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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military aid to South Vietnam grew through the 1960s in an attempt to bolster the government, but US armed forces were withdrawn following a cease-fire agreement in 1973.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: 013 - (01/01/03)

Political review 
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.

Social Issues: White-collar Crime Remains a Headache 
Police detected 9,921 cases of economic crime in 2002, causing total losses of VND1.16 trillion ($76.7 million) to the State coffers. Inconsistent laws, poor coordination among responsible organizations, and increasing collusion between corrupt officials and culprits are blamed for the situation. Up to 45% of State money in infrastructure construction was went missing during implementation. 
The trading of banned goods and fraud in valued-added tax (VAT) refunds were rampant among import-export companies with the support from border customs officers. Police nationwide have detected 250 illegal VAT refund claims misappropriating up to VND450 billion ($31.4 million) since the VAT Law was introduced more than three years ago
This year also saw a drastic rise in smuggling, which has become increasingly sophisticated. Smuggling activities were well organized with hundreds of local residents transporting contraband. 
The trading, transporting, and use of counterfeit money, both the Vietnamese dong and foreign currencies, was also on the rise. Forged savings-books and credit cards also appeared. 
Around 37,000 women are working as prostitutes in Vietnam, of whom 39% or 14,600 are under a supervision list of the authorities. 
The country reports 130,000 drug addicts as at late October, of whom 70% were juveniles and 10% State cadres.

Overall economic situation
The overall economic situation in Vietnam has improved over the past 12 months, and robust economic growth momentum is expected in the medium term. The country estimates GDP growth at 7% this year and 7-7.5% for 2003, the highest growth level in Asia. Firmly increasing exports and expanding domestic consumption backed GDP growth. 
Vietnam's total exports in the first eleven months this year have increased by 8.3% year-on-year to $14.96 billion, and imports up 18.6% to $17.27 billion. Major export items included crude oil ($2.86 billion), garment and textile ($2.45 billion), seafood ($1.86 billion) and footwear products ($1.62 billion).
Industrial output, which accounts for roughly 40% of total GDP, reported total value of $15.6 billion in the January-November period, up by 14.4% compared with the same period last year. Key industrial products of the country included crude oil, processed seafood, coal, garment and textile, and footwear products.
Foreign investment into the country in January-November period totalled $1.71 billion in registered capital, down 46.4% on year. However, realized capital was about $5.15 billion, higher than the corresponding period last year. Cheap and highly-skilled labour forces, convenient location in the centre of the Southeast Asia region, and preferential taxes interested many foreign businesses.
However, a 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 investment environment to attract more investors by streamlining administrative procedures, reducing land rent and other preferential policies.
A series of economic reforms in recent years have boosted the private sector's confidence, especially since the introduction of the liberal 'Law on Enterprise' in 2000. New private businesses are currently being 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 yet 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 programmes, funded by the World Bank and International Monetary Fund to keep pace with international integration.
The government is carrying out a plan of recapitalisation of about $650 million for the five state-run banks, which account for 70% of local market. Small joint stock banks are also planning merge and increasing capital to expand capability. 
The bilateral trade agreement with the US, which became effective last year, will
lead to a growth in exports, especially of garments and footwear. Vietnam is also making efforts to join World Trade Organization before 2005.
The estimate by the World Bank for GDP growth is 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. 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.

Trade: Vietnam's Major Export Markets 
Vietnam has established economic and commercial ties with nearly 170 countries and territories. It expects to join the WTO in 2004. 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 in second with 13.2%, followed by China and Singapore, each with over 9%.

Major Export Commodities
 

 

Exports in Jan-Nov 2002 ($Mln)

Compared to Jan-Nov 2001

 

 

 

Crude Oil

2,862

-3.4

Garments & textiles

2,449

+34.7

Seafood

1,875

+13.6

Footwear

1,624

+17.9

Electronics & computers

448

-19.3

Rice

730

+22.2

Coffee

291

-18.2

Handicrafts

299

+42.4

Fruits & veggies

184

-40.3

Rubber

229

+53.6

Pepper

106

+19.5

Cashew

194.3

+38.7

Coal

131

+31.5

Tea

76.9

+20.9

Peanut

48.5

+30.1

 (Source: General Statistics Office) 

Major Import Commodities

 

Imports in Jan-Oct 2002 ($Mln)

Compared to Jan-Oct 2001

 

 

 

Machinery & Equipment

3,297

+33.2

Petroleum Products

1,839

+8.2

Textile, Garment and Footwear Materials

1,482

+1.8

Electronics, PCs, and Components

594

-2.2

Steel

-Steel Billets

1,184

+37.6

409

+44.4

Motorbike (thousand units)

271

-49.6

Fertilizer

-Urea Fertilizer

397

+8.9

185

-1.8

Plastics

541

+20.7

Cloth

891

+236.7

Chemicals

363

+17.7

Chemical Products

433

+33.5

Pharmaceuticals

282

+7.3

Fiber

287

+29.2

Cars (thousand units)

535

+36.4

Pesticides

123

+23.1

Cotton

91

-26

Agriculture: Record food output of 35.85m tons in 2002 
Vietnam plans to produce 35.85 million tons of food in 2002, a record output compared with previous years 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, little damage caused by insect infestation, good weather - all have resulted in a higher average paddy rice productivity of 0.22 tons to 4.5 tons per hectare.
The country's rice growing areas for the three crops were reduced by 0.4% to 7.46 million hectares because farmers have turned to other agricultural crops and fish farming
Output in the winter-spring crop, 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 rice trading companies will export 3.5 million tons of rice this year, up from the target of 2.8-3 million tons in the preceding months. 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 $695 million, up 24.1% on-year due to the price being around $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.
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. 
Vietnam estimates it will report agro-forestry and fishery production value of VND153,827 billion ($10.1 billion) in 2002, up 5% against last year. Of the total value, agro products will be worth VND120,149 billion ($7.9 billion), forestry VND6,026 billion ($396.4 million) and fishery VND27,652 billion ($1.8 billion).

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AUTOMOBILES

Vietnam mulls US$38.9m auto plant in Binh Duong 

The Ministry of Transport and Communications has proposed that the government devise incentives to support the construction of an automobile plant in the Di An Industrial Park in the southern province of Binh Duong VDCMedia has reported. 
The VND598 billion (US$38.9 million) plant will assemble modern buses, trucks, vans of various kinds with a designed capacity of 4,000 units a year. 

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AVIATION

Aviators aim high with expansion plan

Vietnam Airlines is progressling well in its plans to become a major carrier in Southeast Asia, but still needs to improve the quality of its service, the airline's general director, Nguyen Xuan Hien, said.
The airline expects its turnover to reach more than VND10 trillion (US$660 million) this year, an increase of 10 per cent, with VND500 billion going into State coffers. It estimates passenger and cargo transport will climb 14 per cent and 12 per cent respectively compared to last year, and it will carry 4 million passengers this year.
Hien said the corporation would spare no efforts to boost international and domestic passenger numbers to 10 million per year by 2005 and to maintain a growth rate of about 13 per cent.
However, to meet these targets the airline needed to improve the quality and quantity of its services, he said. "There are three aspects which need to be developed simultaneously: the planes and other equipment, our business methods and human resources," Hien said.
The corporation has purchased three ATR 72 aeroplanes for short domestic routes, and are developing routes and airports to service border gates, islands, the Tay Nguyen (Central Highlands) region and the northwest.
For longer runs, the airline has purchased four Boeing 777s and hired two more. The corporation will use these planes to service Japan, the Republic of Korea and France from next year. For medium-distance routes, it plans to purchase five more Airbus models to add to its existing 12. 
Hien said the airline planned to expand its fleet to about 40 aircraft by 2005 to meet its target of becoming "a high-calibre airline with a strong local flavour." Hien said training programmes for the airline's staff play a key role in achieving its targets. The airline sends 20 pilots to the US, France and Australia for training every year to enable Vietnamese pilots to fly 85 per cent of the airline's flights by 2005.
Hien said it was also essential to invest in infrastructure, especially maintenance.
The maintenance workshops at Tan Son Nhat and Noi Bai are being upgraded step by step, with the airline aiming to remove any need for outside assistance, Hien said.
Nguyen Van Hung, director of Aircraft Maintenance Enterprise A76, said existing technicians are able to perform periodic maintenance on 10 of the airline's A320 aeroplanes. It was also training its staff so that Vietnam Airlines workers would become self-sufficient. 
The enterprise's technicians are often sent abroad for training to improve their skills, he said, which satisfies maintenance requirements for A321 aeroplanes and Boeing 777s. 
Hung said the enterprise's hangar would soon be granted certificates by Seysel Democratic Civil Aviation which would enable the enterprise to carry out maintenance work for international airlines.

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CONSTRUCTION

Heat is on local cement industry to meet booming construction demand 

The country's cement plants will need to make major investments in automation to boost productivity and competitiveness to keep pace with the booming construction industry, according to building sector insiders, VNS has reported.
The industry plans to up production to 29 million tonnes a year by 2005 by not only upgrading its dated technology, but also expanding plants and building new ones. Demand too is expected to reach 29 million tonnes by that year.
This year, Vietnamese cement producers will bag 17.6 million tonnes of cement, while the national demand is expected to be 20 million tonnes.
While cement manufacturers produce four times as much cement as they did in 1990, demand has grown by 18 per cent each year over the past decade.
Chairman of the Vietnam Building Materials Association, Tran Van Huynh, said cement plants urgently need to upgrade their operations as many of them are still using outdated technology that results in low productivity and wasted of materials and energy.
Huynh said that the average Vietnamese cement worker produces between 1,000 and 1,500 tonnes of cement each year, which is well below the global average of 5,000 tonnes. However, the industry will soon install high-technology equipment, such as automation, to boost its productivity, reduce waste and production costs and make it more competitive on the world market, he said.
Industry officials warned that a severe cement shortage could arise as early as next year unless the industry invests more in production. Although many regional countries have a cement surplus, their demand is expected to catch up to supply in coming years.
To bridge the domestic gap, the industry plans to open seven new production lines and two new cement plants in northern and central Vietnam over the next two years.
Between 2006 and 2010, cement manufacturers will continue to invest in new plants, and will establish three major cement production zones.

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ENERGY

Electricity utility floats dam plan in Phu Yen

Electricity of Vietnam is drafting a plan to build a 260MW hydro-electricity plant on the Ba Ha River in the central province of Phu Yen, VNS has reported.
Construction work on the plant is expected to start in 2004 and cost about US$311 million. According to the State-owned power supplier, it has received a thumbs-up from Phu Yen's authorities to proceed with the plant.
However, the province also wants the Government to set up a committee to manage water resources to ensure adequate water remains for agricultural production. 
It has asked EVN to develop an early plan for ground clearance work and co-ordinate with the province to build roads as well as guaranteeing the living conditions of resettled people.
More than 5,000 people will be resettled in Son Hoa and Song Hinh districts in Phu Yen Province and Krong Pa in the Central Highlands province of Gia Lai.
The project is now undergoing a feasibility study and is waiting for the prime minister's approval. 

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FINANCIAL NEWS

Central bank predicts dollar deposit rates set to stabilise

Interest on dollar deposits will not keep falling and the central bank is working to ease pressure to cut rates, the State Bank of Viet Nam (SBV) governor has promised. "Demand for dollar loans will continue to be large," said Le Duc Thuy, "therefore, banks should keep their foreign currency intakes stable, so that they have enough funds to lend," VNS News Agency has reported.
The SBV has recently increased the interest rate it offers banks for their at-call dollar deposits held with it from 1.2 to 1.35 per cent a year.
According to Thuy, this is to help banks keep deposit rates firm, or at least, avoid large cuts, which may affect dollar inflows. Banks have reportedly stopped cutting deposit rates since the SBV hike.
He assured it was unlikely there would be a shortage of foreign currency at the year end even if some businesses planned large imports ahead of Tet. "Besides, I have not seen any signs of big demand for foreign currency to finance imports. I can guarantee that banks will have no difficulties with dollar withdrawals by depositors." 

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FOREIGN LOANS

ADB delivers loans to needy rural areas

The Asian Development Bank has approved loans of US$90m targeted at Vietnam's rural economy, VNS News Agency has reported. 
According to the bank, the loans aim to increase agricultural productivity, profitability and competitiveness, as well as addressing the declining growth in the rural economy.
Some of the projects to be funded involve increased research capacity, new technologies, better access to information, agricultural support services, and capital.
The bank's project economist Raymond Renfro said the incidence of poverty in Vietnam halved during the 1990s, dropping to 37 per cent by 2000. However, poverty levels remain high in rural areas, which are home to 90 per cent of the country's poor people. "Sustainable growth in agriculture is a pre-requisite for economic growth and poverty reduction in Viet Nam," Renfro said. "But a new strategy is needed to achieve this, involving higher productivity, diversification, quality, and use of innovative technologies."
One programme loan for US$60m will focus on small farmers and small-and medium-scale enterprises. Another loan, for US$30m, will encourage the development of agro-industry small- and medium-sized enterprises by providing access to loans. 
"The poor stand to benefit from an agricultural system that is better targeted and more applicable to the needs of small farmers. Greater productivity will translate into higher incomes and more jobs for poor rural producers," Renfro said.
Both loans come from the bank's Asian Development Fund and will be carried out by the Ministry of Agriculture and Rural Development and the Viet Nam Bank for Agriculture and Rural Development. 

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INTERNATIONAL RELATIONS

ASEAN members work on code of conduct

Ministers from the ASEAN members claiming sovereignty rights - Vietnam, the Philippines, Brunei, and Malaysia - have agreed to work on a code of conduct aimed at easing tensions over the Spratley and Paracel islands while sovereignty claims are dealt with. However, it is unclear whether China, which is an ASEAN dialogue partner and also lays claim to the islands, will agree to such a code. Bilateral relations between Vietnam and China have strengthened in recent months in line with a number of high-level official exchanges. The most likely area of difficulty relates to Vietnam's relations with the US. As well as differences over human rights, there are also looming disputes over trade and the implementation of the bilateral trade agreement.

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TELECOMMUNICATIONS

Siemens steps up local market presence

With its current market holdings of 15 per cent in the mobile phone sector, Siemens Vietnam has reported it will assume the position as the third biggest telecom supplier in the country by 2003. The company is a subsidiary of the telecom giant Siemens AG of Germany.
Meanwhile, Finnish mobile phone company Nokia maintains the top position with a 52-per cent market share, leaving the second position to Samsung Co. Ltd of the Republic of Korea with 28 per cent.
Siemens Viet Nam, founded in 1993, is producing not only cell phones but also other wireless equipment, as well as investing in the overall installation of technology for the telecom industry. 
Its products have been popular with the Vietnamese youth because of the variety in design and reasonable price per quality balance. Two models of mobile phones have recently been marketed for young, first-time users: the Siemens 2128/C55 and the Siemens 1168/A50.
In addition, Siemens AG has recently secured a licence to set up a limited liability in HCM City, a move to stretch the ability to fulfil local demands in Viet Nam, one of the fastest growing telecom market in the world. 

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