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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military aid to South Vietnam grew through the 1960s in an attempt to bolster the government, but US armed forces were withdrawn following a cease-fire agreement in 1973.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.
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: 014 - (04/02/03)

Vietnam's economy in 2002 made a number of encouraging strides despite the global economic slump.
However, it faces a number of challenges if it is to sustain the momentum in 2003. Looking back, GDP growth was the second highest rate in the region, after China. Exports increased by 8 percent, exceeding earlier predictions and industrial output increased by 14 percent, of which the non-state economic sector jumped by 19.1 percent, creating more 1.4 million jobs and reducing unemployment in urban areas.
The environment of the macro-economy was improved by the upgrade of three world financial companies Standard & Poor, Moody's and Fitch. 
Political stability and social safety have become a clear advantage in the region, illustrated by the rise in tourists during the recent months.
The competitiveness of manufacturers and the services industry was notable with textile and garment exports rising by more than 30 percent, leather and shoes exports by 21 percent, fishery exports by 12 percent and tourism by 20 percent.
These sectors have displayed positive changes in improving product quality and developing slick marketing promotion. 
Handicrafts exports increased by 34 percent, creating more jobs and income in the rural areas.
The year 2002 also saw the nation drawing on internal strength to overcome difficulties. Domestic storage and consumption increased as domestic market retail sales turnover inched up by 12.5 percent.
The Enterprise Law was well received. More than 20,000 businesses in 2002 registered investment capital of VND30,000 billion, an increase of 17 percent and 38 percent respectively.
The giant US market was explored, but many firms discovered that increased marketing and research was needed in 2003 to fully get to grips with the market.
However, exports to the US increased by more than 100 percent compared to 2001, exceeding the target of $2 billion for the year. Goods enjoying tax reductions, thanks to the Vietnam-US trade agreement, increased strongly in areas such as textiles and garments, leather and shoes and a big increase in handicraft goods.
Experience shows that if Vietnam's businesses are provided with favourable conditions in 2003, its goods and services will be able to penetrate other new markets.
On the other hand, economic growth in 2002 benefited from investment capital and an increase in labour. But, competition between Vietnam and China has increased. Foreign project investment is a concern with the number of projects increasing by 32 percent, but committed capital reducing by 48 percent.
Business costs are still high compared to the region as a whole, while the full benefits of administrative reform have yet to be seen. The lack of coordination and synchronisation between economic policies and solutions impacted badly on the investment environment.
Progress by commercial banks has yet to satisfy the economy's development requirements. The rate of outstanding debt compared to GDP and bad debt rates were all below China and countries in the region. The business environment, in general, improved but there are many pressing problems needing to be solved regarding land and credit. 
Traffic accidents, food poisoning and education inconsistencies need to be dealt with by the state.
Economists agree further economic reform is needed in 2003 to exploit the great potential of Vietnam and its people. Never before has Vietnam's economy faced such big opportunities.
On the other hand, 2003 will be much different from 2002 with many kinds of tax being reduced under the AFTA (Asian Free Trade Area) framework and the continuing implementation of Vietnam-US Bilateral Trade Agreement (BTA) commitments.
It is believed that competition in 2003 will be much fiercer. The results of reform, fully realizing the strength of science-technology, education and training and administrative systems, as well as reducing costs of monopoly services, will all bring benefits.
The synchronisation of policies, especially in trade, industry and tax will be important if Vietnam wants to continue to strengthen it's economy.

Foreign firms starts New Year on a high note
Vietnam's foreign business sector is in a healthy state, displaying a strong growth and profitability.
That was the prognosis from some of the biggest foreign investors, with the business associations of Japan, Taiwan, Singapore, the US and Britain saying their projects were operating well.
The Japan Business Association in Hanoi said that almost all Japanese-invested companies in Vietnam were returning profits. There has been no report of failure or bankruptcy of any Japanese-invested companies and all Japanese-invested projects are implemented very quickly.
Taipei Economic and Cultural Office said most Taiwanese investors are satisfied with their operations in Vietnam. Chinfon Cement and VEMP, among others, are both making a decent profit.
Japan is Vietnam's biggest foreign investor with nearly $3.3 billion out of its committed $4.3 billion disbursed to date, followed by Singapore with $2.6 billion and Taiwan with $2.3 billion. 
Although the US-Vietnam Bilateral Agreement in its first year of implementation has yet to bring any tangible increase in US investment flows to Vietnam, improvements have been detected at American-invested projects. 
Since the trade embargo was lifted between the US and Vietnam in 1994, the medium-term point for returns on investments and business plans developed in the mid 1990's, has been safely reached. It is, therefore, not surprising that many US firms are now maturing and finding success, particularly from a growth and profitability perspective. 
However, many potential foreign investors are still taking a "wait-and-see" approach towards Vietnam. 
Ministry of Planning and Investment (MPI) officials say foreign investor confidence is up, reflected in the dramatic increase in capital of foreign direct investment (FDI) projects last year, reaching their highest level in the five years since the regional financial crisis.
MPI figures show the overall increase in FDI project capital jumped by 51 percent year-on-year in 2002 to $918.7 million, with 305 projects increasing investment capital.

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FOOD & DRINK

Vietnam to create robust coffee industry with arabica blend


The chairman of Viet Nam's Coffee and Cocoa Association has called on the Government to promote a shift from robusta to arabica as a means to rescue the country's troubled coffee industry, despite ongoing debate about the wisdom of the policy, Le Hung Vong wrote, the BBC has reported.
The move to arabica would ensure the industry's sustainable development, Vicofa's Chairman Doan Trieu Nhan told over 100 coffee growers, traders and processors at the Asia International Coffee Conference (AICC) in HCM City.
Industry experts say that the climate in Viet Nam's mountainous northwestern and Central Highlands' provinces is particularly suitable for arabica coffee, pointing to the encouraging results of trial cultivation in these areas.
Nhan said that an international quality control company rated a sample of processed Vietnamese arabica as equal or better to Brazilian natural arabica.
In 1997, the Government approved a US$42 million feasibility study on arabica, funded by the French Development Agency (AFD), which recommended that Viet Nam develop 100,000ha of arabica in 14 northern and Central Highlands' provinces by 2010.
However, arabica only accounts for 20,000ha of the estimated 500,000ha under coffee cultivation in Viet Nam. About 10,000ha of this is an arabica coffee development programme, funded by an AFD preferential loan, said the general director of the Viet Nam Coffee Corporation (Vinacafe), Nguyen Van Truong.
"Arabica accounts for only 4 per cent of the total area and nearly 2 per cent of the total coffee production in Viet Nam. The potential resources for coffee production (including labour force, climate, and soil) have not been tapped," Truong said.
However, not all are convinced of the wisdom of a shift to arabica. The policy is still under discussion, Vicofa's chairman Nhan admitted.
Some argue that robusta is better suited to Viet Nam because the southern cultivation area is not affected by frost. Others point out that there are few regions which are 1,000m above sea level, an essential ingredient in the distinctive arabica flavour that Viet Nam must maintain to be internationally competitive.
Industry analysts have been searching for a solution to the sector's woes ever since Viet Nam flooded the world market with cheap coffee in the late 1990s, when production leapt from 140,000 tonnes in 1992-3 to 900,000 tonnes in 1999-2000.
The resulting plunge in world prices hit both export turnover and coffee growers hard, with some forced to sell their coffee at a loss.
"Selling prices could not cover production costs, and a number of growers could no longer take care of their coffee, while others decided to remove coffee from their cultivation plan," said Nhan.
But although the cultivation area decreased to 500,000ha in 2002-03, Viet Nam has continued to produce a surplus, making Viet Nam Asia's largest coffee producer and second only to Brazil in the world market.
"Viet Nam should not produce 16 million bags (each weighs 60kg) each year as we are doing at present. An annual 10 million to 11 million bags should be enough," said Vicofa's chairman Nhan.
Vicofa said that arabica prices increased from $914.3 per tonne in January 2002 to $1,012.4 per tonne in September.
Vietnamese coffee growers received VND4,100 ($0.23) per kilogram in January 2002, but were getting VND7,200 ($0.38) per kilogram by December 2002. 

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FOREIGN ECONOMIC RELATIONS

Vietnam pushes for WTO membership

Vietnam's plan to join the World Trade Organisation (WTO) has received a boost from one of its biggest trading partners, the European Union (EU). The support comes after the country modified its proposals for membership. 
European Commission's trade director Antonio Parenti says the new offer is more realistic and has a greater chance of winning acceptance from Vietnam's trading partners. 
The changes relate to the level of trading tariffs, which have been lowered, and the degree to which Communist Vietnam is opening up its economy. 
Vietnam is spurred on by regional competition, not least by China's recent WTO entry, and the fact that its poorer neighbour Cambodia is expected to join next year. 
The EU says the offer on the table shows that Hanoi is now ready to enter serious negotiations. 
Mixed blessing 
According to the European negotiators, Vietnam's original proposal would have opened up the services sector at a lower rate, in contrast to assurances made almost a year ago to the United States under a bilateral trade agreement (BTA). 
There are split views on the benefits of the BTA to Vietnam. Some, particularly the US, say it has given Vietnam a roadmap into the WTO. 
Others believe Hanoi has set itself a difficult precedent. It is thought that no other trading partner will now be willing to any accept trade agreements that offer less than what Vietnam has already agreed with the US. 
Preparations 
The team of European Commission officials is in Hanoi for negotiations on Vietnam's new WTO bid, which was made three weeks ago. The talks will centre on the terms of Vietnam's entry to the WTO. The officials are also preparing for a major round of multilateral talks in Geneva in December, the sixth round on Vietnam's efforts to join the WTO in the next three years. 
The EU is looking for more ways to help Hanoi get the expertise required for the negotiations. It has been training government officials and providing technical and research assistance. It says Vietnam needs to do more to prepare for what will ultimately affect everybody in the country. 
Vietnam is cautiously making the transition from a centrally planned economy to a player in the global free market. The problem is that Vietnam appears to be both protectionist and liberal at the same time. 

Vietnamese and Ukrainian provinces boost cooperation

Senior officials of central Khanh Hoa province of Vietnam and Kharkov province of Ukraine have signed a framework agreement on their economic, commercial, cultural, educational and sports exchanges, VNA reported. The agreement was signed during a visit to Khanh Hoa province by a delegation of Kharkov province led by Kusnaryo Ecgeny Petrovich, chairman of the provincial administrative committee. 
Under the agreement, Kharkov province will provide Khanh Hoa province with equipment and machines for industrial and agricultural production, electrical appliances, fertiliser and medicines. It will help train university and post graduate students, scientific researchers and football players. In return, Khanh Hoa province will supply farm products to Kharkov province, including rice, refined sugar and seafood. It will also supply wooden products, textiles and garments and exchange specialists in economics, education and sports between the two provinces. During their stay in Khanh Hoa, the delegation also visited a number of economic and cultural establishments.
Vietnam has offered Ukraine the possibility of participating in a tender to build hydro-electric plants and to take part in a satellite communication project, Ukrainian Prime Minister Viktor Yanukovych told journalists on 20th January after a meeting with Vietnamese National Assembly Chairman, Nguyen Van An, Interfax-Ukraine has reported.
According to Yanukovych, Vietnam is currently interested in the construction of hydro-electric plants and in supplying the necessary equipment. "Ukraine will participate in the tender," Yanukovych said.
Yanukovych also said that Vietnam had expressed interest in cooperation with Ukraine in the space industry. "This is about satellite communication, and Vietnam is offering Ukraine to participate in the project," he said.

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TOURISM

Vietnam sees tourism boon

A boom in the number of tourists visiting Vietnam is providing strong revenues for the country. 
Major private and government-owned hotels are reporting high occupancy rates and the national airline says passenger numbers increased by 80% last year. 
The Vietnamese tourist authorities expect last year's strong growth to continue in 2003 with the General Administration of Tourism forecasting almost three million foreign tourists over the year. 
Meanwhile, many other countries in the region are coping with empty airline seats and quiet hotels. 
Countries like Indonesia and the Philippines are trying to find ways to bring tourists back to resorts cleared out by the threat of bombs or kidnappings. 
New image 
Vietnam is capitalising on its reputation as one of the safest destinations in Asia, a business ranking given by the Political and Economic Risk Consultancy in Hong Kong last October. 
Vietnam's rich history is a selling point. There's also a surge in interest in a country which is emerging from a stereotype framed by years of war. Vietnam is modernising, opening up and developing its economy. It has also begun running tourism campaigns to encourage foreigners to see what it has to offer. Five star beach resorts, golf courses, adventure travel and centuries of history are pulling in more tourists from traditional markets as well as new ones. They include France, Japan, the United States, South Korea and Thailand. 
Downside 
Vietnam's national tourist office says foreign visits exceeded 2.6 million last year, generating revenue of more than $1.5bn. 
This year the target is 2.8 million tourists, a figure which jumps to 17 million if domestic tourism is included. 
It's difficult to independently check the Communist Government's tourism figures, and it is hard to say how well Vietnam's infrastructure will cope with a continuing increase. 
But Vietnam's economic development is increasing the gap between its richest and poorest people. One of the biggest challenges could be to ensure the benefits of tourism are shared. 

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