Halfhearted modernity in Vietnam
HANOI - The recent ratification of a bilateral trade agreement
between Vietnam and the United States is Vietnam's attempt to
jump onto the globalization gravy train. But the governing
Communist Party wants to keep political control while promoting
economic openness. This is contradictory.
Consider the failure to find local use for bank deposits. Some $5
billion has gone to Singapore and other offshore markets to seek
small but safe returns, while the country's fledgling entrepreneurs
are short of loans.
Wasn't globalization supposed to bring in foreign investment and
aid? Why then is the outflow of hard currency more than the total
of all foreign direct investment and official aid to Vietnam in 2000?
Because efforts to promote private enterprise are halfhearted and
enforcement of supporting laws is weak.
Since Vietnam introduced rural reform in the late 1980s and began
opening the country, it has dramatically reduced poverty. The
World Bank says the proportion of people in absolute poverty has
fallen from 75 to 37 percent in a decade. But the reforms have
slowed to a crawl as the party hesitates to take the axe to
inefficient state-owned companies and government banks laden
with bad debt.
By the end of 2000 the bad debt, owed mainly by bankrupt
cooperatives and state-owned enterprises, stood at $1.3 billion,
according to a recent official admission. The party would like to
bring efficiency and stronger growth to the economy, but it worries
that its hold on power would weaken as a result. Thus it has been
one step forward followed by one or two steps back.
An enterprise law removing many bureaucratic obstacles to setting
up private business has had the effect of monsoon rain on parched
fields. In just two years some 30,000 private firms have sprouted.
Given nourishment in a proper legal and regulatory environment,
these small and medium-size enterprises could boost the country's
growth and make a significant dent in its high unemployment.
But entrenched bias against private enterprise and fear of taking
action against delinquent borrowers have kept banks closed to the
private sector. Bankers say the risk of being involved in a scandal
by lending to private firms, and the danger of having to cover
default themselves, make it safer to lend to state firms or send
money offshore.
Hanoi is counting on overseas investors to put their money into
Vietnam to build export-oriented industries. But such investment
will provide only a small part of the 1.4 million jobs that the
country needs to create each year. The government will have to
change its mind-set and policies drastically to encourage the
private sector. Otherwise the ranks of the unemployed are going
to swell even faster.
Foreign investment will shy away from a country that remains
deeply distrustful of its own entrepreneurs and lets politics rather
than economics dictate business decisions.
To reap the benefits of global integration, Vietnam needs less
ideology and more good governance. Without nourishing the tens
of thousands of small entrepreneurs, it can only remain at the
margins of the global economy.
By Nayan Chanda - The International Herald Tribune - February 05, 2002.
|