5:01:34 PM | 28/10/2008
Vietnam has handled its domestic economic woes well but must now brace for “tsunami” of financial turmoil that originated in the U.S., the International Finance Corp (IFC) country chief told AFP.
Turbulence on global markets could impact Vietnam’s exports and its inflows of FDI, Sin Foong Wong, the country manger of the IFC, an arm of the World Bank said.
Wong said Vietnam has done much to stabilize its economy, which after more than a decade of rapid growth has been hit this year with double-digit inflation, a widening trade gap and fears about its currency.
The inflation rate reached 27.9 per cent in Sept, and the trade deficit has widened to US$16.2 billion in the first 10 months, but the rates of increase for both have started to level off, according to official data.
“Vietnam went through a tough time a few months ago and obviously they have taken a whole series of monetary and fiscal measures, and I think most observers would say things have stabilized,” Wong Told AFP.
“Inflation increased at its slowest pace in Sept, growth in the trade deficit has also come down. In terms of the currency, there was quite a bite of speculation on the dong six months ago about potential devaluation.
“Those things have calmed down and I think the dong is now trading fairly comfortably within the band, and there’s no situation where there is a parallel grey market with a different rate to the official rate.”
However, he warned that “now of course you have a different sort of tsunami coming along that originates not within Vietnam, but in the U.S.
“And I think everybody in all corners of the world will be affected. It’s a matter of to what decree and with what impact.”
Vietnam’s banking sector remains fairly isolated and not exposed to U.S. toxic assets and bad debts, but Vietnam would still be exposed to the wider economic downturn triggered by the financial crisis, he said.
“There are these ripple effects that are flowing through the global economy,” Wong said. “One is the impact on the exports. There is a slowdown in the U.S. and Europe, which are key markets.
“The other uncertainty is FDI flow. With the global turmoil and the credit crunch, how will it impact investors, whether they are portfolio investors or people coming in to build factories?”
Vietnam attracted US$56.3 billion FDI commitments and US$8.1 billion in disbursed FDI between Jan and Sept.
“So far Vietnam has done tremendously well in attracting FDI, the numbers are terrific,” said Wong. “But in this global situation, I guess they have to be vigilant.”
IFC recently launched a US$2-million program to improve corporate governance, transparency and investors protection in Vietnam.
The 3-year project aims to help more Vietnamese companies adopt modern business practices as the country integrates further into the global economy after joining the WTO last year.
An IFC statement said “corporate governance standard in Vietnam are poor” and pointed out that Vietnam ranked 170th out of 181 countries for investor protection in the World Bank’s latest annual “Doing Business” survey. (Thanhnien Daily)
Vietnamese
