ABSTRACT
Relations between Vietnam and the international financial institutions became critical before the onset of the regional economic crisis. The tension reflected a mood change about Vietnam: the national authorities were blamed for a slowdown in the reform process and the international pressure increased towards bolder steps (as we will see in the following chapter). Before we start discussing the new reform agenda promoted by the international financial institutions, it is useful to examine the arguments used to justify the need and, indeed, the urgency for a change of route. The main claim was that Vietnam, after achieving important results during the first phase of doi moi, had entered a period of slower economic growth and was losing the confidence of foreign investors, as witnessed by a shrinkage of FDI flows to the country, which began before the Asian financial meltdown. While a limited contraction in the outstanding Vietnamese growth rates was actually true, the change of mood among foreign operators had, in reality, much to do with excessive expectations among foreign operators in the previous years, self-fulfilling predictions (once investors started to foresee an investment shrinkage, they influenced each other to that outcome), and even more with a visible attempt by the international financial institutions to step in with their own reform proposals. Since the ‘common wisdom’ converged in representing the economic trend as negative and perilous (due to Vietnam’s own responsibilities), foreign advice was represented as the only possible salvation.
