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Vietnam

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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military aid to South Vietnam grew through the 1960s in an attempt to bolster the government, but US armed forces were withdrawn following a cease-fire agreement in 1973.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: 012 - (29/11/02)

Vietnam has recorded encouraging economic growth this year despite the negative effects of declining external demand and foreign direct investment, National Assembly members heard at their end-of-year sitting held recently. 
Prime Minister Phan Van Khai especially lauded the contribution of private sector business and domestic-market development policies for assisting Vietnam's economic growth this year. The National Assembly were told that the private sector has recorded the strongest growth, expected to reach 19 percent by the year's end.
Gross domestic product (GDP) growth will reach 7 percent this year, generally considered a positive result in view of the ongoing difficulties faced by regional and global economies. Industrial output, which accounts for roughly 40% of total GDP, reported total value of $14.3 billion in January-October period, up by 14.3% compared with the same period last year. Key industrial products of the country included crude oil, processed seafoods, coal, garment and textile, and footwear products, Agro-forestry and aqua cultural output value is up 5 percent.
The World Bank estimates GDP growth at 6% for 2002 and 7% for 2003, the second highest level in Asia, second only to China and about double compared with those of Thailand and Indonesia.
But exports, which contribute 40 percent of GDP, have grown by just 7 percent, well below targeted growth of 10-13 percent. Vietnam's total exports in the first ten months this year increased to $13.4 billion, with imports up 17.1% to $15.37 billion. Major export items included crude oil ($2.5 billion), garment and textile ($2.1 billion), seafood ($1.7 billion) and footwear products ($1.5 billion). 
To summarise the performance of the economy in the last 11 months, officials said that the efficiency and competitiveness of the economy was low. Improving the business environment is one of three key measures outlined by the government in its social-economic report presented to National Assembly together with raising commodity competitiveness and improving state management.
Up to 35 per cent of social investment capital flows into infrastructure development and the extension of production levels, while investment for improving production efficiency remains limited. 
Whilst the country is to target a 7.5 percent GDP growth next year, the government has projected that possible elements of political and economic instability, in both a regional and global sense, may restrict the figure the figure to as low as 7 percent.
The authorities' five year plan up to 2005 aims to achieve 7.3-7.5 percent GDP growth each year. A repeat of this year's growth would make the government's five-year targeted growth difficult to achieve.
Talking about the focus points of next year, deputy Prime Minister Nguyen Tan Dung said the government would pay special attention to assisting domestic production and enlarging the domestic market in order to offset the possible negative effects of external elements next year. 
Government and party leaders are trying to ease the local population's concerns about the future of the economy by making promises and drawing up many scenarios. Prime Minister Phan Van Khai pledged in his report to National Assembly early November that he would push for greater government action to level the playing field for all economic sectors, ending subsidies and reducing state-owned enterprise protection. 
Deputy Prime Minister, Nguyen Tan Dzung, undertook to accelerate attempts to reduce operation and investment costs for businesses, particularly charges for telecommunications, transportation and port services.
The country's party leader, Nong Duc Manh, is focusing more on maintaining political, economic and social stability. Manh also emphasized the need to harness the nation's internal strength, as well as mobilise and effectively utilise capital from both domestic and overseas sources for national development.
A series of government economic reforms in recent years have boosted private sector confidence, especially since the introduction of the liberal Law on Enterprise in 2000. New private businesses are currently established at a rate of 2,000 per month, and earlier this year a special meeting of the Party Central Committee gave the strongest endorsement of the private sector ever.
The country's banking system, including six state-run banks, 36 joint stock banks, five joint ventures and 25 foreign banks, is embracing dramatic restructuring programs, funded by the World Bank and International Monetary Fund to keep pace with international integration.
The government is carrying out a plan of recapitalising about $650 million for the five state-run banks, which account for 70% of the local market. Small joint stock banks are also planning to merge and increase capital to expand capability.

Foreign investment and trade
Foreign investment into the country in January-October period totalled $1.1 billion in registered capital, down 46.4% on the year. However, realized capital was about $1.8 billion, higher than the corresponding period last year. Registered foreign investment capital has dropped sharply by nearly 50 percent year-on-year.
A cheap and highly-skilled labour force, convenient location in the centre of Southeast Asia region, and preferential taxes interested many foreign businesses.
However, complicated and inconsistent legal environment and policies are still seen by foreign investors as the main hurdle in doing business in the country. The government has pledged to improve the investment environment to attract more investors by streamlining administrative procedures, reducing land rent and other preferential policies.
The bilateral trade agreement with the US, which became effective last year, will lead to a growth in exports, especially of garments and footwear. 
The UN Conference on Trade and Development (UNCTAD), in September, ranked Vietnam the third in Asia and 20th out of 140 countries worldwide in terms of FDI performance.
Vietnam has established economic and commercial ties with nearly 170 countries and territories. It hopes to join the WTO in 2005. Its annual export value has surpassed $16 billion, accounting for nearly half of the total gross domestic product (GDP).
Asia has been Vietnam's most popular export destination among all continents in the world this year, with Japan topping the list of importing countries. Asian countries account for 55% of all Vietnam's exports, while European nations buy 23.4%. Japan - Vietnam's top importer, buys about 14%, the US comes second with 13.2%, followed by China and Singapore, each with over 9%.

Vietnam's export potential by 2010 
The Ministry of Trade's import-export strategy for the period 2001-2010 sets the country's annual growth rate of commodity exports at 14%, reaching total export sales of $50 billion by 2010. Service exports are projected to grow to $8-$9 billion by 2010 from the present $2-$5 billion.
Vietnam plans to reduce the proportion of material exports in its total export turnover to 9% by 2005 and 1-3.5% by 2010 from 20% currently. The proportion of export earnings from agro, forestry and fishery products will also reduce to 22% in 2005 and 17.2% in 2010 from around 25% currently. Meanwhile, it will increase imports of electronic products and software.

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AGRICULTURE

Record food production

Vietnam planned to produce 35.85 million tons of food in 2002, marking the highest output ever, and representing an increase of 1.58 million tons from last year, according to the latest figures released by the Ministry of Agriculture and Rural Development. 
Of the total output, paddy rice will be 33.62 million tons, an increase of 1.5 million tons from last year, and maize yield will be 2.23 million tons, up by 3.3% on year. 
The main factors that have contributed to the year's high food production include: farmers using high productivity rice strains, no damages caused by insect infestation and harmony weather - all have resulted in a average paddy rice productivity of 4.5 tons per hectare. 
The country's total rice growing areas for the three crops were 7.46 million hectares, of which, the hybrid rice area accounted for 500,000 hectares. 
Output in the winter-spring crop, which lasted between November 2001 to March 2002, and was the most important of the year, was 16.71 million tons, up 8% on-year, the summer-autumn rice output increased by 3.2% to 8.59 million tons and the output of subsidiary crops was 8.3 million tons. 
The agriculture ministry estimates trading companies will export between 3.3-3.5 million tons of rice this year, compared with 3.55 million tons last year. 
They shipped 3.09 million tons of rice in the first ten months of the year, down 9.4% against the same period last year. However, export value reached US$695 million, up 24.1% on-year due to the price being around US$10 per ton higher. 
The cassava area is to be enlarged by 9.2% on-year to 319,100 hectares with output of 3.91 million tons, up 11.5%. Although the sweet potato area will narrow by 2.6% to 238,200 hectares, output will rise by 2.5% to 1.69 million tons. 
Farmers nationwide are expected to plant 1.5 million hectares of cash crops this year, an increase of 29,300 hectares over last year. The areas of cashew, rubber, pepper and tea will widen to 34,400 hectares, 14,700 hectares, 8,700 hectares and 8,000 hectares, respectively, over last year. The coffee area, meanwhile, will reduce by 30,000 hectares and the coconut area will shrink by 7,600 hectares because of the prospect of low profits. 
Orchards will widen by 26,200 hectares on-year to 635,800 hectares. Farmers will develop 191,800 hectares of forests. Deforestation, including burnt and illegally logging areas, meanwhile, will lead to a reduction of 15,460 hectares, an increase of 11,300 hectares from last year. Wood processing plants in Vietnam are to log 2.42 million cubic metric of wood, some 31,000 cu. m higher than last year. 
As farmers have increasingly turned unproductive rice areas into aqua-farms, Vietnam will report seafood output of 2.56 million tons in 2002, an increase of 127,900 tons from last year. Of the total, aqua produce output is to rise by 11.2% to 789,400 tons and fishing output by 1.77 million tons, up 2.8% on-year. 
Pig herds are to increase by 93,000 heads to 22.7 million this year, cow herds by 16,000 to 3.9 million heads and fowls by 13 million to 231 million. The number of buffaloes, meanwhile, will be equivalent to last year total of 2.8 million heads. 
Vietnam estimates it will report agro-forestry and fishery production value of VND153,827 billion (US$10.1 billion) in 2002, up 5% against last year. Of the total value, agro products will be worth VND120,149 billion (US$7.9 billion), forestry VND6,026 billion (US$396.4 million) and fishery VND27,652 billion (US$1.8 billion).

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ENERGY

Pipeline in Vietnam an energy milestone


It took 10 years from gas discovery to transmission and 7,000 workers, but now Vietnam has seen the fruits of a $1.3 billion energy project, the biggest foreign investment in the country, Reuters has reported. 
On budget, on schedule and with no major glitches, the BP-led project shows a "foreign-invested project can be successfully done in Vietnam," Nam Con Son pipeline managing director, Do Ba Canh, said during a tour of the 168-acre terminal. 
The gas from Nam Con Son basin, 224 miles off the southern coast, estimated at 95.35 million cubic feet a day, will be piped to a power and urea complex. 
"It's a landmark development for Vietnam," said Norman Valentine, energy analyst at Wood Mackenzie in London. 
Project operator BP, which owns 35 percent of main gas Block 6.1, about a third of the pipeline and all of another block under development, reckons Block 6.1 will help meet about 40 percent of the current national demand. 
The timing couldn't be better. Electricity demand is seen at twice the pace of the economy's 7 percent economic expansion. 
Yet, about a third of Vietnam's 80 million population lack access to modern energy such as kerosene, electricity and gas. 
The World Bank says that two-thirds of Vietnam's required investment in energy will have to come from official development assistance, export credits and foreign direct investment. 
For investors such as ONGC Videsh Ltd., in from the start with the gas field discovery, the project has whetted its appetite. 
The biggest stakeholder in the upstream part of the project at 45 percent, the unit of India's state-run Oil and Natural Gas Corp may go beyond its $200 million investment to date. 
"We would like to look at the pipeline, too," Atul Chandra, managing director of the company said. 
The 240-mile pipeline's stakeholders are BP with 32.67 percent, ConocoPhillips at 16.33 percent and Petrovietnam with 51 percent. 
Petrovietnam sees the gas field supply, along with several other projects, raising Vietnam's oil and gas production in 2004 to 23 million tons, from 18.5 million this year and 16.75 million tons tapped in 2001. 
Crude oil is Vietnam's biggest export, bringing in $2.86 billion from January to November. But Vietnam must import oil products at considerable cost as it has no refining capacity. 

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ENVIRONMENT

Forum experts discuss sustainable development in mountainous region


A two-day forum on sustainable development in the mountainous region began in Hanoi recently.
Participants discussed poverty reduction and development, natural resources conservation and bio-diversity. In the last 15 years of renovation, remarkable achievements have been recorded in the mountainous region. Living conditions, education, healthcare and culture of the highlanders have improved considerably. However, a wide gap exists between people living in the plain and the mountainous regions. A large portion of forests is being destroyed, which presents a major challenge to the region's sustainable development.
According to Dr. Tran Van Thuat, Director of the Policy Department of the State Council of Ethnicity, the country should focus on the following areas, "Production re-arrangement and rational restructuring should be prioritised. In the meantime, we have to invest further in infrastructure development to meet socio-economic development in mountainous regions. Though much progress has been recorded in infrastructure development, it is still far below the usual requirement. We also should focus our investment on education, health care, culture and the current programs of poverty reduction and improving the quality of life of ethnic minority people."

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FOREIGN ECONOMIC RELATIONS

Japan pledges to bolster comprehensive relations with Vietnam

New Japanese ambassador to Vietnam, Norio Hattori, expressed pleasure over two-way trade development between the two countries Radio VoV has reported. He told reporters in Hanoi that Vietnam's export turnover to Japan last year was US$2.5bn, accounting for 17 percent of the nation's export revenue. 
Japan's direct investment accounted for 15 percent of FDI in Vietnam. Japan took the lead in reserving ODA for Vietnam, granting US$7bn over the past ten years showing Vietnam is Japan's first priority country. The ambassador said in the coming consultative conference of Vietnam donors, Japan's ODA to Vietnam will be raised from last year's figure of US$750 million, Japan will increase its ODA to Vietnam because Japan attaches importance to co-operative relations with Vietnam. Japan recognises Vietnam's potential for development. Japan's ODA aims to help developing countries strengthen economy and society, and Vietnam is worthy of receiving such ODA.''
Japan's ODA to Vietnam will focus on infrastructure, environment, education and community healthcare.
Ambassador Norio Hattori said during his term in Vietnam, he will do his best to bring friendly relations between the two countries to a new height, particularly in economics, trade and investment, and in political, security and cultural relations. He wished for further strengthening of relations of the two countries, particularly from exchanges between the younger generations of Vietnam and Japan. 

AFTA's arrival leaves local enterprises running scared

Local enterprises, often considered inferior to foreign-invested enterprises in terms of capital and operation technology, will be scrambling for their very existence when AFTA (Association of South East Asia Nations Free Trade Area) comes in two months. 
According to AFTA's roadmap of tariff reduction, the majority of locally produced items that are protected with the 40 to 50 percent tax will see that lowered to 5 percent. 
Local enterprises will have to cope with tough competition from foreign companies. With such competition, some 30 to 35 percent of local enterprises still need some support measures from the state for existence. 
As many as 80 percent of local enterprises were of small and medium size which held capital below USD670,000.
To exist and succeed in the home market, local enterprises should find a strategy that works and apply it flexibly in their own situation. 
There are currently 80,000 local enterprises nationwide.

 

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