As the famous American financial strategist Warren Buffet likes to say: “It’s only when the tide goes out that you learn who’s been swimming naked.”

For some years now, Vietnam’s Communist Party leaders have frolicked in the surf, their brazen nudity hidden by bubbling waves of frothy, easy-credit growth.

But as is now frighteningly evident, there has been far too much froth and not enough substance.

Starting soon after Prime Minister Nguyen Tan Dung took office in June 2006, it was clear that the tide was drifting out and exposing some very unsavory figures.

Of course, the full extent of Dung’s naked incompetence was not immediately apparent.

Growth rates for the first two years of his administration chugged along at about 7 per cent; less than others in the region, but still not too bad.

Concurrently, a campaign against corruption, the nation’s endemic Achilles’ heel, was launched – with Dung himself becoming head of the new Anti-Corruption Steering Committee.

All fine and dandy and everyone cheered.

Unfortunately, it was soon apparent that the rosy economic figures were built on sand and about to be washed away by the retreating tide.

And that anti-corruption committee was a toothless quango designed by Dung to deflect attention from the staggering misappropriation of funds by the state-owned enterprises.

Yet for some reason, many journalists, diplomats and even alleged experts continued to report that everything was swell.

To hear them prattle on about “dynamic” Vietnam and its “booming” economy was totally baffling – as it still is today.

If only they would just Google “economic rot in Hanoi”, or “Vietnam’s financial woes” or anything similar and see the cascade of fiscal obituaries.

What is really shocking is that the malaise is far worse now than it was when Dung took over.

As Vietnam’s own General Statistics Office reported last month: “The economy is facing major challenges.” When the regime itself says that, you know things are pretty desperate.

And they are. According to the GSO, 70 per cent of the country’s businesses reported losses in the first half of this year and nearly 22,000 went bankrupt.

The inventory index of many products surged sharply, while consumption continued to decline – basically, people had less money, and the money they had was worth less, so they weren’t spending.

Vietnam’s currency, the dong, remains prone to regular devaluations – it lost 10 per cent of its value last year and is forecast to drop another 2 to 3 per cent this year.

All the country’s state-owned banks are effectively bankrupt due to the massive non-performing loans they are carrying.

Property prices, which fell 10 to 20 per cent last year, are expected to dip another 5 to 10 per cent this year.

And Vietnam’s trade imbalance not only remains huge, but it is growing – its state budget deficit alone was $2.87 billion to June 15, equal to 42.8 per cent of the full-year estimate and nearly double that of last year.

The stock market is among the world’s worst performers, and the much-heralded growth rate is down to 4.4 per cent and falling.

In short, Vietnam’s top-down command economy is dying. As the World Bank said last month, there is a drastic need for structural reforms in the state-owned companies, banks and public investments.

Thankfully, the party has finally got the message and Dung is under fire.

After it was officially conceded that “corruption is still taking place in a rampant, serious and complicated fashion in multiple areas”, he was sacked as head of the anti-corruption committee.

That was humiliating enough, but now there is open talk in many ministries, and even in the military, that Dung simply cannot cut the mustard.

Of course, we should not only blame him and his cronies, but also the people themselves for putting up with this dreadful performance.

Instead, they should heed the regime-changing message from Myanmar to Tunisia: If you want reform, it can happen.

Contact our regional insider Roger at [email protected]