Emerging Markets

Vietnam up to its old tricks?

Is Vietnam up to its old tricks, playing cat and mouse with western banks as it once did with American troops? Or is it a recently liberalized Communist country, out of its depth in the capitalist world of markets and bankers? That is the question puzzling bankers and debt holders as they struggle to understand why the country has still not settled its lengthy negotiations with the London Club to reschedule $750 million worth of unserviced private-sector loans and interest.

At issue is the extent of forgiveness. The State Bank, which last year negotiated a rescheduling of the country's debt with the Paris Club, covering foreign government creditors, received 50% forgiveness - a generous settlement recognizing Vietnam's progress towards opening up its economy and keeping inflation under control. The creditor banks have no intention of being so lenient, and they are offering the Vietnamese...