Period of optimism faces sobering dawn
Will soaring prices rain on Hanoi's growth parade? Chief Asia correspondent Greg Torode in Hanoi examines Vietnam's new inflation challenge
For years, they have flooded into Hanoi by the thousands: poor rural workers seeking better wages as cooks, cleaners, and construction and factory workers. As they came, steady economic growth helped the Vietnamese capital absorb them and provide a ladder out of poverty, allowing them to dream of a better life for their children.
Wealthy Hanoians have long dubbed them nha que, a vaguely derogatory term for 'peasant', yet they stand as a success story for Vietnam's Communist Party leadership.
Just 10 years ago Vietnam was considered one of the world's poorest nations after decades of war-era austerity, mismanagement and a crippling US economic embargo. But next year the government is aiming to announce the eradication of poverty and plans to join the ranks of mid-level industrialised nations by 2020.
But suddenly, things are not quite so simple. Rising inflation has emerged as the economy shows early signs of overheating, potentially trapping low-income earners in poverty and putting the government's much-vaunted targets at risk.
National inflation figures saw prices rise 19.4 per cent from March 2007 to March this year. In the capital, the situation is even worse, as food, fuel and rents rise even more.
For the first time in years, many poor and low-income workers now flooding Hanoi will feel worse off, rather than better.
'It is like some money gets stolen every day,' said Tham, 28, who earns 2 million dong (HK$973) per month pumping petrol in a central Hanoi fuel station. 'It is becoming more and more difficult to maintain the living standard in our family.'
Sang, a 56-year-old driver, said he noticed everything becoming expensive. 'I have to ask my wife to think carefully before doing any shopping. She does complain, but I tell her the whole country needs to economise, not only us.'
The government has ratcheted down growth targets this year as it embarks on a range of blunt measures to rein in prices, forcing banks to tighten liquidity, launching economy drives and forcing state companies to invest more wisely.
Prime Minister Nguyen Tan Dung has described the fight as the government's top priority - apparently confirming the party's long-held desire for stability over growth.
Domestic policies are just part of the problem, however. Vietnam has been importing inflation from its biggest trading partner, China. Its largest export target, the US, is suffering a slowdown and a weakening dollar.
Not everyone is happy. Some veteran foreign investors fear the government is being too fierce in its effort to reduce demand rather than stimulate supply by, in part, reinvigorating economic reforms.
Widening access to land and easing regulations to promote competition in retail, distribution and services would all help, they say.
Given hot inflows of foreign investment capital - more than US$20 billion last year as Vietnam joined the World Trade Organisation - some also fear slowing approvals and banking problems as the government seeks to slow development.
Nguyen Minh Phong, an economic researcher at the Hanoi People's Committee, said the government only wanted to tweak rather than stifle growth.
'Twelve per cent [inflation] would be fine ... but 20? That is too hot for us,' he said.