Vietnam's Economy Loses Its Roar

Four years ago, Le Van Tho borrowed $200,000 to build a new ceramic factory on rice fields bordering Hanoi. But with the economy slowing, orders have slumped this year and she recently laid off almost half her workers.

It's also a grim picture down the road: bowls, statues and flower vases gather dust in export showrooms as shoppers in a recession-hit Europe and sluggish United States stop spending.

Once seen as an emerging Asian dynamo racing to catch up with its neighbors, Vietnam's economy is mired in malaise, dragged down by debt-hobbled banks, inefficient and corrupt state-owned enterprises and bouts of inflation.

Vietnam's one-party Communist government has promised reforms, but it appears unwilling to give up the reins of an economy that has delivered fortunes to top officials and their business partners.

House prices have crashed by up to 50 percent in some places from the boom years and jobs are reportedly drying up for school leavers. Foreign investment has dropped 34 percent this year over the same period last year, according to government figures, put off by the economic instability, poor infrastructure and rising wages.

Small and medium-sized enterprises like those in Bat Trang are struggling to stay in business, their stock piling up and unable to get credit.

"Things aren't as good as we hoped for," said Tho, as she supervised a team of workers carving statues, dipping mosaic tiles in glaze and firing up a gas-fired kiln.

The slowdown is adding to pressures on the Communist Party, whose legitimacy is in large part staked on its ability to deliver ever greater prosperity to the country of 87 million people.

While few predict economic meltdown or that the slowdown could weaken the party's grip on power, authorities have stepped up a crackdown on dissidents, bloggers and trade union activists over the last year, according to international human rights activists.

The government is also at pains to appear that is tackling corruption and impunity. The state-controlled media have been unusually direct in highlighting cases of corruption involving party officials and their families. President Truong Tan Sang has made a series of interviews and speeches pledging action.

"It is the command of the people," he told Tuoi Tre daily recently. "We even have to accept painful measures because it is the survival of the party, of the regime and the bright future of this country."

Until 2010, the economy had been growing by more than seven percent on average from 2001, lifting millions out of poverty and leading some to predict the country would follow countries such as South Korea and Singapore in leaping to developed world prosperity within a generation.

The boom transformed what had been a mostly rural nation scarred by war and economic isolation into one dotted with busy towns and cities, their streets clogged with motorbikes and other signs of rising prosperity.

But growth was just over 4 percent in the first half of 2012, and is predicted to be around 5 percent for the next two years. That rate would be the envy of many developed economies, but in Vietnam it means treading water given that average incomes are still low, inflation often far outpaces growth and the country lacks decent schools, hospitals and other basic infrastructure.-ABC News (September 11, 2012)