Can Tourism Save the Vietnamese Dong?

Abstract

In 2011, Vietnam has devalued its currency three times. For years, the Vietnamese Dong (VND) has been weakening against the Euro and the U.S. dollar as well as currencies of neighboring countries. Confidence in the VND is low – even within Vietnam; locals prefer to invest in real estate, gold or the U.S. dollar. Despite several devaluations, Vietnam remains vulnerable to inflation and is facing a widening trade deficit. Inflation may reach 14% in 2011. Imports grew 30% in 2010 and the trade deficit of 2011 may widen to US$ 5 billion. Value-added production is low due to the high import content of Vietnam's exports which has prompted policymakers to shift focus from textile and footwear output to tourism. In the coming five years the tourism and travel industry could become the country's major foreign exchange earner. There has been recent significant growth in tourist arrivals, although their share of total GDP remains modest. The authors analyzed the strength and weaknesses as well as opportunity and threats of Vietnam’s tourism industry. The research was based on in-depth interviews and may be summarized as Grounded Theory (GT) approach. The findings suggest that community based tourism and cooperation within the Greater Mekong Subregion (GMS) offer great potential. Inbound-wise the Russian segment looks very promising. Major investment in the development of human resources is essential to complement infrastructure investments in hotels, resorts, casinos etc. Competing against neighboring countries such as Thailand and China will require a service attitude that Vietnam has been lacking so far. Tourism has the potential to bring the trade balance back into equilibrium either by making foreign independent travelers stay on average 3 days longer or by increasing the number of incoming tourists by 50%. In both scenarios the tourism industry is still underutilized compared to Malaysia or Thailand.