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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military aid to South Vietnam grew through the 1960s in an attempt to bolster the government, but US armed forces were withdrawn following a cease-fire agreement in 1973.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: 018 - (03/06/03)

The government of Vietnam is making a further commitment to consolidate social and political order, and to protect the way of life of tribal ethnic peoples, the National Assembly (NA) heard in May. The restructuring of state-owned enterprises and the creation of a competitive investment environment are also high on the agenda during the NA sittings.
Widespread drug use amongst the youth, illegal motorbike and car racing on roads in big cities, traffic chaos, high unemployment, large scale cases of fraudulent trading, together with the increased corruption of high-ranking officials are considered to be key reasons for the worries of the government regarding potential social and political disorder. 
On the economic front, there is a determination to reorganize unprofitable giant state-owned corporates, which are currently heavy burdens for state budget. According to measures announced at the NA, 38.2 per cent of state-owned enterprises (SOEs) are to keep their present structure, 45.3 per cent are to be equitised and the remaining 16.5 per cent will be assigned to workers, sold, contracted or leased.
Deputy Prime Minister Nguyen Tan Dzung, said that in the first fourth months of this year, 150 SOEs were equitised, nearly equivalent to the total number equitised last year. Privatising SOEs is a very important task as they account for 40 per cent of the total gross domestic product of the economy, which is considered to be high rate for a dynamic economy. There are now 5,400 SOEs in operation.
At the NA, the government also promised other policies to draw in investment capital by stimulating the creation of domestic private enterprises and wooing foreign investment.
In the recent times, the expansion of the private sector in Vietnam has been astonishing. There were 55,793 new enterprises registered between 2000 and 2002, compared with 45,000 between 1991 and 1999. Nearly $6.7 billion has been mobilised for new enterprises in the last three years. The total amount of mobilised capital was larger than the total foreign investment registered in Vietnam in the same period.
In Ho Chi Minh city, the economic hub of the south of the country, privately-owned enterprises currently account for 38 per cent of the total amount invested in the city. The combined investment of state-owned enterprises and the state investment budget in the city is 36.5 per cent of the total amount invested. 
Private enterprises launched after 2000 created between 1.3-1.5 million jobs. To support the private sector further, Dzung said that the Enterprise Law would be reviewed and existing obstructions and shortcomings would be removed. 
Dzung also revealed that mountainous and rural areas of the country, disadvantaged in eliciting foreign investment, would be considered for further favourable state policies on land leasing, infrastructure establishment and other factors affecting foreign investment. 

Vietnam and SARS 
The SARS-related slump is only temporary, business leaders confidently say, as investors are showing no intention of abandoning Vietnam for greener pastures. The World Health Organisation declared Vietnam SARS-free on April 28th, but not before the disease killed five medical workers at the Hanoi French Hospital and affected 63 others. 
Hotel occupancy rates in Hanoi have plunged to record lows since the outbreak. This time last year the 411-room Daewoo hotel was half full but now only 15 per cent of its rooms are occupied.
Some foreign investment projects and business trips by overseas investors to Vietnam have been delayed because of SARS fears. A Taiwanese project to manufacture special steel pipes for Vietnam in the oil sector has been delayed and a Japanese investor group seeking opportunities also postponed its trip. Despite these setbacks, business groups from the region most affected by SARS including Singapore, Hong Kong and Taiwan, say investors still look favourably on Vietnam.
Neither the war on Iraq nor the SARS situation it seems, will have any special bearing on Vietnam's economy, as noted by many investors in Vietnam.

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BONDS

Vietnam Industrial & Commercial Bank to Raise US$130m via bonds

The State-owned Vietnam Industrial & Commercial Bank, or Incombank, has begun to raise VND2,000 billion ($129.57 million) by issuing bonds, the second issuance in 2003, in June and July nationwide to fund major projects at the end of the year, Vietnam Economic Times has reported.
An official from Incombank, one of Vietnam's five state-owned commercial banks, said that the two-year bonds are denominated in Vietnamese dong. They carry an annual coupon of 8.5% and have an issuing date of August 1, 2003 and maturity on August 1, 2005. The bonds have par values of VND5 million ($325), VND10 million ($650), VND20 million ($1,230), VND50 million ($3,250) and VND100 million ($6,500).
Last August the bank issued bonds with one-year and two-year terms, which carried annual interest rates of 8% and 8.1%.
Financial experts in Hanoi said that local banks are competing in raising interest rates on dong deposits to further mobilize money for the government's big projects in the energy and transport sectors.
The bank plans to raise VND6 trillion ($388.72 million) through issuing bonds by the end of this year. It targets coupons for two-year bonds of 8.5% per annum and 9% for three-year bonds.
Capitalized at VND2.12 trillion ($137.4 million), it reported total raked-in capital of VND84.06 trillion ($5.45 billion) and total outstanding loans of VND76.23 trillion ($4.94 billion) as at the end of the first quarter.

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ENERGY

Rising oil price brings Vietnam's export turnover up

The global rise in petroleum prices has lifted Vietnam's first quarter crude oil export turnover 1.6 times, or 60 per cent, higher than that in the same period last year, according to preliminary data from the state-owned Oil and Gas Corporation (PetroVietnam), VDC Media web site has reported.
PetroVietnam exported 4.3m tonnes of crude oil in the first quarter of this year, a year-on-year increase of 3 per cent. With a value of US$1.42bn, crude oil secured itself as the leading export earner in Vietnam over the period.
PetroVietnam sold 586m cubic metres of natural gas to gas-fuelled thermal power plants and 96,500 tonnes of liquefied petroleum gas, representing year-on-year increases of 46 per cent and 20 per cent respectively. The corporation's revenue increased 40 per cent, representing 33 per cent of the expected yearly income plan.
In the period, Vietnam tapped 4.414m tonnes of crude oil and 732.8 cubic metres of gas, up by 5.3 per cent and 40 per cent respectively.

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FOREIGN ECONOMIC RELATIONS

Vietnam inks trade agreements with three African nations 

Vietnam has signed a number of agreements to boost trade with three African nations following an investment conference in Hanoi. 
The Vietnam News Agency reports two agreements on trade and investment protection were signed with Namibia, and an accord was signed with Sudan on agricultural cooperation.
Agreements on economics, commerce, culture and technology were concluded with Sierra Leone, while a memorandum of understanding on fishing cooperation was also signed with Sudan. 
Vietnamese Foreign Minister Nguyen, Dy Nien, said the agreements would facilitate Vietnam's accession to the World Trade Organization because most of the signatories were WTO members.
Vietnam is hoping to join the global trade body by the end of 2005, a date seen by the World Bank and most analysts as overly ambitious. 

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INFORMATION TECHNOLOGY

Vietnam's Software Park receives nod for continued use of VSAT Satellite Station

The Vietnamese Government has recently approved the application by the Saigon Software Park (SSP) in Ho Chi Minh City to continue the operation of its very small aperture terminal (VSAT) satellite earth station for Internet access, despite earlier protests by the Ministry of Post & Telecommunications, Saigon Times Daily has reported.
Deputy Prime Minister Nguyen Tan Dzung said at a meeting in Hanoi that the park was allowed to operate the VSAT station on a trial basis to make it easier for its tenants to hook up to the Internet.
The Deputy Prime Minister told the ministry to license SSP to continue the operation of the station.
"We have received guidance from Deputy PM Dzung to allow SSP to operate the VSAT station and cancelled the order directing the park to discontinue," Le Quang Trieu, deputy head of the ministry's Post and Telematics Department No. 2 said.
In a document sent to SSP on March 4th, the ministry ordered the park to suspend the operation of the VSAT station, saying that operating the station without approval went against prevailing telecommunications and Internet regulations.
SSP has piloted the VSAT station from July 1st last year, but was not licensed by the ministry to do so despite submitting an application.
Nguyen Huu Hien, general director of SSP, said that his park had no choice but to continue the VSAT station to meet demand from tenants for a high-speed Internet transmission line. Hien said that with the station in place, Internet access was faster and easier as the two-megabite-per-second-leased-line of Vietnam Data Communications Co. (VDC) was often jammed. "SSP needs a good line to ensure fast and efficient Internet access for some 6,000 software programmers." Hien said.

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INVESTMENT

New investment reaches US$5.1 billion

Investment capital totalling VND77,400 billion, about US$5.1 billion, was raised for socio-economic development throughout Vietnam in the first five months of this year, VNS has reported.
The figure, published by the General Statistics Office, show that of this, VND17.4 trillion, $1.16 billion, was provided by the State, representing about 39.5 per cent of the yearly target. But private-sector capital raising was relatively high.
It increased 7 per cent by volume and 69.6 per cent in value against the same five months of last year to $1 billion and will finance 7,657 newly-licensed enterprises.
International donors pledged to provide Official Development Assistance, ODA, totalling $1 billion - $906 million in loans and $103 million in non-refundable aid. About $509 million of ODA - or 30 per cent of the yearly plan - has been disbursed so far this year. Of this, $444 million was in loans and $65 million in non-refundable aid.
Disbursement of foreign-investment capital increased by six per cent to $900 million.
Of this, industry and construction accounted for 78 per cent; services 14 per cent and agro-forestry and aqua culture 8 per cent.
Planning and Investment Ministry statistics show that Vietnam licensed 24 foreign-invested projects with total capitalisation of $167.28 million in May.
This helped take the total licensed projects in the first five months to 235 with a capital valued of $632.96 million - an 14 per cent decrease in projects but a 30 per cent rise in capital against the first five months of last year. 

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TEXTILE INDUSTRY

New garment quota rules sewn up

New inter-ministry rules governing textile and garment quotas for exports to the US have been issued. The rules - written by the trade, planning and investment and industry ministries - comply with a prime ministerial instruction that quotas for Vietnamese manufacturers be made public before September 1st.
The prime ministerial instruction also requires the responsible ministries and agencies to devise both a reasonable export delivery system as well as measures to prevent "negativity" in the granting of quotas.
Vietnam is allowed to export US$1.7 billion worth of textile and garment products to the US market in accordance with the textile agreement signed between the two countries in April. But some manufacturers worried about the way in which the quotas would be granted, hence the need for a system that guarantees equality.
The newly-issued rules say that garment makers not able to fulfil their quotas must inform the Trade Ministry in writing as soon as possible so it can transfer them to other enterprises. Enterprises which fail to meet their quotas but return them to the ministry before October 1st this year, will have those same quotas allotted next year. Those who fail to inform the ministry will be granted no such corresponding quotas.
The inter-ministerial rules emphasise that the sale, transfer or substitution of quotas is not allowed. Between 65 and 70 per cent of this year's quotas will go to enterprises based on their export record of last year and the first quarter of 2003.
Another 23 to 28 per cent of the quotas will go to new enterprises that have the capacity to meet major orders but started exporting only at the end of last year or early this year or those that have not made shipments to the US market during the same months but have snared major contracts.
About 3 per cent of the quotas will go to those garment makers that have signed direct contracts with major US importers and distributors. The remaining 7 per cent will be reserved for enterprises that use domestic materials or are in economically disadvantaged areas but have production capacity and export contracts. The ministries will soon announce 80 per cent of quotas for manufacturers who have completed the required documents of Phase 1. 

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TRANSPORT

Vietnam starts US$100m project to upgrade northern mountainous roads

Vietnam has begun to carry out a US$100-million project to upgrade 1,666 kilometres of roads in 18 northern mountainous provinces, with the first in Thai Nguyen, according to the Ministry of Transport, Vietnam News Briefs has reported.
The project, which will have four phases of development, 160 bidding packages and is expected for completion in early 2006, is funded by loans from the Asian Development Bank (ADB) with US$70m and developed by the Project Management Unit 5 under the ministry.
It aims to facilitate transportation in mountainous areas in the north, such as Cao Bang, Lang Son, Lai Chau, Son La, Bac Kan, Thai Nguyen, Ha Giang, Tuyen Quang, Lao Cai, Yen Bai, Hoa Binh, Bac Giang and Phu Tho provinces, for socio-economic development, the ministry officials said.

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