HANOI, May 24 (AFP) - Vietnam posted a 71.5-percent plunge in its trade deficit to 289 million dollars during the year so far, official data showed Monday, as stiff import curbs kept overseas products out of the market. Economists warned such non-tariff barriers would only blunt the economy's competitive edge. Faced with the growing threat of a foreign exchange shortfall, Vietnam has slapped quantity restrictions on cement clinker, fertilizer and some forms of steel, slicing 13 percent off the import bill to 4.295 billion dollars. The curbs are also the result of cries for protection by state-owned industries being undercut by cheaper and superior imports. The move to greater protection has met with uniform disapproval from international donors, notably the World Bank and the International Monetary Fund which have withheld quick disbursing aid pending greater reform. Economists warn Vietnam is falling further behind neighbours who have been forced to become leaner and fitter as a result of the regional downturn, which only partly affected Vietnam. Observers say it is time for Vietnam to make good on its pledge to overhaul the opaque legal system, slash through the labyrinthine bureaucracy and level the playing field to allow for private sector development. "It's better to swim in the stream than stay on the river bank and talk about it. Vietnamese companies will become more competitive if they face competition," said Le Dang Doanh, director of the Central Economic Management and Research Institute. Doanh acknowledged it's easier said than done, and that vested interests controlling state owned enterprises will resist any attempts to erode their position by dismantling trade barriers and removing implicit subsidies. He also said protection will allow Vietnam to avoid measures needed to improve its long-term competitivess and export growth prospects. After registering year on year declines for the past two months, exports inched up 2.1 percent to 4.006 billion dollars for the year to date, thanks to a recovery in the shipments of textiles and shoes. Combined, the two top export sectors accounted for 26.6 percent of export revenues, and are the most promising areas for Vietnamese export growth. Textile and garment exports grew 10.5 percent to 539 million dollars during the year to date compared with a year earlier period while footwear exports increased 24.1 percent to 526 million dollars. But prospects for crude oil, rice, aqua products and coffee, ranked three to six in foreign exchange earnings, are dependent on weather and world commodity prices over which Vietnam has no control, Doanh said. Doanh said Vietnam's best hopes lie in achieving a speedy conclusion to trade talks with the United States. Though the Americans say the accord's conditions are similar to those Hanoi must meet to join the World Trade Organization, it is perceived by party conservatives as a serious threat to the dominance of state-owned firms -- a cornerstone of Vietnam's "socialist market oriented" economy. The accord, which contains chapters on intellectual property rights, investment, national treatment and trade and services, requires Vietnam to open key sectors to US investment, especially banking and insurance. It also envisions replacing quotas and import bans with tariffs and introducing much needed transparancy into Vietnam's trade regime, which would require Vietnam to essentially abandon its import substitution policy, forcing many state-owned companies to the wall. In turn, a trade deal would pave the way for most favoured nation (MFN) status for Vietnam that would boost exports to the United States by as much as 800 million dollars in the first year, analysts say. Vietnamese exports to the United States last year were about 470 million dollars last year. -=-=- 