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Vietnam must brace for financial ‘tsunami’: WB agency
Vietnam has handled its domestic economic woes well but must now brace for the “tsunami” of financial turmoil that originated in the US, the International Finance Corporation (IFC) country chief told AFP Friday.
Turbulence on global markets could impact Vietnam’s exports and its inflows of foreign direct investment, Sin Foong Wong, the country manager 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 percent in September, 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 September, growth in the (trade) deficit has also come down. In terms of the currency, there was quite a bit 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 US.
“And I think everybody in all corners of the world will be affected. It’s a matter of to what degree and with what impact.”
Vietnam’s banking sector remains fairly isolated and not exposed to US 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 US 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 $56.3 in foreign direct investment (FDI) commitments and $8.1 billion in disbursed FDI between January and September.
“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.”
Corporate governance project
IFC Friday launched a $2-million program to improve corporate governance, transparency and investor protection in Vietnam.
The three-year project aims to help more Vietnamese companies adopt modern business practices as the country integrates further into the global economy after joining the World Trade Organization last year.
An IFC statement said “corporate governance standards 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.
“This reflects the very real concerns that investors typically have about the way most companies in Vietnam are managed and the corresponding lack of transparency,” the IFC said in a background paper.
The project aims to teach international-standard business rules, including internal control and audit mechanisms, financial reporting and the rights and responsibilities of company boards, managers and shareholders.
It would review laws and policies on corporate governance, work on education programs with universities, business leaders and the general public, and help pilot companies reform their operations, the IFC said.
“Good corporate governance builds strong companies, and in these times you need strong companies,” Wong said.
Thanhnien
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