Hanoi's culture of secrecy thwarts IMF
For nearly a year, a $400m International Monetary Fund reform programme in Vietnam has been in deadlock over the IMF's request
to scrutinise how the central bank manages its estimated $4.5bn in foreign currency reserves. The IMF says independent audits of
borrowing countries' foreign reserve accounts have been standard practice since 1999 when a country was found to have deliberately
misreported its position.
Yet Vietnam's communist rulers have balked at this routine safeguard. Under the country's sweeping Official Secrets Act, the
central bank's reserve position is classified information, and the potential punishment for revealing it is death.
Although the state-controlled media report rising reserves, communist authorities have made no move to amend secrecy laws and
allow the figures to be independently verified. "We're not here to break their law," says Susan Adams, the IMF's resident
representative. "But we'd like to encourage them to change their law."
While delaying the disbursement of a $57m loan instalment, the dispute over financial transparency has also highlighted the
challenge Vietnam still faces in overcoming its deep-rooted culture of secrecy as it seeks to integrate more closely with the global
economy.
For years, Vietnam's communist authorities ruled behind a veil of secrecy that deemed most government business - including draft
policies, relations with foreign countries or international organisations, and budget details - as classified information that could be
revealed only with high-level political clearance. Even when decisions were made, authorities felt little need to inform the general
public, a failing that created big obstacles to an effective rule of law.
But as Hanoi strives to attract more foreign investment and join the World Trade Organisation, it is under pressure to be more
transparent in the way it makes, interprets and enforces its rules. Its trade agreement with the US, ratified in 2001, obliges Vietnam
to circulate draft laws for public comment and to announce new rules before enforcing them.
Hanoi is opening up a bit. Ministries that once guarded their decisions now rush to print them in an official gazette, previously
published once a month but now coming out daily. Technocrats increasingly consult business groups on draft legislation. Yet much
remains murky. Many Vietnamese officials still view information as power to be shared selectively. Provincial authorities lag behind
in the efforts for greater disclosure. Bidding, tendering, licensing decisions and other processes remain opaque.
"The decision-making process is as un-transparent as ever," says Tony Foster, an attorney with Freshfields in Hanoi. "You have no
real way of knowing how the system works because there are no procedures set." Court verdicts are still not explained, leaving
interested parties to guess how decisions were made. Fredrick Burke, an attorney with Baker & McKenzie, says the lack of clarity
"hurts the legal system because people don't have the benefit of knowing how judges are interpreting the laws".
Hanoi also still hits investors with unexpected bombshells. Japanese motorcycle assemblers, for example, were furious last year
when Hanoi suddenly imposed quotas on imported motorcycle components, forcing some factories to temporarily cease production.
This week investors expressed dismay at a decision that came out of the blue restricting the number of expatriates that can work in
local companies.
"Instead of having an open discussion, they are always thinking about what they can discuss, and what they cannot discuss, and
the safest course is not to discuss anything," said Mr Foster. "It tends to retard thinking."Deepak Khanna, country representative for
the International Finance Corporation, said the government also had changed tax rules, then tried to enforce them for years past.
"You can't bring in new laws and make them retroactive," he says. "Choppiness in the policy environment doesn't help anybody's
business."
Human rights groups are also concerned that the Official Secrets Act remains a blunt instrument for controlling political dissent, or
even internal discourse. "The ordinance on state secrets is loosely worded and all-encompassing with catch-all provisions," said
Daniel Alberman, an Amnesty International researcher. "They can be used in a more or less arbitrary way to criminalise dissent."
However, recent Vietnamese dissidents accused of espionage were not charged with secrecy act violations. But as investor interest
in Vietnam's economy grows, those who share too many economic details - and those who receive them - will have to tread
carefully.
"A lot of people got in trouble in China for sharing statistics and economic data," Mr Alberman said. "As Vietnam gets more plugged
into the international economic scene there are greater risks for this happening to people in Vietnam as well." Also worryingly, the
culture of secrecy has spilled into the fledgling private sector, where entrepreneurs' lack of openness is hampering their ability to
develop businesses.
By Amy Kazmin - The Financial Times - October 01, 2003
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