Vietnam ’07 inflation above economic growth-report

HANOI, Dec 24 (Reuters) – Vietnam’s economy is estimated to expand 8.44 percent this year but its inflation would be above the growth rate, with prices jumping to a record 12.6 percent in 2007, state-run newspapers quoted a government official as saying.

Planning and Investment Minister Vo Hong Phuc estimated higher prices of food and fuel were behind the consumer price index rise of 12.63 percent, the Saigon Giai Phong (Liberation Saigon) newspaper reported on Monday.

Phuc told a cabinet meeting on Sunday that exports this year would rise to $48.3 billion and foreign direct investment would soar nearly 70 percent from 2006 to $20.3 billion.

Inflation stood at only 4.5 percent in 1996 when the economy of the southeast Asian country expanded 9.34 percent. Prices last rose beyond the 10 percent mark three years ago, reaching 10.3 percent in October 2004 from a year earlier.

The Vietnamese government had previously targeted 2007 GDP growth at 8.5 percent and inflation below the growth rate.

Last month, Vietnam raised the 92-octane petrol retail prices by 15 percent to 80.5 U.S. cents per litre, while diesel prices firmed 18.6 percent to 63 U.S. cents per litre, as Hanoi moved to help cut losses by state-run importers when global oil prices surged.

At the cabinet meeting, Industry and Trade Minister Vu Huy Hoang forecast prices next month would firm 1.8 percent from this month, driven by consumer’s demand ahead of the Lunar New Year festival, Vietnam’s largest, which comes in early February, 2008.

The government is expected to release full GDP details and trade statistics later this month. (Reporting by Ho Binh Minh; Editing by Valerie Lee)



Vietnamese students are in the streets of Hanoi and Ho Chi Minh City protesting what they call a renewed Chinese “invasion” of the Spratly and Paracel Islands in the oil-and-gas-rich South China Sea. Their last war was a brief one in 1979, though less than two decades ago a confrontation near the Spratlys left several dozen Vietnamese dead.

Vietnam claims the islands because they are off its coast, but with so many resources under the sea, several other nations in the region claim them as well, most forcefully China.

There has long been an intense love-hate relationship between these two countries, who share a border as long as that between the United States and Mexico. China’s influence began in the second century B.C. and actually increased after Vietnam won its independence a millennium later. Many Vietnamese today play down this heritage, and only 3 to 5 percent of 85 million Vietnamese are identified as ethnic Chinese. Vietnam does have its own very specific identity. Still, as Vietnam National University law Professor Pham Duy Nghia has argued, to understand contemporary Vietnam, one must look back to its Confucian past.

Vietnam’s war with the United States was a terrible and destructive experience, but it has far less significance for Vietnam today and tomorrow than the deeply rooted Confucian-based culture. Vietnam’s reforms are themselves in many ways closely patterned on those launched almost 30 years ago in China and, despite periodic disputes relations between the two, are expanding exponentially.

The cultural heritage stands out in many ways. Most obviously, there is the elitist government that sees governance in moral terms and maintains a paternalistic relationship between rulers and ruled. Since it launched reforms in 1986, the Vietnamese government has set high goals to be achieved by pragmatic economic change, rapidly improved education and a strong goal-oriented work ethic, encumbered by corruption.

Other Confucian-influenced governments in East and Southeast Asia preceded Vietnam in exploiting these qualities and became Asia’s economic “dragons” and “tigers,” most moving in time beyond traditional Confucian institutional authoritarianism to some form of democratic governance. Countries in Asia without the Confucian background have had much less success with reforms.

Today, Vietnam is still a rapidly growing tiger cub, so to speak, because it got started late in its market-oriented reforms. This was because Le Duan, who succeeded Ho Chi Minh as Communist Party boss in 1969, rejected reconciliation at the end of the war in favor of a brutal campaign of reprisals. He further centralized the economy and focused his persecution especially on the Chinese-Vietnamese entrepreneurs who had made what was then Saigon so prosperous. Hundreds of thousands fled across or into the sea as “boat people.”

When Le Duan finally died in 1986, Vietnamese pragmatists launched the “renovation” (doi moi) program that is remaking Vietnam today. While doi moi does not include democratization, as the continuing harassment and imprisonment of political dissidents demonstrates, it does recognize the need for the greater individual opportunity and personal initiative that in some other countries have in time resulted in more democratic governance.

Vietnamese and Chinese leaders today are pragmatic and know they have too many common roots and interests, bilateral and beyond, to get sidetracked into real conflict, even over oil in the South China Sea.

William Ratliff is a fellow at Stanford University’s Hoover Institution and author of the forthcoming book “Getting Down to Business in Vietnam: Entrepreneurship in Asia’s Tiger Cub” (Independent Institute).