Newspaper article The Christian Science Monitor

Vietnam's Tough Road to Recovery US Expected to Ease Embargo This Year, but Analysts Say Problems Will Remain

Newspaper article The Christian Science Monitor

Vietnam's Tough Road to Recovery US Expected to Ease Embargo This Year, but Analysts Say Problems Will Remain

Article excerpt

MANY Vietnamese hope for a windfall of foreign investment when the United States ends its 17-year trade embargo. But Nguyen Cong Hai, head of the foreign department at the State Bank of Vietnam, says that ending international isolation and luring fresh capital will be no cure-all for Vietnam's moribund economy.

The bureaucracy is stifling and untrained, he says. Inflation is out of control. Distrusting Vietnamese withhold sizeable nest eggs of potential investment. Many state enterprises can't be salvaged, and unemployment is already high.

"There are still many big issues we have to solve, and we think we can do it" Mr. Hai says. "Vietnam is like a hungry man. But if we eat too much, we will die of overeating."

The US is expected to begin easing the embargo this year by allowing American businesses to open offices, but not to sign joint-venture deals. Since the fall of Saigon to communists in 1975, the US-led blockade has stifled international trade and crucial assistance from the World Bank and the International Monetary Fund.

Washington insists on a full accounting of more than 2,000 American servicemen missing in Indochina before easing economic restrictions. But the Bush administration is under growing pressure from US businesses that are frustrated with the blockade. Some are said to have invested surreptitiously through European and Asian front companies.

"We think that foreign investment is knocking at the door of Vietnam," says Nguyen Ngoc Truong, editor of the World Affairs Review, a foreign policy journal in Hanoi. "The question is, can Vietnam change enough to gain a new momentum?"

Since the ruling communists launched economic reform and sought foreign investment six years ago, the economy has withstood hyperinflation, an aid cutoff from the former Soviet Union, currency free fall, and a foreign-exchange and capital shortage.

In recent years, foreign-investment approvals have jumped, inflation has moderated, and Vietnam has balanced its trade by slashing imports and restoring links to noncommunist former adversaries in Southeast Asia.

Next month, the government is expected to pass constitutional reforms aimed at reassuring Western investors and creating a new legal system. …

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