English Transcript

Cập nhật 16/07/2008 10:09:00

Inflation in VN has become a serious problem, with prices rising 26% on average. This week the country's communist government moved to depreciate the value of the currency - the dong - to reduce pressure on inflation. But expers say much more needs to be done to counter lower growth and overcome investor fears.

Speaker: Karen Percy; Presenter: Hanoi-based Australian economist Ray Mallon.

PERCY: Hanoi's streets are crowded with new cars and motorbikes… evidence that ordinary Vietnamese are becoming more prosperous. The growing number of luxury stores reveal just how prosperous some have become.

Since the communist government here embraced the policy of 'Doi Moi' or economic openness more than a decade ago, millions have been lifted out of poverty and VN has become one of the best performing economies in Southeast Asia, averaging growth of 8 to 9% year.

Ray Mallon is an Australian economist based in the capital.

MALLON: I mean when I first visited VN in '88 you saw poverty everywhere on the streets. Now there still is poverty here, it's increasingly in the more isolated areas. There just has been an incredible bustling of entrepreneurial activity. Things have opened up, everything is much freer to move around, it's far from being totally free but it's just a very different economy, a very different society, the standards of living have increased dramatically.

PERY: But there are worries now that the economy might be overheating.
Inflation is at more than 26%, the stock market has dropped 50% this year and there are fears of a real estate bubble.

MALLON: In the last 12 months or so inflation has taken off and is at scary levels as is the current account deficit. When you look at inflation about half of that's due to external factors, if you take out food price inflation then the inflation rate is more like 12%, which is a worry but less scary. So overall other sectors, manufacturing, agriculture are still doing very well. Employment rates are still very strong, this suggests that there will be continuing strong consumer demand, so it's somewhere in between probably, there is cause for concern but also for optimism.

PERCY: Despite the fact that VN is still a one-party, centrally controlled country, the spirit of doing business is alive and well. Economist Ray Mallon again:

MALLON: The degree of entrepreneurial activity here is just amazing. Wherever you look you see it. But there's also this work ethic, this ethic in terms of trying to invest in human capital, get ahead. You see that reflected in the amazing rapid transfer of technology, willingness to try new technology, you see things since the internet has opened up, that level of use of the internet as a percentage of the population is up from nothing to higher than the Philippines for instance, and similar levels to Thailand. So these sorts of things, picking up of language skill, anything related to technology, people invest a lot of their time in getting ahead in learning.

PERCY: How is it that a country like VN which is ostensibly still a communist country in so many ways can have such capitalist success?

MALLON: Officially the constitution still classifies the country as being Marxist-Leninist system. But it's also a system that very much embraces the market economy and very much embraces competition. There's always been paradoxes even when you look back, that in the old days under central planning you'd only ever had the government revenue was around 14-15% of GDP compared with say 40% in China or 80 or 90% in Russia. It was much less than most Southeast Asian countries, so the affected degree of control was, even under those days, was somewhat less.

PERCY: The government still keeps a firm hand on the flow of capital, the currency and central bank policy.

And there are still many government run and government owned businesses.
That is changing, but there are concerns that if the economy doesn't improve soon, then the government might be tempted to turn its back on the policies that have brought the country this far.