Academic journal article Southeast Asian Affairs

Crafting a New Economic Order

Academic journal article Southeast Asian Affairs

Crafting a New Economic Order

Article excerpt

In 1997, Vietnam continued to see the first signs of economic slow-down since the early 1990s. Although the government expected gross domestic product (GDP) to expand 9 per cent in 1997, the World Bank estimated that it would rise by only 7.5-8.5 per cent. Levels of direct investment declined. According to Prime Minister Phan Van Khai, the first ten months of 1997 saw a 30 per cent slide in investment from overseas. In mid-1997, the financial crisis in Southeast Asia began to have an impact on Vietnam. The devaluation of the baht and the rupiah made products from Thailand and Indonesia, already considered to be of better quality than Vietnam's, effectively cheaper, and statistics from the Ministry of Trade indicated that the volume of Vietnam's main exports such as coffee and rice would drop for the rest of the year. The slide in regional currencies could also aggravate Vietnam's trade deficit, since Thailand, Indonesia, Malaysia, and the Philippines --- all of which saw their currencies drop in value --- had imported about 5 per cent of Vietnam's exports in 1996 and also figured among its top 20 per cent of foreign investors.

In October the State Bank widened the band within which the dong could trade from 5 to 10 per cent either side of a daily fixed "central rate" to boost exports and ease a shortage of dollars. …

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