MANY Vietnamese hope for a windfall of foreign investment when the United States ends its 17-year trade embargo. But Nguyen Cong Hai, head of the foreign department at the State Bank of Vietnam, says that ending international isolation and luring fresh capital will be no cure-all for Vietnam's moribund economy.
The bureaucracy is stifling and untrained, he says. Inflation is out of control. Distrusting Vietnamese withhold sizeable nest eggs of potential investment. Many state enterprises can't be salvaged, and unemployment is already high.
"There are still many big issues we have to solve, and we think we can do it" Mr. Hai says. "Vietnam is like a hungry man. But if we eat too much, we will die of overeating."
The US is expected to begin easing the embargo this year by allowing American businesses to open offices, but not to sign joint-venture deals. Since the fall of Saigon to communists in 1975, the US-led blockade has stifled international trade and crucial assistance from the World Bank and the International Monetary Fund.
Washington insists on a full accounting of more than 2,000 American servicemen missing in Indochina before easing economic restrictions. But the Bush administration is under growing pressure from US businesses that are frustrated with the blockade. Some are said to have invested surreptitiously through European and Asian front companies.
"We think that foreign investment is knocking at the door of Vietnam," says Nguyen Ngoc Truong, editor of the World Affairs Review, a foreign policy journal in Hanoi. "The question is, can Vietnam change enough to gain a new momentum?"
Since the ruling communists launched economic reform and sought foreign investment six years ago, the economy has withstood hyperinflation, an aid cutoff from the former Soviet Union, currency free fall, and a foreign-exchange and capital shortage.
In recent years, foreign-investment approvals have jumped, inflation has moderated, and Vietnam has balanced its trade by slashing imports and restoring links to noncommunist former adversaries in Southeast Asia.
Next month, the government is expected to pass constitutional reforms aimed at reassuring Western investors and creating a new legal system.
Despite enthusiasm for Asia's new economic frontier in Indochina, international companies have been dissuaded, not just by the US blockade, but also by poor infrastructure, political uncertainty, inflation, and corruption.
Though investment approvals are rising, much of the foreign money is going to build hotels or fund oil exploration. So far, investment in manufacturing operations has been limited.
When the embargo is lifted, businesses here "won't be flooded with as much money as they think," says one Western business consultant.
Lifting the embargo is also likely to sharpen the potentially explosive economic imbalance between the long-time communist north and the freewheeling capitalist south, Vietnamese and Western observers say. The south has most of the roads, electrical power sources, airports, and railways, in contrast to the war-devastated north. And in the south, where 80 percent of the ethnic Chinese community lives, a large amount of capital and gold remains hidden.
"Trying to integrate the two parts of the country is still very difficult," says economist Nguyen Xuan Oanh. "It will still take 20 to 30 years to equalize the infrastructure."
The government must also tackle the deficit-ridden state sector.
At one point, contending that 40 percent of the state firms are viable, Hanoi announced plans to sell more than half of the 700 enterprises. Private econo-mists estimate that few state firms would last long in a free-market climate.
The divestiture has stalled amid government fears of rising unemployment, now officially at 10 percent of the nation's 34 million workers. Some economists put the rate at 40 percent.
Subsidies and credits to state firms, meanwhile, mean rising prices.
"The struggle against inflation is arduous," says Pham Van Trong, the nation's vice minister of finance.
The World Bank estimates that Vietnam, impoverished by decades of war and economic mismanagement, needs $500 million a year for five years to rebuild.