No-confidence motion over currencies

PUBLISHED : Wednesday, 04 March, 1998, 12:00am
UPDATED : Wednesday, 04 March, 1998, 12:00am

Spare a thought for the humble kip - the currency of Laos, the region's smallest economy.

In the months after the Southeast Asian economic meltdown, the currency has fallen against the rival Vietnamese dong and has even weakened next to a wounded Thai baht.

A year ago it was worth 980 to one US dollar. Now it is worth 2,480 and falling.

Like the dong, the kip is governed ultimately by the most shadowy of Communist Party politics rather than market realities. Not surprisingly, neither is tradable internationally.

For a while, isolation insulated both currencies from the worst of the slides of the past eight months. However, strange things are now happening in the trading posts and gold shops of the region's more mysterious corners.

Vast black markets have developed in Hanoi and Vientiane despite the best efforts of both governments to restore confidence.

In Laos, the trade for the slimmest of margins takes place in considerable secrecy in the back rooms of shops and restaurants. Rumours are flying of frequent police roundups and detentions of foreigners.

In Vietnam, although officials are nervous about the creation of a new and damaging underground economy, the trade is brazen.

Anyone who appears outside the capital's main post office looking like they might be carrying dollars is accosted by screaming elderly women wielding fistfuls of dong. Police chuckle and saunter past.

It is a clear sign that the confidence of the past few years - which saw people haul out their private savings and start to flaunt their wealth - is fast evaporating. Age-old suspicions of authority are returning.

In the congested French-built areas of Hanoi's old quarter, the fear is palpable.

Prized possessions are being forgone for gold and the musty, damp US notes that still wash through the country are being stashed again under the floorboards and in old chests, often in the bedroom of the family matriarch, who rarely leaves the house.

'My family just opened our first bank account three months ago . . . it was a big step,' said Ms Ha, one young businesswoman in the old quarter.

'We will close it next week. We all fear a bank collapse or something worse. Many people want their savings in their hands.'