Over the past few years, $2,400 motorbikes, $300 televisions, $400 mobile phones, and even $100 Ray Ban sunglasses have come to play a central role in the lives of Vietnam's top echelon of consumers. Foreign visitors return home telling of the "new" Hanoi, Saigon and other major cities, which appear to be bursting with commerce.

Yet in recent months negligent lending practices by state and joint-stock banks, only partly attributable to "blind greed," has led more than a few of the country's most prominent lenders and promising businesspeople quite literally to the gallows. In many cases, they have been convicted of violating legal principles that are still being drafted.

The clampdowns have reduced all banking activities and inspired the remaining high-profile businesspeople to switch off their cell phones and practically go underground.
In this way, Vietnam has identified its business villains before it has found its heroes. As one Hanoi entrepreneur put it, "I am stuck in the middle of a banking crisis that has struck before there is even a banking system."

Just a few years ago annual per capita income was measured in the currency not of rice. Gold, not dong or dollars, is the standard currency for large purchases. Money is new here.

Last year most loans, particularly short-term letters of credit, were granted freely. Today, following defaults that topped 20 percent of the total amount borrowed, including 60 percent for state-owned companies -- domestic bank lending has practically dried up entirely.

In addition, the country is seeing a wave of private and state-owned banks not honoring letters of credit, an act that violates one of the most essential rules of banking. And foreign-invested joint ventures are finding it harder to convert the domestic currency into dollars.

Could it be that the very role that money plays in Vietnam must fundamentally change, before it begin to form a sustainable economy? Or will green dollars remain a strange novelty that can be easily invoked, then exchanged, like magic, for amazing sunglasses?

In an attempt to understand the country's current fiscal problems, and domestic perceptions of money, consider the following hypothetical. Mr. Peters, a potential foreign investor considering the computer software sector, has arranged a meeting with Mr. Hung, a potential business partner. Hung is employed by a state-owned company, but he also designs software for municipalities -- Peter's target market. Over lunch at a small café in Hanoi, Peters chats with Hung and determines that he is a worthy potential partner. After all, he seems ambitious and knowledgeable, identifies himself as a businessman and currently earns only $30 per month at the state-owned company that employs him. The bill comes and Peters pays the $11 tab, and is excited by this new prospect.

Here is where Peters should examine the bill he just paid. For in it can be found a crystal-clear vision of the role that money plays in Vietnam, and how its value is defined.

First, a bit more about Hung. Because of his state job, he and his family are able to live in a state-owned house, for which he pays only 30,000 dong (less than $3) per month for his "land use right," and perhaps another 40,000 dong in assorted bills and debts. His company provides daily meals. His wife's parents take care of his children, as is traditional. He typically works at his job one day per week. Assuming he stays with that job, he will also receive a pension and benefits that will allow him and his wife to live in relative comfort after retirement. And if he cannot meet his 70,000 dong monthly nut, there is generally no penalty.

Of course, as an educated, upscale urbanite, he also has expenses that require cash. That draws him into the "system" that has generated considerable fuel for temporary, but highly visible, economic growth.

In the case of lunch with Peters, he received a standard ten-percent of the tab from the café where he brought them, just as he would with a Vietnamese colleague.