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Vietnam: The price of progress

Rapid growth can mean rising inflation, as Vietnam is discovering.

Readers of the financial media and users of trading terminals will have become accustomed to seeing graphs with sharp downward curves in recent months. However, not all of them are directly related to the sub-prime mess. Vietnam’s Ho Chi Minh City Stock Exchange Index, known as the VN Index, has been in free fall for most of 2008 for reasons that have as much to do with growth as sub-prime failure.

After peaking at 1,100 in November 2007, the VN began a steady decline, halving in value by March 2008 and reaching a low of 496 as Euromoney went to press. Foreign investors are spooked: the government has embarked on a programme of strict tightening that has hit markets hard, just as investor caution in the current bout of volatility has encouraged a sell-off of riskier stocks. This round of rate cuts, however, has less to do with global liquidity issues than a pressing domestic concern, one that has always dogged countries that are growing fast.

China has been hogging the headlines recently, but there’s another communist-run Asian state undergoing a period of transformative growth at the moment.

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