Sang Baichuan, a professor of international investment at the University of International Business and Economics in Beijing, said that Viet Nam's current financial difficulties are attributable to the weakening confidence of the Vietnamese toward their own currency. Given the depreciation of the dong and the dramatic fall of Viet Nam's stock market, few want to buy shares of the nation's blue-chip companies, even at giveaway prices. This further fuels the country's financial problems, he said. As it pursues fast economic growth by running huge trade and fiscal deficits, the Vietnamese Government can do little to save its economy from deteriorating when worrisome signs emerge, he said.

Loose policies on foreign indirect investment or foreign investment in financial markets are also a culprit, because foreign investors can easily pull out their money and deprive the country of the support it needs to finance the gap between its money reserves and its spending, Sang added.

Sang also said hot money engaged in speculation in Viet Nam and other Southeastern Asian countries may flee in response to the bad news in Viet Nam, generating greater economic fluctuation in the region.

Another problem adding fuel to the fire is that Viet Nam is short of human resources, especially professionals who study the market economy, Fu said. It should cultivate more talent and draw on experience from other countries' development, so it could be run more smoothly, he said.

Not a financial crisis

People doubt whether Viet Nam's financial woes could spread to other nations, because neighboring countries, such as Malaysia, India, Thailand and the Philippines, are subject to high inflation and currency depreciation, too.

"The agonizing situation can exert certain influence on other adjacent economies by altering economic expectations in these countries, especially those having similar development modes to Viet Nam," Sang said.

Many other developing countries have followed Viet Nam's approach to development, which is characterized by attracting foreign investment through favorable policies while boosting trade and especially increasing imports, Sang said. The model also uses government spending to promote industrial development.

The trade deficit and the deterioration of fiscal status caused by overstretching this strategy finally led to the current crisis, Sang said. Such a setback in Viet Nam certainly would have some psychological effects on other economies that embrace the same strategy, he added. But the crisis only would have limited spillover in the region, because the country's problems are unique and less serious than some have made them out to be, he added.

Viet Nam's economic development bears some similarities to that of Thailand in the 1990s with high inflation, an influx of foreign capital and an overheated economy. Fu declined to call the problem a "financial crisis" as did the Morgan Stanley report, arguing that it was a far cry from the onset of a new Asian financial crisis. He said although the Vietnamese Government exercised lax control over its capital market, the government still had a grip on it.

Echoing Fu's view, Sang said the scale of hot money in Viet Nam was far smaller than the amount that flowed into Thailand in 1997. The current predicament is rooted in the country itself, as a result of its long-term economic policies, he said.

Furthermore, Viet Nam is still an agricultural country with a low level of industrialization and adequate food reserves. Inflation, and the rise of food prices in particular, would not likely have catastrophic effects, Sang said. Also, the overall impact of the Vietnamese financial problem would be controllable, because Asian countries have strengthened their ability to fend off financial crises as a whole, he said.

At a meeting in May, finance ministers from the 10 member countries of the Association of Southeast Asian Nations, China, Japan and South Korea agreed to create a pool of at least $80 billion in foreign exchange reserves to be tapped in case they needed to protect regional currencies. The move sent a message that Asia was making a concerted effort to secure its regional financial stability.

The Vietnamese Government has put forward a series of measures to ease its problems, such as tightening monetary policy, strengthening the supervision of infrastructure projects, adjusting the import mix to control inflation and reducing its trade deficits with other countries. On June 6, the country's central bank announced that foreign currencies should not be sold to individuals-a further move to stabilize the foreign exchange market.

Fu said besides Viet Nam's efforts, such international financial organizations as the International Monetary Fund also would lend a helping hand if the situation became grave, because under the scenarios of globalization and regional integration, no country would be immune from turmoil in other nations.

Viet Nam's status quo is not an isolated problem. Given the rising prices of oil and agricultural products, countries around the world all suffer such predicaments, and they have a common responsibility to fight them, Fu said.

"Asian countries should be prudent in attracting foreign investment and act in tandem to upgrade their industrial structure," Fu said. The Vietnamese phenomenon shows that countries should not act radically when opening their financial markets; otherwise, their national security would face severe challenges, he added.

Viet Nam's problems sound an alarm not only for the country itself, but also for all developing countries, Sang said. Apart from paying surging costs for their development, developing countries are faced with the additional burdens of improving the livelihoods of low-income citizens and adjusting their income distribution systems, he said.

"All these have boiled down to one truth: an extensive pattern of economic growth that relies on resources is no longer sustainable in a world where costs keep soaring," Sang said. He suggested that Viet Nam encourage technological innovation to offset its rising costs and narrowing profit margins.