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The Great Recession and Developing Countries
Shifting Consumption Patterns One of the often-cited structural causes of the global crisis is the unsustainable global imbalance between overconsumption in the United States (as reflected in its large current account deficit) and over-saving in China and other emerging East Asian countries (with large current account surpluses). Such unsustainable global imbalances will necessarily be rebalanced, either with a gradual adjustment or a sudden sharp adjustment caused by, for example, a global crisis. As a result, either the world consumption map may evolve into a multipolar one (featuring the United States, the European Union, Japan, and emerging consumer nations in Asia), which is the more likely scenario, or it may evolve into an Asia-centered, unipolar map. In either case, the emergence of a consumption center in Asia (China, India, and other current account surplus countries) may have important implications for Vietnam’s export strategy. With already high consumption and a low saving rate, Vietnam may not be able to become part of the consumption center. Instead, it may need to foster more domestic saving and rein in domestic consumption. In this case, resources would be shifted from manufacturing industries that are concentrated on exports to developed countries to industries and services that serve markets in China, India, and other emerging Asian countries.46 Another important consequence of China’s rising wage is that the lowerend manufacturing is beginning to shift into other countries that are lower on the development ladder such as Bangladesh, Cambodia, Vietnam. The lower-end products include cheaper, labor-intensive goods like garments, toys and simple electronics that do not necessarily require skilled workers and can tolerate unreliable transportation systems and electrical grids.47 This would surely create an opportunity for Vietnam to fill the vacuum left by China. However, this may not come automatically and may require active policy from the government (See also Nguyen and Nguyen 2010). Economic Reform: Unfinished Agenda? Vietnam’s recent economic growth has its roots in policies of economic openness, with trade liberalization at center stage in recent decades. Since its joining the WTO in 2006, the country has experienced tremendous economic changes and fluctuations. Although it has received a large amount of FDI and (presumably) technology transfer, as a result of its