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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military aid to South Vietnam grew through the 1960s in an attempt to bolster the government, but US armed forces were withdrawn following a cease-fire agreement in 1973.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: 07 - (02/07/02)

The government of Vietnam is very conscious that to maintain social stability and strengthen economic development, it urgently needs to launch various new policy initiatives in many sectors.
Some of the aging party leaders who have gained absolute control over the nation, are starting to understand that there is no longer any room for negative attitudes towards an open economy with some sectors of the economy struggling to survive, a heavily-protected economy and a half-open door to the fast- changing, outside world. 
In the first half of the year, Vietnam's development has undeniably improved due to a number of important government reforms which have been implemented. Together with its foreign partners and key sponsors, Vietnam has been able to construct and adhere strictly to the implementation of a Comprehensive Poverty Reduction and Growth Strategy. It has made remarkable progress in banking and private sector reforms, and seen improvement in trade and public expenditure policy. 
During the second half of the year the government is prioritising actions to improve the legal environment in order to gain trust from domestic and foreign investors and to reinforce administrative reforms. 
Economic groups will replace four large state-owned corporations on a trial basis including Electricity of Vietnam, Vietnam Post and Telecommunications Corporation, Petrol Vietnam and Ministry of Construction. Companies under those corporations can become limited or joint stock entities with the government holding the major stake. 
The establishment of powerful conglomerates is important in the context of integration into Asian Free Trade Agreement and World Trade Organization. 
However, many concerns have been raised by the public regarding corruption among government and party leaders which needs to be urgently and decisively addressed. This remains a thorny issue!
The prime difference this year is that government and party chiefly focused on how to implement policy initiatives rather than how to design them as they used to do in the previous years.
The government is convinced that in order to kick start the economy in the short run, they must promote enthusiasm from donors and foreign partners. Especially they need to attract foreign investors who will pump cash into the economy and bring jobs to the young population suffering from low employment, as well as to bring new and high technology to the country.
In the first half of the year, Vietnam recorded a 12.8 per cent rise on the number of foreign-invested projects. The country obtained 22 foreign-invested projects with combined registered capital of US$32.4m from May 21st to June 20th, raising the country's foreign-invested projects to 263 in the first half of the year, up 12.8% year-on-year.
Although the six-month foreign capital has decreased by 55.6% year-on-year to US$473m, the real disbursed capital recorded US$1.05bn, up 11% year-on-year. 
Most of the foreign-invested projects have focused on industry and construction. These sectors attracted 210 projects with US$393m in chartered capital, representing 80% of the projects and 83% of investment. 
Heavy industry recorded 78 projects, the oil and gas industry 2 projects, light industry 112 projects and the foodstuff industry 15 projects.
The agriculture, fishery and forestry sector reported 14 projects with US$28.6m of registered capital and the service sector lured 39 projects with US$51.8m 
Most of the country's foreign investments in the first half have been centred in the southern region, home of many key industrial parks in Vietnam. Dong Nai province led with 34 projects worth US$108.3 million. 
Foreign invested firms reported an increase of 19% in their revenues and 14% in tax payments in the first six months of the year. They exported US$1.98 billion and imported US$3 billion worth of products, rising by 18% and 38% respectively year-on-year. 
Up to 28 countries and regions have been licensed in Vietnam in the six-month period, the ministry of planning and investment (MPI) reports. South Korea heads the list followed by Taiwan, Malaysia and Japan. 

Exports target US$17.9bn in 2002
The Ministry of Trade has set Vietnam's export value target this year at US$17.9bn, up 11% against 2001. The service export value is expected to increase by 18% on year, industrial exports up 11.4% and agro exports up 10%. Vietnam reported exports to the value of US$15.1bn and import spending of US$16bn last year.
The ministry predicts exports to Europe and America will account for 35% of the country's total exports, with the EU importing US$3.4bn and the US$1.8bn. Deputy Trade Minister Mai Van Dau said that the ministry would send more staff to expand Vietnamese product sales in major markets. However, many exporters worry about increasing competition and requirements in the world market, which exceed their capacity. 
Chairman of the Vietnam Textile and Garment Association Le Quoc An said that few domestic garment producers can meet requirements regarding quality, time and delivery of their US clients in order to take advantage of the Vietnam - US Bilateral Trade Agreement. 
Vice Chairman of the Vietnam Leather and Footwear Association Mai Duy Hien said: "Vietnam will face more difficulties in exporting leather and footwear this year, particularly with China's participation in the WTO." 
Deputy Director of the Vietnam Bank for Foreign Trade Nguyen Phuoc Thanh suggested that the government should sign more payment agreements with other countries to facilitate export deals of enterprises, and for the National Export Assistance Fund to lend to foreign clients to encourage them to buy Vietnamese goods.

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AUTOMOBILES

Auto makers promised more incentives


Vietnam will introduce favourable conditions to encourage 11 foreign auto makers to produce locally, an official from the Ministry of Industry has said.
"New regulations will be in place by the end of the year in order to encourage producers to manufacture these products (trucks and buses) locally," said Do Huu Hao, director of the Ministry of Industry Institute for Industry Policy and Strategy.
Hao's comments came after automakers complained that soaring numbers of imported second-hand buses and trucks were affecting their businesses. Last year 22,266 vehicles, most of them second-hand, were imported into Vietnam, an 85 per cent year-on-year rise. Local producers blamed the increase in imports on the low import tax scheme and high taxes levied on locally-produced trucks and buses.
There are 11 foreign-invested automakers in Vietnam, most of them producing cars, due to low demand for trucks and buses. However, several companies, including Daewoo and Mercedes Vietnam, have joined the race for the truck and bus market.
However, if the new regulations come into effect it would be a blow to local firms who have applied for licences to assemble vehicles. In May, the state announced a halt to the licensing of a new vehicle assembling plants.
Around 50,000 vehicles are sold in Vietnam every year, of which domestic firms make up about 20,000 units. The government estimates that number could reach 100,000 units by the 2010 and 400,000 by 2020.
Special advisor to the Japan Automobile Manufacturers Association Tsutomu Kagawa said Vietnam would become one of the most promising markets for auto makers. Kagawa said Vietnam should encourage suppliers to invest in turning Vietnam into a parts production base

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AVIATION

Shanghai Airlines to fly to HCM City


Shanghai Airlines is scheduled to begin two direct flights between China's Shanghai and Vietnam's Ho Chi Minh City per week from July 8th.
The carrier will use 160-seat Boeing 737-800 aircraft, according to Hoang Tien Dung, managing director of Transviet Promotion Co., general agent of Shanghai Airlines in Ho Chi Minh City.
Shanghai Airlines also plans to cooperate with Vietnam Airlines to open four code-share flights between Japan and Hanoi every week by the end of this month.
Other airlines from Korea, Malaysia and Singapore are considering more flights to Vietnam, Dung said.
Hanoi now has around 25 operational foreign airlines and most are running promotional programs to attract more passengers.

Vietnam to sign Airbus contract Q3, mulls leases 

Vietnam Airlines said on June 24th that it plans to sign a contract to buy five medium-haul Airbus 321s (EAD) (EAD) in the third quarter of this year and is also considering leasing one or two more Boeing (BA) 767s, Reuters has reported.
Airline spokesman, Nguyen Tan Chan, said the national flag carrier was aiming to bring its total number of aircraft to 32 or 36 by 2005 and to more than 40 by 2010. It currently operates 30 aircraft.
"We will sign a contract to buy five Airbuses in the third quarter and are selecting a partner for the lease of the Boeings," he said.
Vietnam Airlines signed a letter of intent to buy the five Airbuses in early September last year but finalisation of the deal has been held up by haggling following the September 11th attacks on the United States.
Vietnam Airlines has been seeking discounts on the 150-passenger airliners made by Airbus SAS, which is 80 percent owned by European aerospace firm EADS. The list price of one aircraft is $50 million.
In December last year, Vietnam Airlines signed a contract to buy four long-haul Boeing Co (BA) 777-200ERs.
The airline's 30 aircraft currently in operation include five Boeing 767s, 10 Airbus A320s and two Airbus A321s.

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ENERGY

US Technic Corp to get US$700m contract building Dung Quat Refinery 

Prime Minister Phan Van Khai has allowed the Vietnam-Russia joint venture, Vietross, to negotiate with the US Technip Corp on the EPC (Engineer-Purchase-Construction) bidding package No 1 - the most important package for the country's Dung Quat Oil Refinery and thought to be valued at US$700m. 
The contractor will provide the major works of the refinery including detailed designs, equipment and construction of technical workshops. Construction is scheduled to begin in June. 
So far Dung Quat's packages No 2, 3, 4, 5A, 5B and 7 valued at US$307m have been kicked off, said PetroVietnam CEO Nguyen Xuan Nham, and contractors disbursed US$20m for construction in the first quarter of this year, equal to 40% of total disbursement last year, Nham said. 
Located in the central province of Quang Ngai, the refinery has total investment of US$1.3bn, equally shared between the state - run PetroVietnam and Zarubeneft from Russia. It is planned to become operational before the end of 2005, with a processing capacity of 6.5 million tons of crude oil per year.

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FINANCIAL NEWS

Workshop discusses service sector issues

Specific issues concerning the country's service sector have been itemized and discussed at a recent workshop hosted by the Ministry of Planning and Investment.
The meeting addressed the specific changes that need to be made as Vietnam strives to participate in the General Agreement on Trade in Services (GATS), as part of its bid for World Trade Organization membership by 2005.
The service sector has grown rapidly worldwide and now accounts for one-fifth of world trade and three-fifths of all investment flow.
In Vietnam, the services sector accounts for nearly 40 per cent of GDP. It is recording a growth rate of around 7 per cent per annum and now employs some 24 per cent of the total work force.
Exports of services are becoming as important as exports of goods. They constitute the mainstay of potential development and are an essential element of the growing economy.
"Vietnam needs an efficient and internationally competitive services sector if it is to grow rapidly and reduce poverty," said UNDP Resident Representative, Jordan Ryan, at the workshop, which was co-sponsored by the UNDP and the United Nations Economic and Social Commission for Asia and the Pacific.
"No country can prosper today under the burden of inefficient and expensive services infrastructure. Vietnam's producers and exporters of textiles, shoes, coffee or any other product will not be competitive without access to efficient banking, insurance, accountancy telecoms, and transport systems," he said.
Mina Mashayekhi, senior expert of UNCTAD, itemized barriers to WTO access faced by developing countries. She listed: limited foreign access to service markets; discriminatory fees and taxes; subsidies to construction, communication, transport, health and education; discriminatory access to information channels and distribution networks; lack of transparency in government measures; and lack of access to international financial institutions.
Thai Van Tuu, deputy director of the Department of Trade under the Ministry of Planning and Investment, said Vietnam was typical of developing countries in that it has a national trade deficit in services, except in the area of tourism and travel and worker remittances. Last year, the trade deficit was more than US$600m. Total revenue gained from exporting services was US$5-6bn. Of this total, tourism and travel contributes the biggest portion (US$1.2-1.3bn), followed by the banking sector which earned about US$600 m.
"As Vietnam opens it door for foreign countries, weaknesses in its services become apparent," Tuu said. He cited the need for a revamped and detailed legal framework governing the banking sector as a prime example.
Tuu said that maritime transportation services were a potentially lucrative area in which Vietnam had demonstrated capability to perform competitively, but was less optimistic about telecommunications. "The telecom sector's infrastructure is regarded as inferior to that of other regional countries, moreover, the industry's prices are around 20 per cent higher, making it a very difficult service to export," he said.

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FOREIGN ECONOMIC RELATIONS

Vietnam to open Investment Forum in Germany

Vietnam will hold a workshop in Germany on June 19th to introduce its investment policies and opportunities, as part of its efforts to seek more foreign investment.
The workshop will hear presentations by officials from the Ministry of Planning and Investment (MPI), and four major cities of Hanoi, Ho Chi Minh, northern Hai Phong and central Da Nang, according to a source from MPI. 
German experts from the Icon Research Institute are also expected to present their studies on German investments and the successes of German investors in Vietnam. 
The forum is part of the country's plan to hold such seminars in major foreign investment markets this year, which has already seen one in Taiwan in April. Others will be held in the United States in July, South Korea in October and again in Taiwan in the same month, said Deputy Minister Vu Huy Hoang. 
Vietnam reported total foreign invested capital of US$393.8m in the first five months of this year, down 26.1% on-year.

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FOREIGN LOANS

Vietnam seeks big foreign loans for education

Vietnam will continue to receive loans of US$55m from the World Bank (WB) and the Asian Development Bank (ADB) for its five major education and training development projects between 2003 and 2007, according to Deputy Education Minister Le Vu Hung.
They include an education promotion project for disadvantaged children (US$150m), a project for assisting scientific research and application in tertiary education (US$100m), the Education for All Project (US$150m), the Junior Secondary Education Project (US$50m) and the child development project (US$100m).
Hung said that the State budget is currently too tight and foreign loans are the best solution to improve education and human resource training, which are important for the country's development. However, he was not certain in saying that the state budget could repay the huge sum in the future.
Vietnam has received US$483.8m worth of total official development assistance (ODA) in the sector since 1995. Of this figure, loans account for 52% or US$252.2m and non-refundable aid totals US$231.6m.
The foreign loans are included in the total state budget spending on the education sector, which stands at 15.6% of total budget spending this year, while non-refundable aid is not included. Vietnam has to pay interest rates of 0.45-1% per annum for the foreign loans.

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INFORMATION TECHNOLOGY

Local companies to promote Vietnam's IT industry in the US market

Nearly 20 HCM City information technology (IT) companies and organisations met recently at the OV (overseas Vietnamese) Business Club to plan a promotional trip to the United States, VNS has reported. 
The visit, scheduled for later this year, was initiated by the municipal Department of Science, Technology and Environment (DoSTE) with the objective of promoting bilateral trade and attracting US investment.
During their visit to the US, the Vietnamese delegation will conduct a workshop with small and medium-sized IT enterprises and the businesses of overseas Vietnamese in the US, to discuss trade co-operation and investment in Viet Nam's IT infrastructure and software industry.
A second workshop will be held with large IT organisations and companies and higher education institutions to investigate investment and training opportunities and co-operation in producing software.
The OV Club, founded and managed by Nguyen Ngoc My, a Viet kieu (overseas Vietnamese) from Australia who returned to Viet Nam in the early 1990s, is a business club with members from many foreign and local enterprises. My has established several investment projects including the Vabis Construction Company and the Sports Management Service Co.

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INTERNATIONAL RELATIONS

Vietnam protests against China's live ammunition exercises at sea 

The Ministry of Foreign Affairs has strongly criticized China's decision to set up a zone of exclusion in the Eastern Sea (South China Sea) to conduct live ammunition exercises, saying that parts of the exclusion zone were well within Vietnam's maritime boundary and continental shelf. 
The Foreign ministry's spokesperson, Phan Thuy Thanh, said that China's move seriously violated Vietnam's sovereignty and its sovereign rights. "China's exercises in those areas threaten the free movement of ships and freighters," she said. It also violated international law, particularly the United Nations Convention on the Laws of the Sea. 
Thanh said any actions conducted by foreign countries in Vietnam's exclusive economic zone and its continental shelf without Vietnamese Government consent were violations of Vietnamese sovereignty and its sovereign rights. She said the Vietnamese government was demanding China immediately cancel the establishment of the exclusion zone for live ammunition exercises, and ensure maritime safety on the international sea route.

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STOCK EXCHANGE

Morgan Stanley eyes Vietnam's bourse

Now is the right time for New York-based finance group, Morgan Stanley Dean Witter, to invest in Vietnam's two-year-old stock market, said Terry E.Rowe, vice chairman of the group's Nevada branch.
"We officially proposed last year for the group to open a branch in Vietnam to provide foreign and local investors with stock trading consulting services," he said.
"Morgan Stanley Dean Witter is planning to negotiate with a Vietnamese partner over the establishment of a stock trading joint venture in Vietnam," he said, declining to reveal the name of the local partner and the registered capital of the joint venture.
In June and July this year, the group will coordinate with the training department of Vietnam's State Securities Commission (SSC) to open two training courses on securities analysing and online stock trading.
SSC will grant certificates to those joining the courses, who will then be admitted to work for the planned joint venture.
"With the development of the stock market, Vietnam's economy will become a "Tiger" in South East Asia soon, especially when some 20 of the foreign invested companies in the country are allowed to list their shares," Terry said.
Morgan Stanley is the world's largest finance group and the second largest stock broker-dealer, with a total asset value of US$473bn. It conducted total transactions of US$80bn in 2001.

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TRANSPORT

US group prescribes Monorail to cure urban transport blues

The Georgia Monorail Consortium (GMC) from the US is pushing hard to build monorails in Ho Chi Minh City and Hanoi to meet the increasing commuter needs and reduce traffic congestion in a clean and inexpensive fashion.
At a recent presentation, GMC executives said one monorail line could carry between one and two million passengers a day, the same capacity as an underground rail system, yet at one-fifth the cost since one kilometre of track only required US$10m or so.
Other advantages are the quicker pace of construction - two years for a 30-km system - the above ground location, meaning little interference with other transport infrastructure, and the ability to run at speeds up to 100 km/h.
On top of this, a monorail is powered by electricity and hence non-polluting.
Using 100% foreign or 100% domestic investment, or even forming a joint venture, are all possibilities but GMC prefers the build-operate-transfer form since the consortium views this as the best way to attract the necessary capital and recoup the investment.
According to an unofficial source, a large American bank is prepared to front the money. 
At the presentation, GMC suggested a price for a one-way trip of VND7,000 (46 US cent), saying this would be acceptable in Ho Chi Minh City given that the city had the highest standard of living in Vietnam, but local transportation officials disagreed and said few people could afford such a price.
GMC is now awaiting comments from the Ministry of Communications & Transport and a decision on whether Hanoi or Ho Chi Minh City should be the first to go monorail.

Twelve-stage Highway 6 upgrade gets underway 

A VND2,563 billion (US$171m) upgrade to National Highway 6, which links the Hong (Red) River Delta with the northern mountainous province of Son La, kicked off yesterday, Vietnamnews has reported.
The rebuilding of the 251km stretch of Highway 6 from Hoa Binh to Son La township will seal the entire road and double its width to 7m, allowing it to handle trucks of up to 80 tonnes.
Sixty-one small and medium-sized bridges will be upgraded and several slopes will be levelled.
The work should allow average vehicle speeds on the road to increase from the current 30km an hour to as much as 60km.
The Transport Ministry said the 70km stretch of Highway 6 from Ha Noi to Hoa Binh town had already been upgraded, during the construction of the Hoa Binh Hydro Power plant more than 20 years ago.
To ensure the upgrade is finished by 2004, construction work on the 251km stretch will be divided into 21 small sections, comprising 21 contract packages, allowing many contractors to be used.
The first tender, which opened yesterday, is Package 10 to build 7km that will bypass the steep Hua Tat Pass in Moc Chau District of Son La Province.
It will be supervised by Project Management Unit 5 (PMU5), while the remainder will be overseen by PMUs 1 and 2 and PMU Thang Long.
These tenders will be carried out after the completion of technical designs and bid consideration, and local bidders will be encouraged to take part.
The project aims to facilitate construction of the Son La Hydroelectric Plant, the country's largest, planned to begin in late 2004.
The existing road was built under French colonialism, and the stretch between Hoa Binh and Son La is one of the country's busiest.
By 2020, the road is expected to carry 11,000-15,000 vehicles every 24 hours.
The renovation will also help meet the needs of transport and socio-economic development in the north-western mountains.

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