Staff writer

Japan is preparing to launch a new program to help Vietnam's government formulate policies on restructuring ailing state-run enterprises and developing the private sector.

The government dispatched Shigeru Ishikawa, a professor emeritus at Hitotsubashi University and a leading Japanese expert on development economics, to Hanoi recently to discuss the details of the program with Vietnamese officials, government sources said Thursday.

The sources said the new program will be implemented as the third phase of a "comprehensive policy-assistance project" launched about four years ago to help the Southeast Asian country switch to a free-market economy from communist central planning.

The comprehensive policy-assistance project was agreed upon at a meeting in Tokyo in April 1995 between then Prime Minister Tomiichi Murayama and Do Muoi, the then top leader of the Vietnamese Communist Party. Do Muoi was the first top Vietnamese leader to visit Tokyo.

Under the agreement, Tokyo and Hanoi set up a team of some 40 Japanese and Vietnamese scholars and experts to conduct a joint study on Vietnam's economic development policy. Ishikawa is a leader of the Japanese side.

The team of Japanese and Vietnamese academics has so far conducted the joint policy study in two phases and reported its findings to the Vietnamese leaders.

The two phases of the joint policy study covered a wide range of areas, including macroeconomics, fiscal and monetary systems, industrial development and the agricultural sector.

Although the joint policy study was originally to have been completed in two phases, the two countries have agreed recently to embark on a new phase focusing on reform of the state-run enterprises and development of the private sector, the sources said.

Nearly half of the Vietnamese state-run enterprises are said to be operating in the red because of inefficiency and lack of international competitiveness.

The joint study marked the first full-scale "intellectual assistance" project that Japan, the world's largest single-aid donor, has implemented for a developing country as part of its official development assistance. Japan is by far Vietnam's biggest aid donor.

The joint study reflects a strong desire among Vietnamese officials to emulate Japan's 19th century Meiji Restoration for its own industrialization and modernization drive. Hanoi has the ambitious goal of joining the ranks of industrialized economies by 2020.

The sources said that the new phase of the joint policy study may also deal with the development of Vietnam's rural farming areas, where nearly 80 percent of the impoverished country's 76 million people live.

Development of the rural economy is high on the policy agenda for Vietnamese leaders. Prime Minister Phan Van Khai reportedly ordered his cabinet and local government officials last month to focus on agricultural production and the rural economy in the communist country's social and economic development plan for 2000.

In a meeting in Singapore on July 26 with his Vietnamese counterpart, Nguyen Manh Cam, Foreign Minister Masahiko Komura pledged to continue helping Vietnam proceed with reforms, including restructuring state-run enterprises and developing the private sector.

The Japanese and Vietnamese foreign ministers were meeting on the fringes of the Association of Southeast Asian Nations' annual talks with so-called dialogue partners, including the United States, the European Union, China, Russia and Japan.

Vietnam was not immune to the fallout from the Asian currency and financial crisis that erupted in Thailand in the summer of 1997.

Because of a sharp decline in foreign investment from its neighbors and a slump in exports to them, Vietnamese economic growth slowed to 5.8 percent in real terms last year after posting annual growth of between 8 percent and 9 percent in the preceding several years.