expensive entourage. I thought, if we managed the crime rate and provided more opportunities for young people… If we simply changed the way we think, the road from Nadzab to Lae could be turned into a massive SME hub with businesses owned by the people of Papua New Guinea.

Nearly every residential home front is either a restaurant or a shop. Every family’s life revolves around income generation, self-sufficiency and economic independence. In fact, I remarked by email, last night that Papua New Guinea’s National Goals and Directive Principles written by founding fathers who were at the time, very young, captured the direction that Vietnam took.
It’s not rocket science!

Transportation is simple.

Motorcycles take kids to school and take their parents to work, while we opt for status over convenience by choosing cars over cheaper transportation. With cheaper transportation, we can ride out the chronic bus strikes that plague cities like Port Moresby.

Of course, one can argue that this is a simplistic view of economic development. But think of the possibilities.

When the government of Vietnam drastically slashed tariffs, it gave people a wider choice of goods and services. The prices dropped and the standard of living rapidly improved.

The Vietnam government has been careful, yet decisive in its foreign economic policy.

As the neighboring Chinese economy grew, Vietnam agreed to have some of China’s manufacturing outsourced to them. The Chinese understood that the cost of production would increase as the middle class grew. That decision has had a flow on effect. Jobs were created and new SME spin-offs emerged, all revolving around the tech manufacturing.

The decision was forward thinking in that it took into account the future uptake of gadgets and luxury items by people who would be in their mid 20s and 30s by 2016.

As we go into Hoi An Market, Mr. Han, guides the imported Toytota Fortuner through the busy narrow streets. There are tailor shops everywhere. Each displaying the kind of clothing items that you find on the lines branded by Louis Vuitton and the rest of the big guns of the world fashion.

The difference? The clothes are of the same quality but unbranded and much, much cheaper. At these SMEs you can get a three piece suit, custom made in five hours for K600. They even keep your measurements in a database in case you want to order by email in future.
As Papua New Guinea’s income levels grow and the middle class expands, our costs also rise. Our costs structures are among the most expensive in the region. For instance, rental costs in Port Moresby average between K2500 per week for a modest apartment to K5,000 per week. Shop spaces cost between K6000 and K30,000. It is out of reach for ambitious Papua New Guineans looking to start a business in town and city centers.

After the APEC meeting in Vietnam, the need for cheaper internet costs, lower taxes and more support for SMEs have come to the fore. There needs to be serious efforts to slash costs drastically so that the opportunities are increased and the cost burden associated with starting and running a business are reduced for our people.
At present, costs and impediments are so restrictive that our people don’t get the opportunity to thrive in their own country.