Economic development calls for much more than the increase of investment, Fu said. While foreign investment should be used to support pillar industries, the country must upgrade and optimize its trade structure to increase its value-added exports and maintain an even trade balance, he added.

But most foreign investment in Viet Nam has been directed to the stock market and the real estate industry, with a small portion of it going to technology-intensive industries, Fu said. For example, Viet Nam boasts abundant offshore oil reserves and is an exporter of crude oil. But because its only two oil refineries are still under construction, it has to import oil products, making it a victim of skyrocketing oil prices.

Sang Baichuan, a professor of international investment at the University of International Business and Economics in Beijing, said that Viet Nam's current financial difficulties are attributable to the weakening confidence of the Vietnamese toward their own currency. Given the depreciation of the dong and the dramatic fall of Viet Nam's stock market, few want to buy shares of the nation's blue-chip companies, even at giveaway prices. This further fuels the country's financial problems, he said. As it pursues fast economic growth by running huge trade and fiscal deficits, the Vietnamese Government can do little to save its economy from deteriorating when worrisome signs emerge, he said.

Loose policies on foreign indirect investment or foreign investment in financial markets are also a culprit, because foreign investors can easily pull out their money and deprive the country of the support it needs to finance the gap between its money reserves and its spending, Sang added.

Sang also said hot money engaged in speculation in Viet Nam and other Southeastern Asian countries may flee in response to the bad news in Viet Nam, generating greater economic fluctuation in the region.

Another problem adding fuel to the fire is that Viet Nam is short of human resources, especially professionals who study the market economy, Fu said. It should cultivate more talent and draw on experience from other countries' development, so it could be run more smoothly, he said.

Not a financial crisis

People doubt whether Viet Nam's financial woes could spread to other nations, because neighboring countries, such as Malaysia, India, Thailand and the Philippines, are subject to high inflation and currency depreciation, too.

"The agonizing situation can exert certain influence on other adjacent economies by altering economic expectations in these countries, especially those having similar development modes to Viet Nam," Sang said.

Many other developing countries have followed Viet Nam's approach to development, which is characterized by attracting foreign investment through favorable policies while boosting trade and especially increasing imports, Sang said. The model also uses government spending to promote industrial development.

The trade deficit and the deterioration of fiscal status caused by overstretching this strategy finally led to the current crisis, Sang said. Such a setback in Viet Nam certainly would have some psychological effects on other economies that embrace the same strategy, he added. But the crisis only would have limited spillover in the region, because the country's problems are unique and less serious than some have made them out to be, he added.

Viet Nam's economic development bears some similarities to that of Thailand in the 1990s with high inflation, an influx of foreign capital and an overheated economy. Fu declined to call the problem a "financial crisis" as did the Morgan Stanley report, arguing that it was a far cry from the onset of a new Asian financial crisis. He said although the Vietnamese Government exercised lax control over its capital market, the government still had a grip on it.

Echoing Fu's view, Sang said the scale of hot money in Viet Nam was far smaller than the amount that flowed into Thailand in 1997. The current predicament is rooted in the country itself, as a result of its long-term economic policies, he said.