Nation flexes its muscles

Nation flexes its muscles

The country will need to muster its inner resources to overcome the effects of the worst economic downturn since Vietnam began its sweeping campaign of reform a decade ago.

Opening this year’s final session of the National Assembly, Prime Minister Phan Van Khai affirmed the determination of the country’s leadership to maintain growth into 1999 and at the same time lay the groundwork for further advances once the economic climate improves. The country’s internal strengths will be the key to its success, he said.

Mr Khai cited the cheap labour force, huge land mass with bountiful natural resources, idle capital held by the population and the people’s native wit and creativity.

The background to his stirring words, however, is a gloomy picture of plunging foreign investment and a regional economic crisis that has seriously affected the country’s economy. After several years of an average growth rate of 9%, the economy has now slowed down to two-thirds of that. The slump has occurred in all sectors, from agriculture and industry to services. Exports have slumped to zero growth for the first time in ten years.

Observers grumble that the government has failed to offer viable solutions to the economic downturn. Instead, they say, Mr Khai reiterates pledges made at the recent VIth Party Plenum: develop agriculture and the rural sector through increased funding and development of the industrial and service sectors, relax land laws and encourage all areas of the economy to invest in the land. Other measures include cuts in government expenditure and laying off state employees. Mr. Khai stressed the need to develop the domestic market in order to reduce industry stockpiles.

As the government turns inward, some Western critics say it should take more drastic measures to proceed with the sweeping changes demanded by multinational organisations and aid donors, including selling inefficient state-owned enterprises, reforming the finance system, cleaning up the banking sector and liberalising trade.

Mr Khai again stressed the importance of state-owned enterprises, and promised to curb imports to improve the trade deficit. He offered little for the finance and banking sector apart from promises to cut expenses and reduce political meddling in commercial bank lending. No important changes to make life easier for foreign investors were suggested, only repetition of pledges to simplify administrative procedures and phase out the dual pricing system for foreigners and locals.

Mr Khai hopes that natural resources, political stability and gains made in the initial years of renovation, will allow Vietnam to overcome its current troubles. Contingency plans for the worst- and best-case scenarios, however, have already been developed, economists say.