Voice

Is Vietnam the IMF's next crisis?

Even as the International Monetary Fund prepares a major loan package for Egypt, there are suggestions that a burgeoning bank crisis could put Vietnam next in line. Via BusinessWeek:

Vietnam risks becoming the biggest East Asian economy to seek an International Monetary Fund rescue loan since the region’s financial crisis more than a decade ago as it moves to support a faltering banking system.

The nation may need IMF aid to recapitalize banks and must act quickly to clean up bad debt or risk “prolonged stagnation,” the National Assembly’s economic committee said in a Sept. 4 report published on its website yesterday. The financial system needs an injection of 250 trillion dong ($12 billion) to 300 trillion dong, according to the 298-page report that included recommendations to address economic risks.

In July, the IMF released a mostly optimistic account of the Vietnamese economy that included upbeat language on government efforts to bolster the banking sector:

[T]he authorities have taken action to address vulnerabilities at a number of small weak banks. The nine banks classified as weak were placed under the special inspection, and required to present restructuring and recapitalization plans for approval by the SBV. The authorities have also adopted a comprehensive medium-term strategy to strengthen the financial sector as a whole.

The Multilateralist

The ASEAN influence competition

The Jakarta Post reports on parallel U.S. and Chinese efforts to influence ASEAN:

As US Secretary of State Hillary Clinton wrapped up her mission in Jakarta to enhance ties with the Association of South East Asian Nations (ASEAN) and bolster the grouping’s role in the South China Sea spat, China pledged to give Cambodia US$500 million in loans and grants as a token of gratitude for Phnom Penh’s move in accommodating the Asian superpower’s interests in the region.

Clinton concluded her state visit to Indonesia by making a courtesy call on President Susilo Bambang Yu-dhoyono and paying a visit to ASEAN headquarters in South Jakarta.

Even leaving aside Chinese efforts to keep the organization divided (at least on the South China Sea), Joshua Kurlantzick of the Council on Foreign Relations argues here that U.S. efforts to back the regional organization will be for naught if ASEAN members themselves don't upgrade its diplomatic capacity:

But Secretary Clinton, or other American, Japanese, or Australian officials pushing and prodding ASEAN to develop a stronger organization, is likely to have little impact. The organization was designed to be relatively weak, by powerful, often autocratic leaders of the original ASEAN member states, who were highly reluctant to cede any ground to a regional organization. Today, however, many ASEAN leaders themselves are starting to realize that, for the organization to pull its weight in regional affairs, and to effectively defend members’ interests on critical issues like the South China Sea, ASEAN will require both greater unity and a more substantial Secretariat, led by a high-profile figure who can command world attention...