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SCMP Reporter

Vietnam's Communist Party is further scaling back growth targets as the region's economic crisis bites deeper and sparks new fears for unemployment.

 Government sources said the party's ruling Central Committee had revised down growth estimates for next year to between 5 and 6 per cent during its recent plenum - a figure some foreign economists feel is already optimistic.

 Some analysts fear rising urban poverty and unemployment could make leaders reluctant to further unshackle layers of bureaucracy and state-owned enterprises. But sources said the committee had made firm commitments that the regional crisis must not be allowed to sabotage a decade of reforms.

 The revised figure is expected to be included in a formal plenum statement due this week - a document set to guide all key government decisions.

 It follows an earlier revision of this year's growth target down to 6-7 per cent after the government claimed an 8.8 per cent rise in gross domestic product last year.

 The write-downs come after a decade of 8 to 10 per cent growth that was expected to continue as part of the party's modernisation plans for the next two decades.

 Plunging export and industrial growth figures have accelerated since July while foreign direct investment has continued to fall.

 Robert Glofcheski, chief economist at the United Nations Development Programme in Hanoi, said the growth decline could see further lay-offs in sensitive state-owned and foreign-invested firms but insisted change would be gradual.

 Vietnam's comparative isolation had protected it from the shocks that had struck more integrated economies.

 'It must be remembered Vietnam is still growing faster than just about anywhere else,' Mr Glofcheski said.

 'Vietnam must take advantage of the breathing space to give themselves room to implement reforms . . . if it does not reform, it will shelter itself in poverty. It will be stable but unfortunately very poor.'  The hiving off of 6,000 mostly lumbering, debt-laden state enterprises remains a thorny ideological problem, laced with potential lay-offs, ownership snags and accounting difficulties.

 Over the 15 or so recently 'equitised' firms more jobs were created than lost - a vital tonic for reformers seeking to step up the pace.

 The plenum has backed the need for more efforts to develop rural areas and agriculture - part of a bid to better spread increased wealth and power after peasant unrest last year.

 Academic and veteran Vietnam watcher Carl Thayer warned of continual caution in the tricky months ahead.

 'Vietnam will respond to these myriad pressures by avoiding risk and through a gradual evolution in policy at a pace its leaders are comfortable with,' he said in a recent address at Georgetown University.

 'Vietnam's greatest concern is with internal stability and maintaining Vietnamese values,' he said.



Hanoi downgrades growth targets