(We would appreciate if anyone could volunteer to translate these articles into Vietnamese for our Vietnamese readers. Please contact Mr. Ho Nguyen, Published on Vietnam Financial Review, Issue No. 8, Volume LIII, 10 Sept 2011 It may be 2030 before Vietnam’s third generation of entrepreneurs take over the leadership reins and bring the country closer to its actual potential.

The dynamics of a country’s economy is very much dependent upon its crop of entrepreneurs. The macro environment of government policies and global trends and the micro conditions of market forces and management of resources certainly affect corporate performance a great deal. But entrepreneurs are often the key difference in the success or failure of enterprises. The individual wealth of a country, measured by GDP per capita, hinges on the efforts of entrepreneurs and managers of business concerns.

The US is well-known for the creative spirit of its entrepreneurs and the innovative management of its organizations. Japanese entrepreneurs and managers are respected for their discipline and work ethic. German business people often earn prizes for their engineering precision and textbook management. French and Italians are loved for their artistic creations and charming personality. Indian entrepreneurs are good at their math, attentive to detail and tireless in deal negotiation. Chinese business leaders are smart, well-connected and patient. These entrepreneurs help in creating the sustained growth in GDP and in the process, propel their country‘s economy to the top.

With the expansion of the MBA programs worldwide and the interaction between global economies, the distinction between the styles and practice of business managers among different countries tend to disappear. Nowadays, managers are often mobile, cross-cultural and world-savvy. On the other hand, home-grown entrepreneurs tend to retain their own character, tradition and class in their respective countries.

During the last 50 years, my personal observation tends to confirm an old wisdom: the country’s wealth often increases with the talent and experience of its entrepreneurs. I have witnessed the rise of many countries’ economic performance following the changes in the leadership of entrepreneurs within that country. The US economy gained a big boost in the 1990s with the arrival of the internet entrepreneurs. The new entrepreneurs who took over the management of South Korean SMEs after years of military dictatorship in 1980 literally changed their country’s economic landscape forever. East European entrepreneurs were entirely different from the staid bureaucrats we found before the collapse of the Soviet in 1989. They turned around the fortunes of Poland, the Czech Republic, and even Russia, with their new vision and ventures.

Vietnam is no different. The difference in entrepreneurship between generations will certainly shape of the face of the economy in years to come.

After the victory of the North in 1975, there were almost no private entrepreneurs left in Vietnam. Under the command and centralized economy, all enterprises were State-owned and all former entrepreneurs in the South became either government employees or unemployed. The victorious jungle fighters became leading bureaucrats who took over the management of all Vietnam’s economic assets. They did not possess any administrative or financial skill set and they improvised business decisions based on the survival instinct developed during the war. The results were predictable and their style of entrepreneurship helped put Vietnam among the poorest countries in Asia for 25 years.

The second generation of entrepreneurs came to the fore in 2000; when Vietnam followed China’s “open door” policy and ventured into global markets. The economy and GDP began to improve, especially after Vietnam secured WTO membership in 2005. The “doi moi” policy allowed private enterprises to operate in many small industries; while large-scale and profitable monopolies remained in state hands. However, this new crop of private entrepreneurs mushroomed into hundreds of thousands within just a few years. They did not have any educational background or experience in management practices or scientific techniques to operate complex enterprises; but they studied hard and took enormous risks because they had nothing to lose.

They had to walk on the edge most of times, as the bureaucrats were still powerful and the regulations were heavy and prohibitive. Interference, harassment and arbitrary enforcement by the Government were frequent and haphazard. I talked to a few successful entrepreneurs recently, and they recounted vivid experiences of life-and-death situations like old war stories. However, they were equipped with a range of survival tools, because they were born in and grew up within the tem. They developed extremely valuable connections with the powerful and their art of wheeling-dealing behind the closed doors was excellent.

In return, these entrepreneurs obtained dirt-cheap land, mineral rights and forests to exploit. They bought buildings and State-owned assets (factories, equipment, brands, market monopolies…) at fire-sale prices. They also enjoyed very low operating cost as labor and capital (from State-owned banks) were plentiful. Many built their fortunes in this “Wild West” environment; while a few unlucky ones were jailed for being too greedy. This generation of entrepreneurs dominated the private sector and was busy trying to entrench their positions with political connections. We don’t expect any change in this status over the next 10 years, or 2020 at the earliest.

Meanwhile, the State sector still owns 76 percent of Vietnam’s economic assets while contributing only 34 percent of GDP. The managers of these enterprises are the princelings of retired political leaders and often educated in Eastern Europe, particularly Russia. They show more flexibility and capability than the old bureaucrats; but they retain the habit of making decision based on personal benefit over that of the enterprise. They too are expected to retain power during the next ten years; as the Government and the Party affirmed many times in their proclamations that State-owned enterprises remain to be the foundation in building a future economy.

Only after 2020, would I expect the third crop of entrepreneurs to come into their own and make a mark in shaping Vietnam’s economy. These entrepreneurs are sons and daughters of the nouveau-rich as well as the children of the hard-working middle class that managed to go overseas for education and training. Most likely, they are schooled in Western universities in the US, Europe, Japan or Australia. They will begin to reflect the new style of management in enterprises, more in tune with global trends and practices. They will do business in the conventional way, competing in a market environment under a strong legal framework. By that time, to ensure the survival and growth of the economy, the Government will also be forced to implement drastic changes in policies and regulations, which we could call “Doi Moi”, part II.

This period will signal the new beginning of Vietnam’s entrance into the global economy and finance. They will begin where South Korea begun in 1980 or where Thailand started in 1997 when students overthrew the powerful grip of the generals.

However, we must realize that a country’s economic status has nothing much to do with an individual’s effort to make money. There are always plenty of opportunities for savvy investors to profit under any environment. I have seen a friend make over 70 millions in one deal in the dirt-poor country of Guinea. On the other hand, the middle-class population of any country is always looking forward to fast-increasing wealth and will be restless and disappointed at the slow pace of waiting.

My personal assumption is that the wealth of a nation depends on the strength of its private entrepreneurs to sustain growth and development. If I am right, the forces that will propel Vietnam into the class of one of Asia’s dragons won’t likely to happen before 2030, ten years after the third generation of entrepreneurs takes over the rein of leadership. It will certainly be a long wait for the country’s middle class.