Vietnam needs bold leadership amid slowdown
HANOI - Vietnam needs to display
decisive and bold leadership to combat mounting
economic woes and get the country back on the road to
rapid growth, a World Bank report released on
Wednesday said.
The lengthy report, prepared ahead of a meeting of
Vietnam's foreign donors in Paris from December 7-8,
said the country's gains in poverty reduction during the
past decade would be at risk unless economic reforms
were accelerated.
It predicted lower economic growth of 3.5-4.5 percent
for the communist-ruled country this year and in 1999
compared with the official figure of 8.8 percent last
year.
Also highlighted was the incidence of growing
unemployment, pressure on Vietnam's balance of
payments, a banking system struggling under mounting
bad loans and $7.3 billion in outstanding debts at
state-owned enterprises.
``Decisive and bold leadership is needed to weather
current difficulties and to ensure a swift return to a rapid
and sustainable growth path,'' said the report.
``This report concludes that the economic situation is
quite serious in Vietnam. There is little doubt that,
absent strong measures to address the current
slowdown, poverty will begin rising substantially in the
coming two years,'' it added.
The percentage of Vietnam's population living in
poverty had fallen from more than 70 percent in the
mid-1980s to 50 percent in 1993 and was now at
30-35 percent, it said.
During next week's meeting, which will include senior
Vietnamese government officials, donors under the
World Bank-chaired Consultative Group will determine
fresh aid commitments to Vietnam. The group first met
in 1993 and a total $10.9 billion has been pledged at
annual meetings since then.
The World Bank has already said pledges this year
would likely fall short of last year's committed $2.4
billion but that this would not be punishment for reform
tardiness.
Conclusions reached in the World Bank report would
come as no surprise to foreign investors, who once
viewed Vietnam as an El Dorado but have since
moaned about the difficulties of doing business and the
slow pace of reform.
The report raised these issues and many others that
have put a break on foreign investment into Vietnam.
It said $26 billion in licensed foreign investment projects
had yet to proceed, but that half of this was in property
and tourism -- two areas where demand and prices had
collapsed.
Added to that was $7 billion in committed aid funds that
sit idle in the donor pipeline waiting to be disbursed.
``Both domestic and foreign businesses find that the
complex and detailed nature of permit requirements, the
opaque nature of decision-making and the prevalence
of corruption are barriers to doing business,'' said the
report.
``Today the climate for small entrepreneurs remains
very discouraging -- but it need not remain so. In the
current climate, Vietnam simply cannot afford not to
harness the resourcefulness of its potential
entrepreneurs.''
To the concern of donors, Hanoi has repeatedly said
the state sector would play the leading role in the
economy.
Meanwhile, Asia's economic woes have flattened the
nation's key sources of foreign investment and export
markets.
The report said 60 percent of Vietnam's state-owned
firms were unprofitable and the level of overdue loans in
some banks had reached dangerous levels.
Nevertheless, it said the modest size of the financial
system -- total credit was put at less than $6 billion, or
25 percent of GDP in 1997 -- limited the extent of
likely losses.
In addition, foreign debt levels were manageable with
the figure at the end of this year expected to be $10.76
billion from an estimated $10.05 billion in 1997.
Reuters - December 02, 1998.
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