Wall Street Journal
Thursday, Feb. 04, 1999
By Reginald Chua and Samantha Marshall
HANOI, VIETNAM: The Communist leadership here says it has learned its lesson from the Asian financial crisis: It needs even more control of the economy.
It isn't as if Hanoi has a loose grip now. State-owned enterprises continue to dominate industry and an army of bureaucrats wields power through a maze of unclear and changing regulations. But in an interview, Prime Minister Phan Van Khai argued that the main lesson of the Asian crisis is that Vietnam needs to build an economy that maximizes the advantages of the country and plays down the importance of exports. And that requires more careful state supervision.
"We have to pay attention to the state management of the macroeconomy," the 65-year-old Mr. Khai said. "We should make the priority which areas we should invest in and which areas we should keep an eye on things."
This probably isn't the lesson international donors, foreign investors and overseas economists were hoping the government would take home from Asia's problems. They have argued Hanoi needs to lighten, not tighten, its hold if Vietnam is to avoid a deeper and more protracted economic crisis than the one battering the rest of the region.
But Mr. Khai a Russian-trained technocrat regarded as a relative liberal in Vietnam on economic issues didn't appear eager to accelerate the opening of the economy. Asked whether Hanoi should shift away from its policy of protecting domestic industry to encourage competition, the prime minister said Vietnam wasn't yet in a position to do so.
He also suggested the government shouldn't focus too much on exports. Instead, he said, Vietnam should look to the domestic economy to spur growth.
It isn't clear how Vietnam's largely rural population, with a per capita income of around $300, is going to boost its purchasing power. Foreign investment, a key source of growth over the past few years, is slowing; one lawyer notes his firm has already cut its professional staff in Hanoi by half.
Still, Hanoi may be able to stave off pressures to accelerate reform for some time. The international donor community's agreement in December to give Vietnam $2.2 billion in loans and aid may buy the government breathing room.
To be sure, the government is still striving to hit economic growth targets of 5% to 6% this year, Mr. Khai said. Private estimates are substantially lower.
Nothing short of fundamental economic changes will stop Vietnam's slide, economists say. "If Vietnam hasn't made deep structural reforms, it will be even less competitive once the rest of the region recovers from its economic crisis," says Carlyle Thayer, a professor at the Pacific Center for Security Studies in Honolulu. " Vietnam's leaders are living in a fool's paradise if they think they are going to be isolated."