Vietnam gets $368 mln from IMF after promising more openness
WASHINGTON - The International Monetary Fund said it will
lend Vietnam $368 million, supporting the country's efforts to ease restrictions on
businesses and crack down on corruption.
The loan ends a four-year impasse between the IMF and Vietnam, which has
been prodded by both the lender and the U.S. government to topple barriers to
trade.
The loan ``seeks to build on Vietnam's recent record of positive performance and
policy momentum,'' said Shigemitsu Sugisaki, a No. 3 IMF official. The country is
trying ``to boost private investment and competitiveness of the economy.''
The loan suggests that relations between Vietnam and the U.S., which as the
lender's largest shareholder plays a crucial role in loan decisions, are strong even
though Vietnam continues to harshly criticize U.S. policies.
``Vietnam's going in the right direction,'' said George Munoz, who served as chief
executive of the Overseas Private Investment Corp., a U.S. agency that helps
finance investment abroad. ``I think that the IMF is recognizing now that it has to
provide incentives to those countries that are trying to open their borders,''.
Foreign investment began to surge 10 years ago after Vietnam took steps to
encourage foreign companies to operate within its borders. That move also
helped persuade the U.S. to end a trade embargo against Vietnam in 1994.
Investment waned in 1998 after the IMF stopped lending to Vietnam.
Investment by foreign companies, which skyrocketed to $2.7 billion in 1997 from
$8 million in 1989, receded to $1.6 billion in 1999, according to the
US-Association of Southeast Asian Nations Business Council, a group that
represents Coca-Cola Co., Ford Motor Co., McDonald's Corp. and about 250
U.S. companies. The council didn't have data for 2000.
The decline occurred because U.S. and European companies grew disenchanted
with business opportunities and Asian firms suffered from a spate of recessions
in the region, said Jeffrey Kaplan, an international affairs fellow at the Council on
Foreign Relations, a New York-based international affairs research group.
Nike
Renewed IMF lending ``is very positive sign that Vietnam is a place where
investment can thrive and U.S. companies can do business,'' said Vada
Manager, director of global issues management for Nike Inc., which sold 22
million pairs of athletic shoes made in Vietnam last year.
Nike, joined by General Electric Co., Citigroup Inc. and other large U.S.
companies, are making U.S. ratification of a tariff-lowering trade agreement
reached with Vietnam under former President Bill Clinton a top priority.
The accord, signed last July, has been pending since negotiators reached a
preliminary agreement nearly two years ago.
Economic Integration
Vietnam is ``committed to pursuing further economic integration,'' the IMF said in
a statement. ``Foreign direct investment will be promoted through an easing of
barriers to entry and liberalizing the business environment.''
Renewed IMF lending ``provides a good signal for foreign investors,'' said Ken
Richeson, the US-Asean Business Council's executive director. ``That's probably
more important than the money.''
Still, the fund alone won't bring investment levels back up, Kaplan warned.
``Having been burned initially, investors will be extra cautious going back in,''
Kaplan said. ``The fact that the IMF is back will generate some greater
confidence, but no rush back in.''
Vietnam's recent tirades against the U.S., which respond in part to U.S. concern
about the protection of human rights in the country, could muffle the impact of
renewed IMF lending.
The U.S. has ``brutally interfered in our country's internal affairs, rudely inciting
and encouraging unrest,'' the ruling Communist Party's newspaper, Nhan Dan
(the People) said, according to Agence-France Presse.
Credit Line
Vietnam last received an IMF loan installment in March 1996, the second of what
was supposed to be three annual payments. It never got the final installment of
that credit line because the fund decided that the country wasn't complying with
its promises to reduce government control over the economy and reduce trade
barriers.
Since then, the lender and country have differed on the pace of Vietnam's efforts
to reduce trade barriers and reduce the size of its government. In its 1999 review
of the country, the fund said, ``it remained essential to take a bolder and more
comprehensive approach to reform.''
Vietnam has since moved in that direction, said Munoz, who led a delegation of
business leaders to the country in December.
Officials at the Vietnamese Embassy declined to comment.
Vietnam, one of southeast Asia's poorest countries, is expected to grow by 5.4
percent this year as exports rise, the fund has said.
Still, Vietnam needs to sell or close many state-owned companies, reduce tariffs
and strengthen bank regulations to boost an economy that has lagged behind the
rest of Asia for two decades, the fund said in an August report.
Lower demand for exports caused by the sluggish global economy will make
Vietnam's economic growth slow to 5 percent this year, from 5.5 percent in 2000,
the fund projected.
The country's accord with the IMF calls for growth to rise to 7 percent by 2002,
while inflation remains below 5 percent.
Vietnam's per capita income of $350 is one-tenth that of neighboring Malaysia,
according to World Bank data.
By Emily Schwartz - Bloomberg - April 6, 2001.
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