Vietnam's economy loses its roar on reduced Europe, U.S. spending

It's also a grim picture down the road: bowls, statues and flower vases gather dust in export showrooms as shoppers in a recession-hit Europe and sluggish United States stop spending.

Once seen as an emerging Asian dynamo racing to catch up with its neighbors, Vietnam's economy is mired in malaise, dragged down by debt-hobbled banks, inefficient and corrupt state-owned enterprises and bouts of inflation.

Vietnam's one-party Communist government has promised reforms, but it appears unwilling to give up the reins of an economy that has delivered fortunes to top officials and their business partners.

House prices have crashed by up to 50 percent in some places from the boom years and jobs are reportedly drying up for school leavers. Foreign investment has dropped 34 percent this year over the same period last year, according to government figures, put off by the economic instability, poor infrastructure and rising wages.

Small and medium-sized enterprises like those in Bat Trang are struggling to stay in business, their stock piling up and unable to get credit.

“Things aren't as good as we hoped for,” said Tho, as she supervised a team of workers carving statues, dipping mosaic tiles in glaze and firing up a gas-fired kiln.

The slowdown is adding to pressures on the Communist Party, whose legitimacy is in large part staked on its ability to deliver ever greater prosperity to the country of 87 million people.

While few predict economic meltdown or that the slowdown could weaken the party's grip on power, authorities have stepped up a crackdown on dissidents, bloggers and trade union activists over the last year, according to international human rights activists.

The government is also at pains to appear that is tackling corruption and impunity. The state-controlled media have been unusually direct in highlighting cases of corruption involving party officials and their families. President Truong Tan Sang has made a series of interviews and speeches pledging action.

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