Who’s afraid of a feverish economy? (Business Week)

Foreign investment keeps coming as the Vietnamese government moves to restrain exuberance

Ho Chi Minh City. Jul 7, 2008. – Michael J. Pease has a problem Ford Motor executives in the U.S. can only dream of. Demand in Vietnam, where Pease runs Ford’s operations, is so strong he can’t make cars fast enough. “We are capacity-constrained,” says Pease, who saw sales double in the first five months of the year. To put enough Focus sedans, Everest SUVs, and Transit vans in showrooms, he plans to cut the ribbon on a newly expanded factory near Hanoi in July. “This is our best year ever,” he says.

Wait a minute. Isn’t Vietnam’s economy having one of its worst years ever? Well, the stock market is down more than 60% since January, and housing prices are off by a third. Inflation is raging at 25%, the trade deficit is ballooning, and the currency, the dong, is headed south as people buy dollars and gold.

“Vietnam is facing its most difficult time since the beginning of economic reforms” in the late 1980s, says Le Dang Doanh, a senior fellow at the Institute of Development Studies, a private think tank in Hanoi.

Yet Ford isn’t the only company doubling down. Taiwanese heavy industry giant Formosa Plastics just got approval from Hanoi to invest $ 7.8 billion in a steel mill, power plant, and port. And in March, Samsung unveiled plans for a $ 670 million mobile-phone assembly plant outside Hanoi.

“Regardless of the economic situation, Vietnam is still very attractive,” says Chi Yong Cho, Samsung’s handset strategy chief. So far this year the government has approved $ 21 billion in foreign direct investment, just over the amount given the green light in all of 2007.

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