CORRUPTION AND INTERNATIONAL PERCEPTIONS

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-- Follow-through on the raft of measures to bring down inflation and stabilise the economy.

-- Credit default swap spreads. They peaked in late January and have come down significantly since, while remaining higher than those of regional peers like the Philippines and Indonesia.

-- The gap between black market dollar/dong rates and interbank rates, which are a key gauge of pressure on the currency. After a crackdown on the black market and the imposition of a cap on dollar deposit rates, the gap has been largely eliminated for the time being.

-- Steps taken by the authorities to cut the trade deficit.



GOVERNMENT EFFECTIVENESS ON KEY REFORMS. The Vietnamese leadership must move forward on certain key reforms to remain attractive to investors in the long term and boost the health of the economy, analysts say. Bureaucratic red tape has been seen as Vietnam's biggest non-tariff barrier because it stalls projects and hinders trade. An ambitious government initiative to cut a third of all administrative procedures has catalogued thousands upon thousands of them. It remains to be seen how the slash and burn stage of the campaign plays out. The near-bankruptcy of state shipbuilder Vinashin cast a spotlight on reform of state-owned enterprises, and its heavy debt load triggered ratings downgrades for some banks. Officials have called on state-owned companies to focus on their core activities; the "equitisation", or partial privatisation, of such firms will also help put some space between government and businesses.



What to watch:

-- Concrete measures to cut red tape.

-- Further divestments by state firms from non-core businesses.

-- Stepped-up "equitisation" of state firms via IPOs and strategic partnerships.



CORRUPTION AND INTERNATIONAL PERCEPTIONS. Corruption, endemic in Vietnam, is a major barrier to foreign investment. The authorities regularly reiterate a commitment to fighting graft and had encouraged the media to act as a watchdog, but journalists were arrested in 2008 for reporting on major scandals. In Transparency International's 2010 Corruption Perceptions Index, Vietnam rose slightly to 116 from 120 in the previous two years, suggesting little change in corruption levels. In addition, U.S.-based Human Rights Watch accused the Vietnamese government in a report at the end of March of intensifying repression of indigenous minority Christians in the Central Highlands provinces. More than 70 people were detained in 2010 and it said more than 250 are in prison on national security charges. Human Rights Watch wants the U.S. government to put Vietnam back on its list of 'countries of particular concern' for religious freedom, from which it was removed in 2006.
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[mrk3nx]

James Hookway of the Wall Street Journal takes a look at Vietnam’s turbulent economy through the lens of Vinashin, its sprawling state-run shipbuilder. In December, the company missed its first repayment on a $600m loan from a bunch of prominent international creditors, led by Credit Suisse. “Some of Vinashin’s lenders now complain that they have been deceived,” the article notes. They expected Vietnam’s government, which wrote a letter of support for the company at the time of the loan, to step in and make them whole. I haven’t seen the letter, but I wonder if they were wholly justified in that expectation. The lenders charged a 7.15% interest rate, arranged at a time (early 2007) when Vietnam’s dollar-denominated sovereign bonds were yielding only about 5.75%. Surely Vinashin’s lenders expected to run some risk in exchange for the extra return?

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