Tran Duc Luong
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military aid to South Vietnam grew through the 1960s in an attempt to bolster the government, but US armed forces were withdrawn following a cease-fire agreement in 1973.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
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.
Update No: 019 -
The current leadership and the new cabinet will be supportive of economic reform, but the pace and the progress of reform is unlikely to quicken significantly. The government message on economic reform is mixed. Equitisation has continued at a slow pace, but large scale state-owned enterprises (SOEs) may soon be equitised. The first auction of a SOE has been a success and 100% foreign invested enterprises (FIEs) will be allowed in more sectors.
Positive foreign investor sentiment has not been matched by foreign direct investment commitments which have dropped steeply but international donors remain supportive.
Real GDP growth will be around 7 percent in 2003-2004, as a recovery in the global economy, albeit sluggish, will provide a boost to inward foreign investment. Consumer price inflation has been steady and the Dong has depreciated gradually against the USD.
Robust export growth has continued into the first half of 2003. Alternative rice export markets have been sought to overcome the lack of access to the Iraqi market. The catfish dispute with the US has dragged on. EU garment quotas have risen sharply. Three oil importers have lost their licences for their so-called role in causing a fuel panic.
Tax policy in the automobile and motorcycle industries has been erratic. Honda has responded to tax policy changes by boosting its exports of motorcycles. Land-use rights will be auctioned. In Ho Chi Minh City, the policy on land ownership by overseas Vietnamese remains unclear, which is unhelpful.
The current account deficit will widen in line with stronger domestic demand and increased imports of key production inputs.
Vietnam is pushing for membership of the WTO. Tariff cuts imposed by the Association of South East Asia Nation (ASEAN) Free Trade Area (AFTA) have been delayed until 1st of July.
Although there is no risk of political unrest in the period of 2003-2004, party leaders are becoming increasingly concerned about losing people's confidence as a result of rampant corruption and difficult living conditions. The party chief, Nong Duc Manh, has acknowledged that the future stability of the party rests largely on its traditional, if suspect, image of probity and he is intent on driving corrupt officials out of the party and government. More cases of high level corruption are being found. Manh is keen for offenders to be made examples of.
It is for this reason that the trial of Nam Cam, an underworld chief in Ho Chi Minh City who bought the support of locals and even national figures, has attracted widespread public attention. Along with Nam Cam, 154 other people have been sent to court including high-ranking police and government officials. The trial is widely being viewed as test case of the leadership's commitment to eradicating corruption. Previous attempts by the party to limit corruption have been largely unsuccessful because of low salaries, and a bureaucratic administration in which opportunities for bribery are widespread and light punishment for graft. Unless the root cause of graft is dealt with and harsh punishments are handed down to offenders, the culture of corruption will continue to thrive, but there is nothing new in that analysis.
The government is also concerned about the threats to national unity and growing social unrest.
Aside from attempting to root out corruption and prevent further periods of social unrest, the government will endeavour to push forward economic and administration reforms. Progress so far has been steady with entry to World Trade Organisation (WTO) expected by 2005-2006. There is a growing sense that the pace of economic reform needs to accelerate. The Prime Minister Phan Van Khai is a capable economic reformer and he will push hard over the next few years to advance the reformist agenda. If he is successful, it will be thanks partly to the performance of his deputy Vu Khoan, a former trade minister who was instrumental in winning approval for bilateral trade agreement with the US. However, the government's implementation of liberal, pro-business policies will be inconsistent owing to opposition from protectionist lobbies and conservative members of party.
The Vietnamese government's strong opposition to the US-led war on Iraq is unlikely to upset the overall trend towards warmer relations with the US. However, the government's stance will ensure that relations remain prickly. There is a risk that differences over human rights issues and trade disputes, will delay the full implementation of the bilateral trade agreement, resulting in heated diplomatic stand-offs. Vietnam will be keen to avoid such an outcome and will aim to strengthen further its ties with the US in order to balance the influence of China. A lingering decree of Vietnamese mistrust of its Northern neighbour remains but both sides appear to have reconciled their differences over disputed territory.
As part of a domestically controversial land border agreement, 1500 border markers will be planted along the 1,350 km joint border in 2003 - 2004. Although, sovereignty over the disputed Spratly islands in the South China Sea (or East Sea) is far from being resolved, the risk of conflict has been greatly reduced following an agreement in late 2002 by members of ASEAN and China to abide by a code of conduct.
US$600,000 for Vietnam's agricultural sector reform
The Asian Development Bank (ADB) has granted a technical assistance worth US$600,000 to Vietnam's agricultural sector reform programme, the ADB's Vietnam Resident Mission announced in Ha Noi, Vietnam News Agency website has reported.
The assistance, funded by the Government of Denmark, will build the capacity for policy and institutional reforms being carried out by the Ministry of Agriculture and Rural Development (MARD) and the Vietnam Bank for Agriculture and Rural Development (VBARD).
The programme aims to increase agricultural productivity, profitability, and competitiveness while addressing declining growth in the rural economy by providing increased research capacity, new technologies, and better access to information, agricultural support services, and capital.
"Although the Government has considerable experience in carrying out policy and institutional reforms, additional expertise is needed on the sweeping changes taking place," said Raymond Renfro, an ADB Principal Project Economist.
Sustainable growth in agriculture is a prerequisite for economic growth and poverty reduction in Vietnam. The sector accounts for 24 per cent of GDP, 70 per cent of employment, and 23 per cent of exports.
The Government's ten-year development plan aims to make the agriculture sector more sustainable, efficient, and internationally competitive. Under the plan, a key role is assigned to scientific research, which is currently fragmented, the application of new technology in rural development, and the promotion of small and medium enterprises.
"The assistance will increase the capacity of MARD and VBARD to implement, sequence, and monitor policy reforms taking place under the ADB-backed development programme," Renfro added.
The programme is estimated to cost the equivalent of US$750,000, of which the Government of Vietnam will finance US$150,000 equivalent.
Plans to build 19 "hi-tech" agricultural parks
The Ministry of Agriculture and Rural Development has unveiled a plan to build 19 "hi-tech" agricultural parks over the next seven years to produce high quality farm produce and crop varieties, Vietnam News Agency has reported.
These parks, mostly in the Mekong delta, are expected to help boost domestic production before fierce market competition, foreseen by the Centre for Research and Development of Mekong delta, will affect Vietnam by 2005, when fruit from Thailand, China, Malaysia and Indonesia start to flood the market.
The parks will also help educate farmers on growing high-quality fruits, chemical-free intensive farming, post-harvest technology, processing farm produce and marketing strategies.
According to the centre, Song Hau State Farm is an exemplary model of a hi-tech agricultural park. Its commitment to better farming practices has resulted in better quality cattle, rice, vegetables, fruits and processed seafood for both domestic and overseas markets.
The centre said it plans to convert more than 800 ha in Vinh Thanh commune, Ben Tre province, into a Vinh Thanh hi-tech agricultural zone. The zone will use the latest agricultural production techniques to produce high quality crop varieties, fruits and bonsai.
The new hi-tech park, which will offer tourism and farm-related services, will cost 6.9 billion VND (US$460,000) and is expected to supply 10,000 tonnes of fruit, four million fruit tree saplings and one million bonsai by 2010.
Its sales are estimated to reach 17 billion VND a year or higher when it starts offering extra services.
2003 Mid-term consultative group meeting report from the Vietnam Business Forum
Approximately 400 representatives of local and foreign-invested businesses, along with delegates from donor countries and international development organizations, met with representatives from the Government of Vietnam for the mid term Vietnam Business Forum in Hanoi on 6TH June 2003. This report summarises the main issues addressed at the meeting. This event was one of the most pragmatic and constructive exchanges the VBF has had in the past several year, and the continuing improvement of the quality of the conversation between the business community and the Government was impressive to all who have been involved in the VBF.
At the Forum, there was a general acknowledgement that continuous efforts are being made by the Government to improve business conditions in Vietnam. The Government was congratulated for its effective and transparent approach to containing the SARS virus. The introduction of Interministerial Circular No. 03 regarding garment exports and quota allocation, and some of the proposals to amend the Land Law were also warmly welcomed by the business community.
The Forum began with comments from various business associations, which among other things, requested that the Government and donor community to continue to work on the following issues.
1. Entry into the WTO: Several business associations expressed concern that Vietnam's efforts to accede to the WTO by its target date of 2005 are not focused or resolute enough, given the many obstacles left to overcome. Among the points raised were the lack of a level playing field for all economic sectors, poor transparency and enforcement of laws and contracts, and limited market access.
2. Costs and regional competitiveness: While businesses were quick to welcome the Government's moves to lower business costs, studies showed that the cost of doing business in Vietnam is still comparatively higher than in neighbouring countries, even China. The main areas of concern included telecommunications, taxes, transportation and electricity. Managerial level personnel are also more expensive, notwithstanding their relatively low salaries, due to the high rates of Personal Income Tax and other payroll taxes in Vietnam. A special concern was raised about the garment sector in light of the pending abolition of the quota system for the WTO members in 2005 and the impact on Vietnam's relative competitiveness if it is still subject to the quota system after that time.
Some of the business associations suggested that export fees and telecommunications charges should be lowered to meet (or beat) those of other countries in the region; and
that Government policy should be developed to encourage more healthy competition among utilities service providers.
3. Sourcing credit was identified as a key problem for all SMEs operating in Vietnam. This impacts on the the ability of businesses to expand and develop in their formative years. Suggestions to overcome this included the creation of more flexible regulations on bank loans; addressing the issue of risk to banks by assisting business to develop clear accounting records and requiring banks to adhere to a clear, consistent policy regarding loan approvals.
4. Enforcement and implementation of laws and contracts was identified as a major impediment to creating a favourable environment for business and reviving investment. The number of agencies with unclear and partial responsibilities for enforcement makes the process of implementing laws unnecessarily complicated. Suggestions raised echoed those of previous years: to repeal outdated legislation, and to adopt more "self-enforcing" laws that focus on punishing violations rather than requiring business to overcome so many documentary hurdles to conduct their legitimate operations.
Quang Nam opens 'liberal' business zone
Authorities in the central province of Quang Nam have launched a campaign to introduce the newly-established Chu Lai Open Economic Zone (OEZ) and lure investors to set up shop in there, VNS News agency has reported.
"Chu Lai, the first open economic zone in Viet Nam, has the most liberal regulations for investment and business activities in the country," said chairman of the Quang Nam People's Committee Nguyen Xuan Phuc at a meeting with HCM City reporters.
The 210sq.km zone, which is adjacent to the Dung Quat Refinery in Quang Ngai Province, is about 100km south of Da Nang. It encompasses Nui Thanh Township and nine communes of Nui Thanh District as well as three communes and a ward of Tam Ky in Quang Nam Province.
The Chu Lai OEZ was designed, authorities said, to apply new mechanisms and policies to create a fair investment and business environment compatible with international practices. In addition, it was organised to allow the application of new models and motive forces for economic development and to remove obstacles in current economic management policies.
Supporters have said the OEZ will boost production of high quality, competitive goods, thus promoting exports and creating jobs, which in turn will step up development of the country's human resources.
In its first stage, authorities reported, the OEZ will include the 4,000ha Chu Lai Airport, a 2,500ha industrial park, a 2,100ha tourism and sports zone, a 1,550ha urban and services area, a 400ha free trade area and a 200ha seaport and services zone.
The second phase will expand the zone's area to 400sq.km, covering the southern bank of the Thu Bon River. However, provincial authorities in Quang Nam have not revealed when the second phase of the project will begin.
The Chu Lai OEZ includes two areas: the free trade (non-tariff) zone and the tariff zone. The free trade zone is being associated with a section of Ky Ha Port and is isolated from the surrounding areas by a fence. The remaining part of the OEZ, the tariff zone, will house industrial parks, export processing zones, recreation centres, tourist resorts, residential and administrative quarters, authorities said.
Tran Minh Ca, deputy chairman of the Quang Nam People's Committee, said investors in the free trade zone, industrial parks and export processing zones will be exempt from land rent fees during the entire life of their project. Land leases will have a term of 70 years.
Investors in the Chu Lai OEZ will enjoy the maximum preferences applicable to areas with exceptionally difficult socio-economic conditions, to the economic zones at border gates, industrial and export processing zones, hi-tech zones and other provisions of international treaties which Vietnam has signed or acceded to, he said.
Projects in the fields of production, trade, business and services (including banking, insurance, post and telecommunications, transportation, recreation and infrastructure) are all acceptable in the Chu Lai OEZ, he said.
Ca added that domestic and foreign investors will be offered a "one door, one price" policy. Investors in the zone will be offered land-clearance subsidies and exemption from corporate income tax for the first four years of operation and 50 per cent tax exemption in the nine years following.
Foreigners and Viet kieu (Overseas Vietnamese) are allowed to purchase houses and to deal in property in the zone as well as invest in the development of housing for sale or lease, he said.
"Quang Nam Province is now giving a red-carpet welcome to all local and foreign investors," Phuc said.
FOREIGN ECONOMIC RELATIONS
Japan and Vietnam to strengthen relations
Vietnam and Japan will further strengthen bilateral relations to contribute to building a region with peace, stability and development, Minister of Foreign Affairs, Nguyen Dy Nien, said, VNS News Agency has reported.
In a meeting with the Japanese Foreign Minister, Yoriko Kawaguchi, the two ministers recognised the countries' relationship was probably the best it had been since they began diplomatic recognition in 1973.
The ministers agreed to work together to accelerate the signing of an investment protection agreement which requires the approval from the two countries' parliaments this year. They also agreed to start negotiations for an all-sided economic co-operation agreement soon.
Nien said he appreciated the Japanese Government's official development assistance to Vietnam's economic development. Kawaguchi said his Government pays much attention to strengthening relations and co-operation in many aspects with Vietnam. He also said Japan would continue to support Vietnam's efforts to reform its economy.
The two ministries will work together to carry out programmes including "Vietnamese month in Japan," "Japanese month in Vietnam" and "Japan-ASEAN meeting month in Vietnam." One day after meeting with Kawaguchi, Nien attended the opening ceremony of the Vietnamese Embassy's new office in Tokyo.
VNPT signs US$9m contract with Nortel Networks
The Vietnam Post and Telecommunication s Corporation (VNPT) has recently signed a US$9 million contract with Canadian firm, Nortel Networks, to upgrade the country's North-South optical transmission system, the Vietnam News agency has reported.
VNPT General Director, Tran Long Tran, said that the project will improve Vietnam's optical backbone from 2.5 Gigabits per second to 20 Gigabits.
Tran further said that the improved infrastructure will also contribute to the national socio-economic development, national security, defence and natural disaster prevention, adding that this would help raise capabilities of the corporation's telecom infrastructure, an essential condition for diversifying services and meeting the growing demand of the market.
Vice President of Nortel Networks for ASEAN and Pakistan, Mark Stevens, also said that this high capacity optical network will be capable of meeting the country's voice, data and video transmission for many years.
Nortel had originally laid the backbone in 1995, when it became Southeast Asia's first 2.5 Gigabits network.
In this connection, Australian giant Telstra, also VNPT partner, has completed the final stage of its 12-year Business Co-operation Contract (BCC) by transferring telecommunication assets to Viet Nam.
A ceremony was held in Ha Noi to mark the successful completion of the deal which started in 1990 when Telstra, then known as OTC, entered into the contract with the Government to upgrade the country's international telecommunication infrastructure.-
Internet Telephony services to be supplied by VNPT
The Internet Telephony services will officially be supplied by the Viet Nam Post and Telecommunication Corporation (VNPT) by July 1, reported the VNPT.
The services will be available at first in the three major cities of Ha Noi, Hai Phong and Ho Chi Minh City.
Earlier on June 13th, the Vietnam Data Communication Company (VDC) announced the first wireless Internet public hotspot in Vietnam, which is stationed in the University of Water Resources. The company plans to expand the network to another 100 hotspots nationwide by the end of this year in service of SEA Games 22.
These are efforts made by the VNPT to meet the goal of between 4 and 5 percent of the national population to use Internet services by 2005 as set by its Internet development strategy for 2001-05.
In recent years, the Internet market has become thriving and competitive, making service charges less and less and quality better and better.
Besides VNPT, five businesses have been permitted to provide infrastructure of Internet services, namely Vietel, ETC, Viet Nam Shipping Telecom Company (VISHIPEL), SPT and Hanoi Telecom. VNPT, ETC and Vietel have been licensed to set up a network and provide infrastructure network services, build and develop a national backbone network. Vishipel and VNPT will establish an Inmarsat satellite network. SPT will establish a network and provide services in Ho Chi Minh City while Ha Noi Telecome will establish a network and provide services in Ha Noi.
Vietnam now has six Internet exchange providers - VNPT, Vietel, FPT, SPT, ETC and Hanoi Telecom. Six of 13 businesses licenced as Internet service providers have provided service for customers.
The number of Internet subscribers has increased from 100,000 in 2000 to around 300,000 now with Internet users reaching more than 1 million or 0.4 percent of the population, far below the regional average of 1.5 percent and the world average of 8 percent. The Internet network has covered all 61 provinces and cities, but Internet services still are developing slowly in the country because most people are not aware of the usefulness of Internet services.
INVESTMENT BACKGROUND REPORTS
Our analysts and editorial staff have many years experience in analysing and reporting events in these nations. This knowledge is available in the form of geopolitical and/or economic country reports on any individual or grouping of countries. Such reports may be bespoke to the specification of clients or by access to one of our existing specialised reports.
For further information email:
Considering an investment or a trip to any newnation? First order our Investment Pack which will give you by e-mail the last three monthly newnation reports and the complete worldaudit democracy check for the low price of
U$12. The print-out would be a good companion to take with you. Having read it, you might even decide not to go!
To order please click here: