Economic reform dilemma stalks Vietnam
HANOI - Vietnam has sought guidance on economic reform over the past few years, but probably never expected the flood-tide of recent
advice.
Foreign donors, investors and Western governments
have fallen over themselves urging Hanoi to avoid the
mistakes that have swept many Asian countries into
misery.
And the advice has been unanimous -- accelerate reform
of the banking sector and state-owned firms, improve
transparency, cut red tape and give the private sector
room to bloom.
So what's the delay?
Analysts say a mix of consensus-based leadership,
hesitancy over how to react to the growing trauma in the
region, powerful vested interests and a simple aversion
to risk could keep sweeping economic reform measures
locked up.
The only way to unleash widespread reforms, and roll
back growing perceptions Vietnam is a nut too tough to
crack as far as making money goes, could be a serious
crisis such as the near bankruptcy that threatened the
country in the mid-1980s, some said.
That prompted the 1986 doi moi (renovation) measures,
which economists and businessmen say ran out of puff
long ago.
``Right now Vietnamese leaders are having a hard time
deciding whether or not they and the country face
imminent losses, and that is what stymies them,'' said
William Turley from the Department of Political Science
at Southern Illinois University in the United States.
``The result is what outsiders see as political stalemate. It
will probably take a nasty downturn to jar them out of
this mode,'' the Vietnam expert told Reuters.
EMPHASIS ON STABILITY
Some of Vietnam's communist leaders have said the
nation will embrace reform at its own pace even though
the outlook for economic growth is the worst since the
early 1990s.
Most economists predict gross domestic product growth
of 4-5 percent this year, down from Hanoi's figure of 8.8
percent in 1997.
Officials have also emphasised the need to maintain
stability in this still impoverished nation, where annual per
capita incomes barely exceed $300. They privately
express horror at the sky-high food prices and violence
wracking Indonesia.
Robert Glofcheski, senior economist at the United
Nations Development Programme in Hanoi, said
Vietnam's first reaction was to adopt a wait-and-see
approach to reform as many of its development models
in Asia started to haemorrhage last year.
He said another obstacle to broad economic reform was
the combination of a dearth of reliable information
stemming from incoherent accounting practices, a lack of
transparency and the country's consensus
decision-making process.
``The question is -- Can Vietnam learn from the Asian
woes so it doesn't have to experience its own crisis to
implement decisions in a less costly way?'' Glofcheski
told Reuters.
Hanoi had heeded some of the lessons of the crisis, he
said, such as new caution on foreign debt and a
realisation that short-term capital inflows can leave a
country vulnerable.
Indeed, Asia's crisis gave Glofcheski cause for optimism
that Vietnam's leadership would now benefit from the
experience of the region.
``Prior to the Asian crisis I was more pessimistic
because you had a boom-bust scenario in Vietnam
where the pace of financing outstripped the pace of
reform,'' he said.
``The crisis has ironically, at least for Vietnam, improved
the likelihood that development can be sustainable.''
NEW POWER CONFIGURATION RESISTANT TO CHANGE
Turley said the close ties that had developed during doi
moi between state-owned enterprises (SOEs), senior
communist party officials and big state banks were a
weight on reform.
The power of this ``troika'' essentially leaves private
business out in the cold.
Major state banks control most of the available credit,
SOEs get the best government contracts and also tie up
most deals with foreign companies while party officials
plot the overall road map of development.
''The new configuration of power and interests that doi
moi has helped to entrench is resistant to anything but
minor, piecemeal change, when another 'big bang' is
what is needed,'' Turley said.
But Hanoi should adopt a ``bang'' that was appropriate,
he said. Taking into account the havoc on Asian financial
markets and Russia's woes, relaxing exchange controls
and opening the dong to speculative attack would not
make much sense, he said.
Most economists agree that giving the private sector
room to blossom in Vietnam is crucial for sustainable
development.
But Adam Forde of the Australian Vietnam Research
Project said major private sector growth would lag in the
near future because most people still regarded the state
as their best bet.
``I don't think you will get human and financial resources
moving out of the state and the state-owned enterprise
shelter until the intent is there for it to happen,'' Forde
said.
``And that means a severe reduction in what the state
has to offer in terms of credit and access to foreign
direct investment, overseas development assistance and
so on. That is happening at the moment, but it is not very
severe.''
By Dean Yates - Reuters - September 22, 1998.
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