Can Vietnam Get Its Credibility Back?

Before the global slowdown started in 2008, Vietnam was experiencing an economic miracle driven by foreign investment.  Four years later, the question facing Vietnam is whether it can win the global community back.  That will depend on trust.

Foreign direct investment (FDI) has declined radically — from $71 billion in 2008 to $6 billion so far in 2012 (an enormous loss in light of Vietnam’s $120 billion GDP).  The obvious explanation is that the whole world’s economy has slowed down.  The less obvious, and probably more important, explanation:  lack of transparency.

In a recent survey by the Vietnam Chamber of Commerce and the World Bank, 92% of respondents emphasized transparency in planning and government policy making.  The survey found pessimism and dissatisfaction with the openness in the country.

In short, foreign investors are not getting accurate, adequate, and trustworthy information they need to devise investment strategies and assess risk.

Declining FDI has contributed to an overall slowdown in the Vietnam economy, which grew 4.4% in the first half of 2012 after a decade of economic expansion in the 7% range.

There’s evidence Vietnam’s slowdown has hit bottom now that inflation appears to be under control, but the country needs to earn the trust of global investors  to get back on the path of the economic miracle that stalled four years ago.

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