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VIETNAM


  
   

REPUBLICAN REFERENCE

Area (sq.km)
329,560

Population
79,939,000

Capital
Hanoi

Currency
dong

President
Tran Duc Luong

 

 

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military aid to South Vietnam grew through the 1960s in an attempt to bolster the government, but US armed forces were withdrawn following a cease-fire agreement in 1973.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.
One of the most important political events to happen in Vietnam in 2002 was the election held in May of the country's new National Assembly (NA), the highest legislative body, for the 2002-2007 term. 498 individuals were elected as parliament members, including 118 permanent members, who will work on NA committees during their term, unlike the majority of members, who usually operate in local areas and only attend regular meetings of the NA when they are arranged.
The NA has decided on the new government cabinet, whose working term will also extend from 2002 to 2007. Prime Minister Phan Van Khai was re-elected and the number of deputy prime ministers cut to three for the next five years from four in the previous term. 
Minister of Trade Vu Khoan, was elected deputy PM in charge of trade and foreign affairs, replacing Nguyen Manh Cam. Khoan is respected for his contribution in signing a landmark trade deal between Vietnam and its former enemy the United States.
Two deputy PMs, including Nguyen Manh Cam and Nguyen Cong Tan who was responsible for agriculture, retired. Deputy PMs Nguyen Tan Dzung and Pham Gia Khiem continue in their posts for the next five-year term.
The NA approved the setting up of 26 ministries and ministerial committees, up from 23 in the previous term. The new formation aims to help ministries to focus more on their responsibilities and to work more effectively. Stagnation, overlapping functions and the bulky structure of the government's administrative bodies was one of the major causes of the ineffectiveness of government in its previous terms.
Fourteen new ministers and committee heads or 50% of the government's cabinet have been appointed for this new term, including ministers of police, justice, trade, transport, construction, industry, planning and investment, home affairs, science and technology, natural resources and environment, post and telecommunication, state inspectorate, ethnic minority people, and population, family and children. Two newly-created ministries included the Ministry for Natural Resources and Environment and Ministry of Post and Telecommunication.
The NA held its second meeting, which lasted from November 12th to the middle of December, to seek measures to improve the country's socio-economic situation in the remaining months of 2002 and discuss plans for the next year. 
Major issues focused on during this meeting were corruption, squandering, education, criminals, justice and traffic jam and accidents. The government firmly pledged to implement changes to provide a more favourable and equal environment to support private enterprises during the term of the 11th National Assembly, in addition to imposing tougher conditions for state owned enterprises (SOEs). In practice, the new-found commitment to the private sector remains to be tested. The government has, however, moved ahead with economic reforms related to its pursuit of World Trade Organization (WTO) membership, and its commitments under the bilateral trade agreement with the US.
In an effort to ease the public's increasing discontent with corruption and other social ills, the Communist Party general secretary, Nong Duc Manh, promised to pursue a tough campaign to crack down on corruption and wrong-doings of party members. Manh has also attempted to breathe new life into the economic renovation (doi moi) process, but the pace and progress of economic reform is unlikely to quicken significantly in 2002-03. 
The Communist Party, easily the most powerful organization in Vietnam with around two million members, has set targets to consolidate control and leadership in grassroots groups. The Party says it will clarify the responsibilities of commune authorities and other social organizations, make them work under local Party organizations' management, and to consult citizens regarding their decisions. It will also improve discipline in those offices, train staff for commune offices and organizations and increase payments and preferential treatment for grassroots officials, according to the meeting's final announcement. 
For many years, Party organizations have had little effect on people since the tasks and responsibilities of Party organizations and local governments have not been clearly defined. 
In urban areas, local Party organizations just assemble some retired Party members for impractical gossip sessions and rarely admit new Party members, because most Party members are drawn from their offices' organizations. 
In rural areas, Party members are also commune authorities, so they have unchallenged power to decide on local issues, which is the root of increasing corruption and abuse of power, illustrated by the mounting number of complaints and criticisms. 
The Party only has groups in State-owned enterprises and administrative offices. While private and foreign invested enterprises keep expanding and increasing their contribution to the economy, the Party has not yet set up organizations in those sectors because it still prevents Party members from operating businesses. The NA's final announcement, however, did not make it clear if the Party would admit business people into its organization in a bid to increase its influence in the private sector. 
However, not wanting to evade the increasingly important role of private businesses, the party this year made an historical decision allowing businessmen to be members and will permit current members to operate private enterprises. Party members can run private enterprises if they do not violate laws and have the support of their staff and neighbours. They can maintain their Party membership if they wish. The Politburo, the country's political elite, hopes that Party members working in the production sectors will be excellent businessmen who can make legal fortunes and encourage other people to make fortunes but do not explain how these objectives may be realised. 
In the Party's previous regulations, Party members could not practice labour exploitation, because it is contradictory to old Russian socialist theory, which the Party adopted as a bible. But the Party never clarified what "labour exploitation" was, resulting in an implicit understanding that Party members could not run private businesses that employ workers. 
In fact, no Party members are directors of private companies and few are working in private companies. The permission to do so came along with the Party's resolutions on boosting the private sector's role in the economy and on improving the Party's leadership in grassroots organizations. 
The Party now has to admit the existence and increasing role of the private sector. Despite much discrimination and repression, the private sector now contributes around 60% of GDP. The Party also realizes that it has lost control, along with its image and prestige at the grassroots level, in rejecting the private sector, the largest and fastest emerging part of society. 
One of the pressing issues that the party has had difficulty in coping with in 2002 is its failure to find answers to the people's complaints and criticisms. The number of petitions from people regarding losses caused by, and their discontent over, the increasing number of cases of wrong doing, corruption, trade fraud and undue extravagance are on the rise. Many also expressed fury at not receiving any answers to their petitions from local authorities. The State Inspection Department received over 35,000 petitions last year, which were described as becoming more complex. 

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Update No: 020 - (01/08/03)

Domestic politics
The gradual trend towards a more assertive, if not independent, National Assembly (the legislature) continues. Under its previous chairman, Nong Duc Manh, the Assembly began to rid itself of its reputation as a rubber stamp for the ruling party. The current chairman Nguyen Van An has yet to offer conclusive evidence that he is intent on continuing the work of his predecessor. However, deputies have been increasingly critical of government ministers and are seemingly willing to debate policy more vigorously. During the five year tenure of the 11th National Assembly (2002-2007), the deputies will oversee a vast array of economic and administrative reforms as the government is aiming for entry into World Trade Organisation (WTO) by 2005-2006.
National unity has increasingly been identified as an important issue. Many well-publicised attempts have been made to improve the welfare of ethnic and religious minorities recently. The government is intent on tightening its political grip on such groups and has rejected the accusation that it has escalated the campaign of repression of ethnic and religious minority groups. 

International relations
Relations with the US will remain prickly in the short term owing to differences over human rights issues and trade disputes. The long-term trend towards warmer bilateral relations between the former enemies, however, is unlikely to be seriously disrupted. Vietnam will also endeavour to maintain strong ties with China. During the recent meeting between Party Chief, Nong Duc Manh, and his Chinese counterpart, Hu Jintao, both leaders agreed to strive to enhance bilateral ties. However, disputed territory, a controversial land border agreement and a lot of history will continue to contribute to a degree of Vietnamese mistrust of its Northern border. In May, Vietnam rejected China's demands for a two-month fishing ban in the South China Sea (or East Sea as it is know in Vietnam) near the Paracel and Spratly islands, for which sovereignty issues are far from being solved. The risk of conflict over the disputed islands, however, has been greatly reduced following an agreement in late 2002 by members of the Association of South East Asia Nations (ASEAN) and China to abide by a code of conduct.

Economic policy outlook
Concerns over rising unemployment and the potential for social instability will ensure that the government will struggle to meet its targets for reform of state-owned enterprises and facilitating the development of the private sector. Limited access to finance and land continues to inhibit the sector from fulfilling its potential. The situation is expected to improve as the playing field gradually levels out.

Fiscal policy
The central budget deficit will remain above 5 percent of the GDP in 2003-2004 as the government maintains an expansionary fiscal policy to cover the cost of its reforms and higher salaries for state workers. Also, there will be pressures on revenue sources, particularly customs duties, which will fall as tariff barriers are lowered in line with the government's commitment to the establishment of ASEAN free trade area (AFTA) and World Trade Organisation accession.
The National Assembly recently agree to revise the value added tax (VAT) system, dropping the highest rate from 20 percent to 10 percent and enforced an unified corporate tax rate of 28 percent (down from 32 percent for domestic enterprises and up from 25 percent for foreign invested enterprise). Although these reforms, effective from January 2004, will reduce revenue in some areas, the change will contribute to the development of a more efficient and less complex tax regime. Robust economic growth and greater exports to prevent tax fraud will help to prop up total revenue.

Economic growth
According to government estimates, real GDP grew by 6.7-7 percent year-on-year in the first 7 months of the year. The outbreak of Severe Acute Respiratory Syndrome (SARS) has disrupted the recent boom in tourism which accounts for around 4 percent of GDP. That, hopefully, will become an historical blip
The government estimates, however, may prove to be slightly optimistic. Outsiders expect real GDP growth for the year to slip to around 6.6 percent before picking up again in 2004 to 7 percent. 
Vietnamese exporters will be in a strong position in 2003-2004 to exploit the opportunities provided by the trade agreement reached with the US in 2001, notwithstanding the recent imposition on garment exports and the prospect of punitive tariffs on catfish exports. 

Inflation
Year-on-year inflation remained steady in the first half of 2003 at around 3.7 percent. However, the effects of higher wage payments to government workers and higher production costs will filter down through the system and increase upward pressure on consumer prices. Rising domestic demand and strengthening food prices will also help to create a firm inflationary trend in 2003-2004. Food items have heavy weighting (47 percent) in the consumer price index, and a sharp rise in world rice prices - increase of 3.9 percent in 2003 and 8.5 percent in 2004 as a forecast - will push annual price inflation up to 4 percent in 2003 and to 4.8 percent in 2004. Further depreciation of the value of the dong will also force prices up. 

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AGRICULTURE

Vietnam, Thailand to co-operate in agriculture

Vietnam and Thailand have chosen to co-operate rather than compete with each other in selling their farm produce in international markets, VNS reported recently.
For the purpose, they inked a Memorandum of Understanding (MoU) in Bangkok recently to collaborate in bio-technology and building trademarks. Minister of Agriculture and Rural Development, Le Huy Ngo, and his Thai counterpart, Sora-at Klinpathum, signed the agreement.
The MoU on agricultural co-operation would pave the way for extensive co-operation programmes between the two countries, Ngo said, adding the two ministers agreed that the best way to develop agriculture is through co-operation.
"Thailand has made certain progress in these areas," he said adding, therefore, Vietnam and Thailand should co-operate first in science and technology.
"From the overall picture, we see that there is enough market for our agricultural products. We are agricultural countries, so the best way is to co-operate with one another - not compete but join hands - to strengthen our agriculture." Thai Minster Sora-at said. He further said there were many things Thailand and Vietnam could learn from each other, such as "how to tackle and to cope with problems in agricultural development." 

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ENERGY

Major oil field to flow this year

Commercial operation of a major oil field in southern Vietnam will begin later this year, the Cuu Long Joint Operation Company has announced.
The Su Tu Den (Black Lion) Oil field in the Cuu Long Basin will be able to produce 10,000 barrels of oil per day, making it the second-most productive oil operation in the country, said the company's General Director, Vu Ngoc An, VNS reported.
Only the Bach Ho (White Tiger) oil field will produce more than Su Tu Den when it starts operation on November 5, 2003, just two years after the discovery of commercial quantities there.
"The announcement of the commercial operation at Su Tu Den is of significant importance for Vietnam's oil and gas sector," An said. "It will not only contribute to the country's oil reserves, it shows the potential of more oil on the edge of the Cuu Long Basin."
Cuu Long Joint Operation Company is a 50/50 venture between the Vietnam Oil and Gas Corporation, which is represented by PetroVietnam Exploration and Production, and a consortium comprising Conoco Ltd of the UK, KNOC and SK of Korea, and Geopetro of France.
The joint venture, licensed in October 1998, announced the discovery of commercial quantities of oil at Su Tu Den field in August 2000 and at Su Tu Vang field in October 2001.
Meanwhile, the Hoan Vu and Truong Son companies are also preparing for announcements on commercial discoveries of oil in the area.
Hoan Vu, a joint venture between PetroVietnam, the UK's SOCO Vietnam Ltd and Thailand's PTTET Vietnam, is expected to announce its commercial discovery at Ca Ngu Vang oil field later this year. Hoan Vu General Director, Nguyen Hoang Hai, said the company hopes to pump its first oil in 2005.
And the Truong Son firm, a joint venture between PetroVietnam, Canada's Talisman and Malaysia's Petronas Carigali, started operating late last year. General director Nguyen Quynh Lam said the company will spend US$20 million on Song Doc 1X, exploring wells to be drilled later this year.
PetroVietnam has also been exploring other offshore basins in the northern province of Thai Binh and the central province of Khanh Hoa. The company has also planned overseas investments in the oil and gas industry.
In June PetroVietnam signed a contract to set up a joint venture specialising in overseas oil exploration. The firm has a 30 per cent stake in this joint venture, shared with Petronas Carigali and Indonesia's Pertamiana.
The three partners are negotiating another contract to explore for oil in two blocks in eastern Java, Indonesia.
PetroVietnam hopes production from new oil fields off the coast of Vietnam, along with those the company has invested in abroad, will make up for decreasing yields from currently operating oil fields.
An of the Cuu Long firm said PetroVietnam is expected to gain 3 million tonnes per year from overseas oil fields by 2010. PetroVietnam targets production of 24 million tonnes of oil per year by 2005 and 30 to 32 million tonnes by 2010. 

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FOREIGN LOANS

Second phase of World Bank farm project begins in Can Tho 

The second phase of a country-wide World Bank project to assist farming and strengthen rural institutional capacity began recently in the Cuu Long (Mekong) Delta province of Can Tho, VNS reported.
The US$200-million project will earmark US$165.7 million for its rural development fund - US$24 million for a micro-leasing fund, and the rest to bolster rural capacity for project management, benefiting individuals, households, co-operatives, and small and medium sized non-State enterprises.
They will receive assistance in manufacturing, agro-forestry and fisheries, handicrafts, garments and embroidery.
The five-year second Rural Finance Project aims to help the Government develop the rural economy and improve living standards.
It will attempt to do so by encouraging investment by rural households and private entrepreneurs, strengthening banks' capacity to serve the rural economy and increasing access for rural poor to formal financial services. It follows the successful first project that ended in 2001 and benefited almost 250,000 households.
Almost 650,000 loans were given, a third of them to women, throughout rural Vietnam during the three-year project through seven banks.
The project will be carried out everywhere except urban Ha Noi, HCM City, Hai Phong and Da Nang.

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INDUSTRIAL INVESTMENT

Better planning urged for industrial parks 

Industrial parks and processing zones would be more prosperous if they were planned and managed better, experts say.
Nguyen Ngoc Phuc, a senior administrator from the Ministry of Planning and Investment, said the shortcomings are making the industries "less attractive" to foreign investors, VNS reported.
Many IPs and PZs have been founded without accounting for socio-economic development demands, Phuc told the national workshop, held in Ha Noi to review the industry's activities. The businesses mushroomed in many provinces without considering the local pace of urbanisation speed and required infrastructure.
"This will result in inefficient infrastructure investment and unfair competition," said Phuc, who heads the ministry's Industrial Park (IP) and Processing Zone (PZ) Management Board.
Up to 57 of Viet Nam's 76 IPs and PZs have been established in delta provinces across the country, with very few in northern mountainous provinces and the Central Highlands, the workshop heard.
Phuc said that in the less attractive areas, rental fees should be set as low as possible to attract foreign investors, even below cost. "State support is essential to develop the infrastructure," he said.
Phuc said construction of infrastructure inside and outside the IPs and PZs has been slow in the last few years.
A ministry report says only 45 per cent of the designated areas for IPs and PZs area has been occupied, and only 45 per cent of capital registered for investment has been put in use.
Eighty-three IPs and PZs have been established so far, taking up a total area of 29,800ha.
Of the 40 foreign countries and territories with business investment in Vietnam's IPs and PZs, Japan, the Republic of Korea, Taiwan, Singapore, Hong Kong, Thailand and Malaysia are the seven largest, comprising more than 80 per cent of the total. Little comes from Europe or North America.
Food processing and light industries are the most common fields of investment.
Last year, the food-processing sector earned US$5.7 billion, an increase of 24 per cent over the previous year.
The export value of all IPs and PZs was US$3.2 billion, 5 per cent higher than the previous year and making up 60 per cent of the total export value of foreign direct investment.
Seventy-three businesses poured around US$1 billion into infrastructure investment last year.
Making government policies transparent and simplifying administrative procedures has been achieved under Vietnam's "one door" policy, workshop participants said.
They said the policy has allowed the State management institutions to work together closely in solving the problems emerging from the investment field.
The workshop also mapped out plans to lease all the area of IPs and PZs, stressing it was a top priority to follow the approved plan.
The ministry has also asked the provincial industrial park management board to move all the industrial enterprises into the IPs, except those special enterprises that have a close link with other areas.
It also proposed to withdraw an investment licence from failed enterprises to avoid the waste of investment capital. 

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LEGISLATION

National Assembly still struggles on land law reform

The National Assembly's Standing Committee is struggling with the same revised draft land law that caused heated debate during the assembly's April-May sessions, VNS reported.
The chairman of the National Assembly's Economic and Budgetary Committee, Nguyen Duc Kien, told the assembly's Standing Committee recently the draft still contained inconsistencies over the definition of land ownership.
The first land law was issued in 1993 and stipulated that only the State of Viet Nam had the power to act on behalf of the people in dealing with land ownership issues.
However, delegates at the last National Assembly session said the State's performance had led to an ambiguous understanding of "what the State is" when authorising land use rights to both corporate and individual entities.
During the last National Assembly session during April and May a number of delegates argued that the existing land laws give too many rights to land users while the rights of the State are not clearly described.
Others wanted the Draft Committee, responsible for the initial document, to clearly define which Government agencies at what administrative levels have the right to act on behalf of the State over land use issues.
The draft divides the State's responsibilities into four categories: controlling who owns what land, deciding the purposes of land use, granting land use, and deciding how revenue raised from land is spent.
The Standing Committee said it favoured the majority vote of National Assembly delegates that the State is the sole owner of land.
However, it also wants the draft to be more specific about the State's role in making decisions over land use and a clear-cut definition of the rights of the State and those of land users.
The Standing Committee also ruled that land redistributed under the Government's land reform policies could not be returned to its original owners, finding such a decision would cause too much pain.
Under the ruling, the committee completely supports the draft provision stating "The State does not recognise requests for the return of land which has already been allotted to others for use in the process of implementing land policies."
The committee also ruled out redistributing land from owners who have passed away or moved out of farming to those without enough land of their own to farm or who were born after the land policy reforms.
To overcome land shortages, the committee instead proposed clearing reserves for farming, taking over "unattended" land lots already set aside for State-owned farms and clearing overgrown and wild plots of land.
The rewritten draft will be submitted to the public before being put forward for adoption at the assembly's year-end session in December. 

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