Until the beginning of July it had been exceptionally hot and dry
in north-central Vietnam. In the south’s usual sub-tropic
environment the temperatures hovered at the expected humid 90
degrees, with perhaps a bit less than the usual afternoon
rainfall. Then came the monsoons and floods. Confused weather is
hardly this nation’s only problem. Just look its confused
economy, where nothing runs smoothly or can pass for normal.
There’s a party congress coming up in six months and a
great deal of hard work to be done beforehand. Before its regular
congress, the Vietnamese Communist Party usually does everything
it can to “cook the books” in an effort to show progress. Who
says Hanoi doesn’t breed some clever capitalists?
The problem is that GDP targets can be manipulated rather
easily if a state-controlled economic system allows inflation to
rise commensurate with those targets. Such trickery does not go
unnoticed, and the nation’s borrowing ability is on the edge of
being submerged well below the negative investment grade at which
it is already pegged.
Hillary Clinton, who arrived in Hanoi yesterday for a much
anticipated two-day visit, had better have stuffed her diplomatic
bags with U.S. dollars, preferably in high denominations. That’s
the currency everyone wants these days in Vietnam. Whether it’s
the little shop on what ex-GIs remember as Tu Do street — now
known as Dong Khoi — or the State Bank of Vietnam, the Yankee
dollar is once again highly sought after.
The Viet Kieu, those 4 million Vietnamese living
abroad, usually send back about $2.5 billion each year. Official
figures state that 500,000 Viet Kieu return to visit each year,
bringing their hard currency with them. But the weak world
economy has hit tourism and financial repatriation hard this past
year.
Of course gold is always good to have around, as any
merchant in Ho Chi Minh City will affirm. But it’s not as easily
convertible or transportable as the greenback. The economic
liberation program known as Doi Moi has succeeded in the
last two decades in reintroducing Vietnam to the world of
international trade and finance, but in doing so has also made it
vulnerable to this same global free market.
As is often repeated, however, from one end of Vietnam to
the other — and, yes, Vietnam still has two very distinct north
and south cultures — according to official sources, the
country’s gross domestic product calculation rose over five
percent while the rest of the world financial system was tanking.
Interestingly, none of these bureaucrats ever allow themselves to
be identified by name.
Vietnam is actually attempting to accomplish two goals at
once. In the first instance the political echelon wants to hold
on to its old socialist system of central government control. At
the same time it wants the benefit of gaining investment, foreign
and domestic, as a result of accepting a market-based commerce.
It’s the Vietnamese perception of how the Chinese success has
been created. Unfortunately for Hanoi’s communist capitalists,
the Chinese model is not that easy to transfer.
China accumulated hard currency by being able to create
well-made basic goods competitive with those produced in the U.S.
and Europe. Vietnam can do the same, even in competition with
other developing nations, but not until what it exports to the
West far outstrips what it needs to import from the West. The
dollar imbalance creates continuing pressure on the Vietnamese
dong that in turn edges inflation forward.
While some government economists support the idea that a
depressed Vietnamese currency actually aids exports paid for in
dollars, the result is an internal economy that cannot
immediately participate in the benefit of the overall export
product increase. Interest rates have been raised to battle
inflation and that has diluted the rate of investment.
The typical Vietnamese businessman reacts, not
unjustifiably, with considerable pessimism at the government’s
ability to manage the broader aspects of the nation’s economy. In
reaction, converting to and hoarding U.S. dollars is his only
protection. The government has had to take drastic action.
With a trade deficit that reached $6.7 billion in the first
six months of 2010, the Ministry of Finance is tightening
controls over imports of not only consumer goods but also basic
commodities. The State Bank of Vietnam has instructed commercial
banks to restrict lending in foreign currencies that fund the
import of a broad list of products, which includes everything
from mobile phones and salt to steel and fertilizer.
On second thought, maybe the climate is easier to figure
out than Vietnam’s economics.
