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The Vietnam News

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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.