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  VIETNAM

REPUBLICAN REFERENCE

Area (sq.km)
329,560

Population
79,939,000

Capital
Hanoi

Currency
dong

President
Tran Duc Luong

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Background:
France occupied all of Vietnam by 1884. Independence was declared after World War II, but the French continued to rule until 1954 when they were defeated by communist forces under Ho Chi MINH, who took control of the north. US economic and military aid to South Vietnam grew through the 1960s in an attempt to bolster the government, but US armed forces were withdrawn following a cease-fire agreement in 1973. Two years later North Vietnamese forces overran the south. Economic reconstruction of the reunited country has proven difficult as aging Communist Party leaders have only grudgingly initiated reforms necessary for a free market.

Update No: 04 - (26/03/02)

Discussions on reconsidering the role of the private sector, and the direction its development should take, topped the agenda of the 5th plenum of the Central Party Committee (CC) and the National Assembly (NA)'s tenth working session, where most strategic issues are aired. 
"Developing the private sector is a strategic issue in building a multi-sector economy in Vietnam," Nong Duc Manh, the Party Chief stated, after the Committee's meeting, which finished on March 2nd.
For the first time, the Party clearly declared that it will treat the private sector equally with other sectors in the economy, and that the State would protect business rights and the private assets ownership of all citizens. It remains to be seen how this works out.
The Party is trying to ease concerns regarding discrimination against private businesses. Private enterprises have continued to complain that they face many difficulties in renting land and accessing bank loans, while State enterprises access them easily. Several times in the past, the Party has diminished the role of the private sector because it considers that all private enterprises practise labour exploitation and are centres of capitalism. The latter is obviously technically true, the former not necessarily so, but the attitude is typical of an economy in transition.
However, private businesses in Vietnam continue to exist and expand despite depressions. Since the Enterprise Law became effective in 2000, more than 36,000 private enterprises have been established with a combined capital of around VND36 trillion (US$2.4bn). The private sector is operating with capital of VND135.5 trillion (US$9.03bn), accounting for 17% of the total capital of enterprises nationwide. Their asset value is VND31.2 trillion (US$2.08bn), or 8.3% of enterprises' assets. They contributed 61% of the country's gross domestic product in 2000, up from 59.8% in 1995. 
The Party now has to recognise the private sector's existence in its socialist-oriented economy. The plenum's announcement repeated that the Party will increase its leadership over the sector, but did not define what it considers "labour exploitation," nor yet leadership; the semantics being a part of the game.
Manh also paid special attention to the development of the collective sector and cooperatives. "We need to diversify business models in the collective sector, particularly to build cooperatives. The State sector and the collective sector should become foundations of the economy." 
The plenum also discussed modernising agriculture and rural areas, and improving theoretical research and analysis within the Party. Manh insisted that Party officials must "look at truths, consider truths and speak truths." This may be a tall order.
He mentioned socialist orientation only once during his speech. The Party Central Committee, a gathering of the 150 top Party officials who also hold the most important posts in the State, meets twice a year to discuss the country's major developments and issues. Local people perceived a shift in the Party over prosperity and capitalism. Manh is encouraging people, particularly State cadres and Party members, to enrich themselves in legal ways.
In an interview with the Cong Nghiep Vietnam (Vietnam Industry Weekly) newspaper, Manh said: "State cadres and Party members must be examples not only in morals and behaviour but also in making fortunes and encouraging people to improve themselves. Making a fortune is one of the human standards of the new era." This is a clearcut signal on a par with Deng Xiao Ping 20 years ago in China, stating that "it was good to be rich," a signal that private enterprise was entirely acceptable, a launch pad for private businesses.
He also said that each individual and enterprise must learn from international experience to develop their own businesses. 
In recent discussions with Party theoretical researchers, Manh asked them to reconsider the definitions of labour exploitation, relations between privatisation and socialism, and whether Party members should be permitted to develop their own businesses. 
His predecessors had rejected these issues outright when they were at the helm. They opposed Party involvement in businesses and neglected, even limited, the private sector. 
The NA's working session concentrated on the five-year economic review, labour code, infrastructure development, investment environment and local enterprises in preparation for new national elections in May.
Prime Minister Phan Van Khai, stated in the NA session that new mechanisms have paved the way for businesses in all economic sectors (including the private one) to handle their own exports. This has invigorated investment, production and business activities, particularly in the private sector. 
He added that the government had improved administrative procedures and removed discrimination in product and service pricing for foreign investors, in an attempt to improve foreign investment flow into the country. 
However, in spite of the economic growth of last year (7.1% GDP growth), development quality was still low because the productivity, competitive ability and efficiency of enterprises and therefore the national economy were low. 
In addition, state subsidies for state-owned enterprises (SOEs) still exist through preferential land and credit allocation and debt restructuring, leading to the reliance of many SOEs on state protection. This is seen to be commonplace where a cormer command economy gives way, little by little, to a market economy where many SOEs are just uncompetitive.
"The common trend in many enterprises, including foreign-invested firms, is to rely on protection barriers rather than improving technology and management in order to enhance competitiveness and efficiency," Khai criticised. Only 40% of SOEs were turning in a profit, while 20% were incurring losses and 40% were in financial trouble, according to the latest research on SOEs. 
Concerning the integration capacity of Vietnamese companies, trade minister, Vu Khoan remarked that it will be very difficult for them to penetrate the global economy but that does not mean that they can't do it. "Trade relations between Vietnam and the US are developing rapidly, just two months after the bilateral trade agreement took effect. Garment and textile exports in the last two months are equivalent to a six month period of 2001. Seafood exports have also rocketed. The diversity of Vietnamese businesses is proving itself already. Doing business in the US is difficult but workable," Khoan said
Khoan argued pragmatically that the government should continue to give support to SOEs, explaining, "I think we should be patient with them. Remember that most of Vietnamese businesses, both state-owned and non-state-owned, only operate on a small scale and are new to the integration game. It is understandable that they often rely on assistance from the government. Therefore, the government should both encourage their initiative and continue to provide them with support."

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ENERGY

EVN asks to pull plug on Wartsila deal

The Electricity Corporation of Vietnam (EVN) has requested that the government abandon a stalled US$110m power project in the Southern province of Ba Ria - Vung Tau, officials announced in late March. The corporation is the local partner in the 120 MW plant, backed by Finish investor Wartsila.
Dinh Quang Tri, deputy general director of EVN, said an official document had been submitted to the Prime Minister calling for the project to be scrapped. "We have been trying to work out major differences on power prices for such a long time. There doesn't seem any need to continue with this project. We can not accept the prices offered by Wartsila," Tri said. 
Wartsila initially pushed for a price of 7.38 cents per KWh over the first three years and 4.58 cents for the following years. EVN, however, said it would only accept a price of 4.09 cents for the entire 20-year project duration. 
Wartsila consistently pushed for a higher price, claiming that it had already invested US$10m in land clearance. 

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FOOD & DRINK

Fruit Juice - an open market 

Fruit juice is a potential market with an annual demand growth of 25% that has not yet been properly exploited in Vietnam, according to the Vietnam National Alcohol and Beverage Corporation. 
The country now consumes 210 million litres of juice per year, and consumption is expected to keep climbing over the next few years. Nineteen domestic fruit juice processing plants currently churn out 63 million litres a year, far lower than demand. Most are small scale and have not paid due attention to developing the fruit areas in their possession. They only utilise around 7% of the country's annual fruit output of 3.8 million tons. 
Growers see the price of their product fall or the fruit ruin whenever they have a bumper crop, as they can only turn a small proportion of the output into dried fruit and have little access to export markets. 
The Ministry of Agriculture plans to raise the total fruit juice capacity to 120 million litres in 2005 and 200 million litres by the year 2010. The corporation plans to build a fruit juice processing line with a capacity of 20 million litres per annum in the Ho Chi Minh City-based Chuong Duong Beverage Company, a plant with a capacity of 10 million litres in the north, and small bases with a combined capacity of 5 million litres in other regions.

Vietnam Slashes Rice Shipment Target

Vietnam will export only 3.5 million tons of rice this year, a reduction from the initial plan of 3.8-4 million tons, said Deputy Prime Minister Nguyen Cong Tan at a conference on rice trading held on March 14th in Hanoi. 
Tan asks the Ministry of Trade and the Vietnam Food Import Export Association to build mechanisms and measures to prevent dumping and fines for enterprises not obeying the association's decisions. Authorities in big rice production provinces must let farmers keep their paddies in the provincial stores to help them not sell rice at low prices. 
For years, farmers sell paddies en mass during the main harvest time because they do not have stores to keep paddy from being ruin. Enterprises shipped only 170,000 tons of rice in the first two months of the year. Their 450,000-ton export volume in the first quarter will be a 41% decrease against the same period last year, according to the Ministry of Trade. 
They blamed the poor trading pace on slow harvesting by farmers of the current winter-spring crop, the most important crop of the year. The Ministry of Trade has not yet decided whether to purchase rice for temporary storage this year, as the rice trading in the domestic market remains stable. It will only ask State-owned enterprises to reserve rice when the paddy rice price falls below VND1.3 million per ton, or equivalent US$171/ton for exportable rice. Farmers are now selling unhusked rice at around VND1.4-1.5 million per ton, or the equivalent of US$171-174 per ton of 5%-broken rice. The rice shipment price is US$178-US$180 per ton of 5%-broken. 

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FOREIGN ECONOMIC RELATIONS

Ukraine, Vietnam sign cooperation protocol

During talks the two sides agreed that the traditionally friendly relations between Ukraine and Vietnam have become stronger and assumed the nature of diverse and mutually beneficial cooperation aimed at meeting the social and economic needs of the two peoples who have chosen reform and renewal, UNIAN News Agency has reported. Ukraine and Vietnam agreed that they should efficiently employ the strengths of their geographic location in Europe and Asia, respectively, and view their cooperation as an important factor in integration processes taking place across the Eurasian expanse. 
Yelchenko also met Deputy Foreign Minister Nguyen Van Nganh in Hanoi. They discussed a wide range of issues related to bilateral cooperation, ways in which political dialogue between Ukraine and Vietnam can be deepened and some aspects of cooperation in international and regional organisations. 
Following the meeting the sides signed a protocol on cooperation between the foreign ministries of Ukraine and Vietnam.
Yelchenko addressed the international relations institute in Hanoi to mark the 10th anniversary of diplomatic relations between Ukraine and Vietnam.

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FOREIGN INVESTMENT

British Investors Look to Vietnam

More British investors will fly to Vietnam to investigate business opportunities in the future, according to the Asia-Pacific regional manager of the British Trade Development Agency (Trade Partner UK), Vincent Fean. 
During his recent testing visit to Vietnam with another 19 British business representatives on March 11th-15th, Mr Fean also revealed that British enterprises are most interested in the fields of foodstuff processing, financing, banking and insurance. Britain poured around US$7.7m into three projects in Vietnam between January 1st and February 20th this year. 

China pushing up investment in Vietnam 

China's foreign direct investment (FDI) in Vietnam last year saw 43 projects with total capital of US$60.5m, up by 2.4 and 3 times in terms of project and capital, respectively. The total number of Chinese projects in Vietnam is now 132 with combined capital of US$246.1m, including 60 Chinese-owned projects and 59 joint ventures, mostly in industry. 
China is negotiating with Vietnam to exploit aluminium in Dak Nong district in the central highland province of Dak Lak and to produce paper pulp, according to the Chinese Economic and Trade Counsellor in Vietnam. 

Foreign investors inject more money in January-February

Foreign direct investment (FDI) injected US$150m into licenced projects in February, increasing the figure for Jan-Feb to US$250m, up 19% against the same period last year, according to the Ministry of Planning and Investment (MPI). 
However, FDI pledged in the period fell 15.7% on-year to US$112.6m. MPI also posted combined turnover of foreign-invested enterprises at US$1.2bn, excluding the revenue of the Vietsovpertro Joint Venture Company, in the first two months of the year, similar to the performance in the year earlier period. They paid total taxes of US$42m.

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TELECOMMUNICATIONS

Telecoms Corporation proposes firms for limited liability status

Vietnam Post and Telecommunications Corporation (VNPT) announced plans recently to turn eight of its affiliate companies into single-membership limited liability firms between now and 2004. 
Should the proposal gain government approval, Vietnam Mobile Service (VMS), Vietnam Datacommunications company (VDC), Software Development Company and Post Savings Service Company would form a conglomerate status.
VDC is the country's internet gateway controller and VDC is the nation's largest mobile phone service provider.
The plan is in line with a government scheme, approved by the Prime Minister last September, to transform thousands of state-owned enterprises into limited companies.
Under the scheme, the limited liability firms are to be restricted to investment from state agencies. However, they are to be legally required to operate under the Enterprise Law, leaving them more open to outside competition.
Nguyen Anh Tuan, managing director of Software Development company said his firm was ready for its new status and was awaiting details of the procedures for the transformation. "VNPT has established a group to deal with this issue. However, there should be further discussions on how to implement the plans. We need to weigh up the pros and cons this move could bring to the telecoms and post sector," said Tuan.
"The new limited liability status firms would enhance the quality of the companies and allow us to be more dynamic regarding the control of business and production activities," Tuan added.
Vietnam ranks second after China in terms of the rapid development rate of its telecommunications sector. Last year, more than one million new telephone lines were installed, bringing the total number of telephones across the country to 4.3 million. 

Telecoms market to open wide for foreigners 

Vietnam will allow foreign players into the local Internet and telecoms market, and gradually dismantle the monopoly in the posts and telecoms sector in the near future, according to the top official with the Department General of Posts & Telecommunications (DGPT). 
"One fundamental change in the coming time will be the appearance of more foreign-invested enterprises in actual telecoms services," DGPT head, Mai Liem Truc, said during the 25th conference of the Asia-Pacific Economic Cooperation Information & Telecoms Working Group in Hanoi. 
Under DGPT plans, foreign companies will be allowed to invest in value-added services in 2004, Internet services in 2005, and mobile phone services in 2006. Presently, 14 valid foreign-invested telecoms projects with total registered capital of US$1,988m can get access to only some of these areas via business cooperation contracts and joint ventures, so the reforms will require amendments to the Law on Foreign Investment and at least a dozen other legal documents, said Truc. 
Last year saw significant reforms, as evidenced by the licensing of several domestic firms to offer Internet and phone services. More recently, he said, the Saigon Posts & Telecommunications Joint Stock Company won a licence to provide a fixed phone service, ending the decades-long monopoly of the state-run Vietnam Posts & Telecommunications Corporation. 
"In the near future, there will be more Internet service providers and Internet access providers licensed," Truc said, adding that " there will not be so many players in the fixed phone business, as our view is that it will be difficult to manage activities such as the installation of equipment and road digging."

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TOURISM

Tourism funds fall short of mark

Vietnam is to pour US$7.7m into tourism this year in a bid to rejuvenate the industry, but hoteliers and tour operators say it is not enough. "We are glad to hear that more money will be spent on tourism; efforts to promote Vietnam are crucial," said Sunway Hanoi Hotel general manager, Lucien Blanchard.
The Vietnam National Administration of Tourism (VNAT) in early February submitted a proposal to the government asking for approval for US$7. m to be spent on tourist industry this year.The proposal suggested US$4.3m could come from state and local budgets, while the remainder would be contributed by enterprises within the industry.
Roughly US$2m would be spent on a promotion and marketing campaign spotlighting Vietnam as a safe destination for international visitors. Nearly US$4m would be spent on improving tourist facilities, a lack of which has long been a complaint on the part of tourists coming to Vietnam. 
Last year, Vietnam received 2.3 million international guests, an increase of 9 per cent on 2000 and reaped more than US$1bn in revenue. 
This year, Vietnam was set to market itself abroad with theme "Peace, Friendliness and Safety" and aimed to attract at least 2.5 million foreigners and earn some US$1.5bn. 
Average spending by a foreign tourist in Vietnam is US$450, lower than the international standard of US$1,000. Only 20 per cent of them made return trips.

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