One of the region's emerging tigers, Vietnam, is learning the hard way on the journey to a free market economy. With its currency, the dong, currently trading above 16,000 to the US dollar, all signs point to possible devaluation in the near future.
Also, inflation has breached 25% and the national trade deficit is approaching US$15 billion. How fast the tide turns in what has been hailed as one of Asia's fastest growing economies in the past year.
In its accelerated march to attract overseas investment and open its doors to trade, the country adopted a much more aggressive liberalization program over the past decade than, for example, China.
China has repeatedly initiated measures to cool down its overheated economy over the years and taken considerably more pragmatic steps on the road from a bleak communist machine to liberalization.
Despite some historic benchmarks to learn from China, Vietnam is now poised on the edge of an economic situation that may have serious consequences for its neighboring Asian economies.
Not since the 1997 regional currency crisis has there been a large-scale devaluation. Already, over the past month, the baht has depreciated against major currencies.
A downturn in the Vietnamese economy would certainly create a larger downturn not only in Thailand but ripples would be felt throughout Asia.
On a global level, inflation combined with the sub-prime problem and rising oil prices is resulting in a slowdown in economic growth with the cost of living everywhere continually on the rise.
For businessmen and property developers in Vietnam, there has been an abundance of US dollar-denominated debt over the past 12 to 18 months. Now, all of a sudden, in cases where loans have been based in US dollars, say at 7.5% interest, banks are converting loans to Vietnamese dong denominations and quoting interest at hyper-inflationary rates of 15% to 16%.
For any business, this creates a sudden vacuum as the cost of investment is doubled overnight and the possibility of