Vietnamese growth potential is huge, but so are the potential bottlenecks. Perhaps the biggest one is skilled labor; firms are overbidding each other for a limited supply of college graduates. Some of the entrepreneurs we interviewed in higher-skilled sectors like IT reported that wages doubled last year. A little of this was clawed back by double-digit inflation, but most of that is pure gain. Workers down the value chain, by contrast, seem to be seeing increases on the order of 12-15%. That implies real wage growth of several percent a year, which is nothing to sneeze at, but not the boom that the educated workers are seeing.

The government is hoping to fill the gap with private schools (indeed, it has no choice; taxes are already very high for a poor country). Meanwhile, however, the energy market is cramping the boom from the infrastructure side. Electricity prices are controlled here, and as usual when that is the case, conservation is not exactly a watchword. The grid is maxed out, and the state electric utility, which has been cross-subsidizing rising fossil fuel generation prices out of its cheap hydro power, has apparently reached its financial limits. But decontrolling energy and fuel prices is politically very tricky, and it's not clear that there's the will to do so; the people we've interviewed are talking about full deregulation sometime in 2030.

There will not be industrial growth, or substantial further poverty reduction, without more energy. But without market pricing, they won't get it.

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