Vietnamese leaders deliver mixed messages
Vietnam's ruling Communist party opened a secretive, eight-day national congress in Hanoi on Wednesday, with leaders once more giving out mixed messages about the government's willingness to restructure the fast growing yet unstable economy.
In his opening address, Nong Duc Manh, the outgoing party chief, said the country must overcome serious challenges – including an under-developed education system, weak infrastructure, corruption and wasteful spending by state-owned companies – if the economy is to continue thriving.
Addressing nearly 1,400 delegates, he said the party had learnt that it must "seriously prioritise the quality and the effectiveness of growth and sustainable development".
However, key documents prepared for the congress emphasised that the state would retain its "leading role" in the economy, which many investors believe is a major source of the turbulence that has buffeted the country over recent years.
Despite growing at an annual rate of 7 per cent over the past decade, Vietnam’s economy has faced some long-standing challenges, with a chronic balance of payments deficit, profligate investment by the government and state-owned companies and a lack of confidence in the currency, the dong.
Macroeconomic policy has undergone violent swings as the government tried first to control inflation, which peaked at 28 per cent two years ago, before moving into stimulus as the financial crisis hit, and then struggling to put the brakes on since.
Last year, the three main credit rating agencies – Fitch, Moody’s and Standard & Poor's – downgraded Vietnam's sovereign debt, citing concerns about the trade and budget deficits, accelerating inflation, inefficient state bank lending to state companies and a lack of transparency.
Nguyen Huu Dung, a delegate from Quang Tri province in central Vietnam, said he believed the congress, which will determine the leaders and policies for the next five years, would "open a new era in Vietnam’s economic development".
However, most analysts are yet to be convinced that the congress, which is held behind closed doors apart from the opening and closing sessions, will produce a government that can match the rhetoric with the reality.
"The analysis of what’s wrong is quite easy," said Jonathan Pincus, head of the US government-funded Fulbright economics teaching programme in Ho Chi Minh City. "The problem is how to impose fiscal discipline on ministries, provinces and state-owned companies. It will take a lot of political will and I would be sceptical about the government’s willingness to do so given its past performance."
The Financial Times - January 12, 2011