UNDP urges Vietnam to heed lessons of asian crisis
HUE - Vietnam has a great opportunity to avert crisis and
instability by learning from the crushing lessons
of Asia's economic turmoil, the United Nations
Development Programme said in a report.
Urging Vietnam to avoid policy mistakes made
in regional countries, the UNDP said the
nation's leadership needed to improve
information flows, boost transparency, curtail
lending to state-owned firms and devalue the
dong currency.
The report, ``East Asia: From Miracle to Crisis,
Lessons for Vietnam,'' was written to coincide
with an informal meeting on Monday between
the country's foreign donors and government
officials in the former imperial capital of Hue.
Referring to the impact of the Asian crisis, the
report made clear what lay ahead for Vietnam
without major reform moves.
``Without further concrete reforms, Vietnam
will most surely eventually experience a
significant decline in export revenues, a flood of
cheap imports, a further decline in (foreign
investment), increasingly scarce foreign
currency, slower growth in real incomes and
higher unemployment,'' said the report, obtained
by Reuters.
Vietnam's donors have said they would alert
Hanoi to the costs of delaying further economic
reforms and assess the state of the economy
during Monday's meeting. Officials have said
they hoped Prime Minister Phan Van Khai
would attend.
Donors, who pledged $2.4 billion to Vietnam
last December following similar commitments in
1996, will meet foreign investors on Sunday
afternoon to discuss the country's business
climate.
The meetings come amid an economic
slowdown, especially on export growth and
foreign direct investment inflows. Economists
attribute Vietnam's declining economic fortunes
to the woes in Asia -- its key export market and
source of foreign investment -- but also to
perceptions that the country has become one of
the toughest places in the region to do business.
Vietnam adopted sweeping economic reforms
in the late 1980s but remains one of the world's
poorest countries, with per capita incomes just
over $300.
The UNDP listed 12 lessons for Vietnam
based on the tough experiences in Asia over the
past year.
It chided one of the world's few remaining
communist-ruled countries over a lack of
transparency and the flow of reliable
information, particularly in the bank and
corporate sector. One example was Vietnam
did not publish a state budget, it said.
``Vietnam's economy remains one of the most
information-starved in the world. In short, while
Vietnam is not yet in financial crisis, it is in the
midst of an information crisis which needs to be
urgently redressed to avert financial crisis,'' it
added.
Greater transparency and access to reliable
information would also limit the scope for
corruption, the report said.
Another area of concern was
government-directed lending to state-run firms,
which should be curtailed or rationed, it said.
Vietnam has said it would partially privatise,
merge or liquidate most of its 6,000
state-owned firms with the exception of some
core industries. As of February only 17 firms
had broken from total state control.
The report also urged Vietnam to move
towards a more competitive currency by
devaluing the non-convertible dong, saying this
would promote exports and encourage more
rational financial planning of new foreign
borrowings.
Economists say the dong is overvalued following
a wave of devaluations that swept Asia last
year.
Hanoi allowed a 5.3 percent downward
adjustment of the fixed exchange rate in
February. But the currency has stayed at the
bottom of a 10 percent trading band, or around
13,000 dong to the dollar, ever since.
By Dean Yates - REUTERS, June 13, 1998.
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