A recent ominous message
from Hanoi should be taken seriously.
Cambodia, Laos, Vietnam and
Myanmar are the poorest, least well-run countries within ASEAN. They are also notoriously
publicity-shy. Anything negative that needs to be shared is usually served-up
amid a flurry of bureaucratic dogma that tends to bury the bad news.
The messages are still there, but one needs to pay attention.
And it’s
worth adding that there is nothing that could be less appealing to a newspaper
editor – even a communist one – than a gathering of bureaucrats for a
discussion about “budgets and oversights” at a joint workshop for ASEAN’s most
economically challenged.
Recently,
it was at such a function that the head of the National Assembly’s Committee
for Finance and Budget, Phung Quoc Hien, underscored that “any changes in the
global economy would have huge impacts on developing countries like Vietnam,
Laos, Cambodia and Myanmar.”
Yes,
Hanoi said “huge impacts.” And it’s worth more than the passing notice it
barely got while buried on the webpages of
the state-owned Vietnam News Service (VNS).
The
obvious economic bombshell to hit Indochina is landing directly from above, led
by an inevitable rout of the Chinese stock
market where Beijing has repeatedly failed to end the massive sell-off with a
series of measures including a devaluation of the yuan.
Devaluation
has already forced regional governments to follow suit and bring down the value
of their currencies in order to maintain their competitiveness within their
respective export markets.
The cause
and effect of this is impossible to predict at this early stage of what should
be a major shake out in the global economic cycle
But China
is not the only problem. The economic consequences of a conflict in Thailand or
Vietnam’s ascension to the Trans
Pacific Partnership (TPP) are another two imposing risks. Meanwhile, Malaysia
appears ready to descend into a
financial abyss and the rest of the region would also be significantly hurt by
another downturn in the United States.
Against
that backdrop are constant threats in the South China Sea, where Beijing seems intent on pushing
Southeast Asian claimant states into a confrontation over disputed reefs,
islands and maritime borders.
Hien’s
warning was delivered at a two-day workshop for the four countries to “share
experiences in financial management helping them adjust and complete
legislative mechanisms.”
It should
be taken seriously. Vietnam has spent the past three years in the economic
doldrums while Cambodia, Laos and Myanmar are struggling to shed their least
developed status.
Economic
growth has been impressive – on paper at least – for some. But a yawning wealth
gap is emerging as a major issue for governments to deal with. Then there’s the
impact of quantitative easing, not just in the United States, but among ASEAN
countries and their neighbors as well.
According
to the VNS report, paraphrasing Hien: “Vietnam has joined the group of
middle-income countries, and this had posed tremendous challenges to growth
quality, productivity, competitiveness, the macro-economy and the labor
market.”
“In
addition, development gaps and the middle-income trap remain setbacks to the
nation …. Laos, Cambodia and Myanmar could face the same challenges because
they had similar economies,” the dispatch said.
Importantly,
the policy wonks are worried and are looking out on the horizons for an
economic tsunami, which will initially threaten the heavily indebted.
Whether
the next economic downturn will match the force of the Asian Financial Crisis
in 1997/98 or the Global Financial Crisis a decade later is already the
question among many investors. But with so many unknowns, answers are unlikely
anytime soon.
Luke Hunt
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