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Unrest over rising prices may unseat Vietnam’s inept rulers

Unrest over rising prices may unseat Vietnam’s inept rulers

BANKERS and financiers often move in mysterious ways that both baffle and infuriate us.

They use our savings to make tons of loot for themselves, often in highly risky ventures that are unfathomable to mere mortals like you and me.

Then, if they screw up, they get massive bailout packages – and go on acting in the same avaricious, self-enriching way as before.

No matter how dire the times, they still urge punters to make investments, often in the most mangy dog of a company or even a country.

This was palpably evident last week, when, days after Vietnam raised prices and devalued the dong yet again, Standard Chartered Bank said Hanoi faced galloping inflation, a huge trade deficit and loss of confidence in its currency.

But, hey, never mind, because the bankers advised investors that they still remained optimistic about Vietnam and saw many growth opportunities.

Yeah, sure, and give me three packs of that snake oil over there.

Vietnam’s economy is on the rack, as it has been for the past four years due to loose interest-rate policies and state-subsidised lending.

The latest 9.4 percent devaluation was the fourth in a little over a year and experts say the dong will droop more in the near future.

It speaks volumes that the Myanmar kyat is a more stable currency these days than the Vietnamese dong.

Last year, the United States dollar lost value around the world, except in Vietnam where it rose dramatically because our poor neighbours exchanged their dong for dollars or gold at every opportunity.

And remember, Vietnam’s trade deficit last year hit US$12.4 billion, meaning the national reserves leaked by over a billion a month.

With all that and the effective bankruptcy of the state-owned shipping conglomerate Vinashin, it’s no wonder that rating agencies like Fitch, Moody’s, and Standard and Poor’s all downgraded Vietnam.

Other state-owned enterprises are also languishing, as doubts arise about the ability of state mining company Vinacomin to service its debts, and Petro-Vietnam is in similar peril.

Regrettably, despite the misguided optimism of Stanchart and other self-interested financiers, things are going to get a lot worse before they get better.

Rolling power blackouts started two weeks ago, and now Vietnam’s long-suffering people have been told that electricity costs will increase tomorrow by a record 15.3 percent.

Already, the head of a foreign company in Haiphong has said the power cuts would make it very difficult for me to explain to the board that we want to stay and develop the company here”.

The increase in power prices caused the already depressed Vietnam stock market to suffer its biggest drop in 15 months last week.

Inflation hit a two-year high this month, and it is sure to go higher after fuel prices were increased by up to 24 percent on Thursday, due, say the apparachiks, to the rise in crude oil prices and the devaluation of the dong.

Might the workers start to remonstrate? You betcha. There have already been warnings that Hanoi’s anti-inflationary actions will boost unemployment and poverty, thus fuelling strikes and other protests.

Remember Indonesia in 1997, when the Asian Financial Crisis crippled the livelihoods of ordinary people, leading to huge rallies that in just two weeks forced out President Soeharto.

He had ruled with an iron fist for 31 years; the Communists in Hanoi have ruled dictatorially, and ineptly, for 35. It is time for them to go.

After Suharto was forced out, it took Indonesia little more than a year to hold multiparty elections and the nation has never looked back.

It could happen next door. As the sage of Nebraska, Warren Buffett, once said: “Only when the tide goes out do you discover who’s been swimming naked.”

Economically, Vietnam’s leaders have been swimming naked for the past decade and the tide has now gone out.


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