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VIETNAM


  
   

 
Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 35,110 32,700 31,200 56
         
GNI per capita
 US $ 430 410 390 167
Ranking is given out of 208 nations - (data from the World Bank)

REPUBLICAN REFERENCE

Area (sq.km)
329,560

Population
79,939,000

Capital
Hanoi

Currency
dong

President
Tran Duc Luong

 

 

Background:
France occupied all of Vietnam by 1884. Independence was declared after World War II, but the French continued to rule until 1954 when they were defeated by communist forces under Ho Chi MINH, who took control of the north. US economic and military aid to South Vietnam grew through the 1960s in an attempt to bolster the government, but US armed forces were withdrawn following a cease-fire agreement in 1973. Two years later North Vietnamese forces overran the south. Economic reconstruction of the reunited country has proven difficult as aging Communist Party leaders have only grudgingly initiated reforms necessary for a free market.
One of the most important political events to happen in Vietnam in 2002 was the election held in May of the country's new National Assembly (NA), the highest legislative body, for the 2002-2007 term. 498 individuals were elected as parliament members, including 118 permanent members, who will work on NA committees during their term, unlike the majority of members, who usually operate in local areas and only attend regular meetings of the NA when they are arranged.
The NA has decided on the new government cabinet, whose working term will also extend from 2002 to 2007. Prime Minister Phan Van Khai was re-elected and the number of deputy prime ministers cut to three for the next five years from four in the previous term. 
Minister of Trade Vu Khoan, was elected deputy PM in charge of trade and foreign affairs, replacing Nguyen Manh Cam. Khoan is respected for his contribution in signing a landmark trade deal between Vietnam and its former enemy the United States.
Two deputy PMs, including Nguyen Manh Cam and Nguyen Cong Tan who was responsible for agriculture, retired. Deputy PMs Nguyen Tan Dzung and Pham Gia Khiem continue in their posts for the next five-year term.
The NA approved the setting up of 26 ministries and ministerial committees, up from 23 in the previous term. The new formation aims to help ministries to focus more on their responsibilities and to work more effectively. Stagnation, overlapping functions and the bulky structure of the government's administrative bodies was one of the major causes of the ineffectiveness of government in its previous terms.
Fourteen new ministers and committee heads or 50% of the government's cabinet have been appointed for this new term, including ministers of police, justice, trade, transport, construction, industry, planning and investment, home affairs, science and technology, natural resources and environment, post and telecommunication, state inspectorate, ethnic minority people, and population, family and children. Two newly-created ministries included the Ministry for Natural Resources and Environment and Ministry of Post and Telecommunication.
The NA held its second meeting, which lasted from November 12th to the middle of December, to seek measures to improve the country's socio-economic situation in the remaining months of 2002 and discuss plans for the next year. 
Major issues focused on during this meeting were corruption, squandering, education, criminals, justice and traffic jam and accidents. The government firmly pledged to implement changes to provide a more favourable and equal environment to support private enterprises during the term of the 11th National Assembly, in addition to imposing tougher conditions for state owned enterprises (SOEs). In practice, the new-found commitment to the private sector remains to be tested. The government has, however, moved ahead with economic reforms related to its pursuit of World Trade Organization (WTO) membership, and its commitments under the bilateral trade agreement with the US.
In an effort to ease the public's increasing discontent with corruption and other social ills, the Communist Party general secretary, Nong Duc Manh, promised to pursue a tough campaign to crack down on corruption and wrong-doings of party members. Manh has also attempted to breathe new life into the economic renovation (doi moi) process, but the pace and progress of economic reform is unlikely to quicken significantly in 2002-03. 
The Communist Party, easily the most powerful organization in Vietnam with around two million members, has set targets to consolidate control and leadership in grassroots groups. The Party says it will clarify the responsibilities of commune authorities and other social organizations, make them work under local Party organizations' management, and to consult citizens regarding their decisions. It will also improve discipline in those offices, train staff for commune offices and organizations and increase payments and preferential treatment for grassroots officials, according to the meeting's final announcement. 
For many years, Party organizations have had little effect on people since the tasks and responsibilities of Party organizations and local governments have not been clearly defined. 
In urban areas, local Party organizations just assemble some retired Party members for impractical gossip sessions and rarely admit new Party members, because most Party members are drawn from their offices' organizations. 
In rural areas, Party members are also commune authorities, so they have unchallenged power to decide on local issues, which is the root of increasing corruption and abuse of power, illustrated by the mounting number of complaints and criticisms. 
The Party only has groups in State-owned enterprises and administrative offices. While private and foreign invested enterprises keep expanding and increasing their contribution to the economy, the Party has not yet set up organizations in those sectors because it still prevents Party members from operating businesses. The NA's final announcement, however, did not make it clear if the Party would admit business people into its organization in a bid to increase its influence in the private sector. 
However, not wanting to evade the increasingly important role of private businesses, the party this year made an historical decision allowing businessmen to be members and will permit current members to operate private enterprises. Party members can run private enterprises if they do not violate laws and have the support of their staff and neighbours. They can maintain their Party membership if they wish. The Politburo, the country's political elite, hopes that Party members working in the production sectors will be excellent businessmen who can make legal fortunes and encourage other people to make fortunes but do not explain how these objectives may be realised. 
In the Party's previous regulations, Party members could not practice labour exploitation, because it is contradictory to old Russian socialist theory, which the Party adopted as a bible. But the Party never clarified what "labour exploitation" was, resulting in an implicit understanding that Party members could not run private businesses that employ workers. 
In fact, no Party members are directors of private companies and few are working in private companies. The permission to do so came along with the Party's resolutions on boosting the private sector's role in the economy and on improving the Party's leadership in grassroots organizations. 
The Party now has to admit the existence and increasing role of the private sector. Despite much discrimination and repression, the private sector now contributes around 60% of GDP. The Party also realizes that it has lost control, along with its image and prestige at the grassroots level, in rejecting the private sector, the largest and fastest emerging part of society. 
One of the pressing issues that the party has had difficulty in coping with in 2002 is its failure to find answers to the people's complaints and criticisms. The number of petitions from people regarding losses caused by, and their discontent over, the increasing number of cases of wrong doing, corruption, trade fraud and undue extravagance are on the rise. Many also expressed fury at not receiving any answers to their petitions from local authorities. The State Inspection Department received over 35,000 petitions last year, which were described as becoming more complex. 

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Update No: 023 - (29/10/03)

The sentiment that the overall economy is in a weak situation due to low competitiveness and business efficiency of all economic sectors has overwhelmed the National Assembly (NA) gathering commencing on 21st of October.
The gathering is tasked with reviewing the economic and political performance of the year 2003, putting up strategies for 2004-2005 in order to fulfil the targets of the five-year plan (2000-2005).
The first discussion was earmarked for the issue of budget distribution to all the ministries, departments and sectors. This is widely applauded by the public since it is the first time national budget distribution has been placed publicly on the table for discussion. Before, such matters were arranged internally by a group of high-ranking officials a process which was considered to be vague and partial. 
The NA session, a forum attended by all government high-ranking officials reported that GDP of the year 2003 is estimated to increase by 7.2 - 7.3 per cent in the climate of declining foreign investment meanwhile the country targets to reach an average of 7.5 per cent GDP growth per year in the period of 2000-2005. In order to fulfil this target, the country needs to gain an increase rate of 8.1 -8.2 per cent for the two years left which is going to be very tough to achieve.
However, some solid achievements have been made in 2003. In the context of declining foreign investment inflows, the government has made a number of feasible measures to effectively exploit domestic resources, especially the dynamic private sector. 
The private sector has contributed remarkably to agricultural production value, and industrial sector (25.5 per cent), commodities exports (48 per cent), creating employment for 90 per cent of the country's labour force.
In an effort to speed up economic growth in the next two years, the government has designed four main socio-economic tasks, of which two are especially crucial for socio-economic development for the year 2004. 
The first task is to prepare the country in all senses to facilitate economic integration, making Vietnam ready for WTO entry.
The second which is rather hard but vital for public confidence in the regime as well as political stability is to implement a real reform in the virtue and capacity of state cadres, especially strengthening the fight against corruption. Discrimination of state sector against the private sector is promised to be uprooted. In the economic sphere, the government has created three main tasks: improving the business environment, facilitating all economic sectors to improve competitiveness and business efficiency; expanding business scale and improving investment effectiveness; plus creating new boost in external economic relations. 
Policies will be made, it is said, to support technology innovation inside businesses to lower production costs, and improve product quality. 
During the meeting, the government officially called on people to "make fortunes" for themselves. This term has been denied for a long time as it was considered to be a "not good term" under the communist regime, but has overtones of China's Deng Xiau Ping in the 1980's. It will be confusing to some of the 'old guard,' but like China, Vietnam is now fast becoming a capitalist economy with a single party government. Thus Vietnamese nationalism succeeds outdated and discredited communist ideology.

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AVIATION

Vietnam - US milestone aviation agreement inked soon 

The long awaited aviation agreement between Vietnam and the US has been initialled, paving the way for a direct air link between the two countries.
The bilateral air services agreement was produced during the fifth round of negotiations between the two sides in Hanoi IN early October and will be submitted to respective governments for official signing in the near future, which will probably be by the end of this year.
The head of Vietnam's Civil Aviation Authority, Nguyen Tien Sam, said the US had agreed its planes would not pick up passengers when stopping in key hubs such as France, Japan, Taiwan and South Korea. This fifth freedom right was the most critical issue for Vietnam Airlines officials who argued it would hurt the company's competitiveness if awarded to US carriers. 
Sam said that the initialled agreement allowed US carriers to land at five airports in Vietnam and gave Vietnamese carriers similar right. During the first two years of the agreement, only two US carriers would be allowed to fly to Vietnam, a third will be allowed from the third year.
There is no direct flight between Vietnam and the US at the moment but the two countries have had a codeshare agreement for a few years. The agreement is said to be vital for the routes to be commercially viable for both countries' airlines. The aviation agreement will facilitate bilateral trade, investment and tourism. 

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BONDS

New government campaign to mobilise US$300 million from bond sales

The government has tabled a plan to raise nearly US$300 million from the sale of bonds by the end of the year, the first phase of an ambitious scheme to collect more than US$4 billion from bond sales by 2010. Payment, both on the principal and the interest is to be made in local and foreign currency, and funds raised by the sale are to support a number of construction and irrigation projects nationwide. 
Government officials, in an attempt to gain confidence and to create a push on the public's purchase of bonds promised that US$300 million would be spent in an efficient and economical manner. 
The Ministry of Finance (MoF) is to announce the interest rate for the bonds, estimated by most experts to be between 3 and 4.5 per cent. 
From now to 2010, the MoF will issue a number of bonds and calculate the interest rates based on specific circumstances. To keep rates consistent, rates will be kept unchanged for the length of any given issuance.
The State Bank issued Decision 1085 in September on adjustments and amendments to market policies to increase liquidity. This move is expected to make it easier for investors to cash in bonds before or after maturation. 

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FOREIGN ECONOMIC RELATIONS

Belarusian, Vietnamese officials discuss economic cooperation

A protocol on the results of the fourth joint session of the Belarusian-Vietnamese intergovernmental commission on trade and economic cooperation was signed in Minsk on 8th October, Belapan News Agency has reported. The session participants discussed ways of implementing agreements reached at the third session of the commission in Hanoi, facilitating the creation of assembly lines based on Belarusian technologies in Vietnam and the prospects for cooperation in new areas.
"We have fully agreed that the tasks set at the third session of the commission were fulfilled," said Vietnamese Deputy Minister of Trade, Le Danh Vinh, who is the commission's Vietnamese co-chairman. "We have discussed areas of continuing cooperation and what goods we can supply to each other. The Vietnamese side thinks that Belarus is strong in such branches as the chemical, car and defence industries. We can cooperate in setting up assembly lines for MAZ lorries and tractors and in purchasing BelAZ [heavy lorries] and defence industry products. Vietnam will export rubber, tea, coffee, rice and clothes to Belarus," Le Danh Vinh said.
Relations between Belarus and Vietnam are developing strongly and are characterized by the high level of political dialogue, close contacts at intergovernmental and inter-parliamentary levels and between representatives of business circles," the commission's Belarusian co-chairman and First Deputy Foreign Minister, Vasil Puhachow, said.
"Belarus is giving close attention to the development of comprehensive relations with Vietnam and is very interested in boosting cooperation in different areas," he added.
Trade and economic cooperation between the two countries is developing dynamically enough, Puhachow said. After the exchange of visits by the presidents of Belarus and Vietnam in 1997-1998, trade turnover between the two countries increased by more than 150 per cent to US$41m in 2001.
Projects for cooperation in the petrochemical sector should be highlighted among those discussed at the session. The Belnaftakhim concern [the Belarusian state petrochemicals concern] is dealing with over 50 per cent of mutual supplies (potash fertilizers from Belarus and rubber from Vietnam). Mechanical engineering ranks second in terms of importance: the creation of assembly lines of lorries and MAZ buses at Vietnamese companies.
Belarusian manufacturers have taken note of customers' complaints and have modernized MTZ [Minsk tractor works] tractors to be used in Vietnamese rice fields, Puhachow said.

Vietnamese will welcome Polish investments, upper house Speaker says

Vietnam is interested in Polish investments in Vietnamese mining, shipbuilding, power engineering, pharmaceutical and food processing industries, Senate [upper house of parliament] Speaker Longin Pastusiak said on 30th September at the conclusion of his visit to Vietnam.
Economic cooperation was the main subject of talks conducted by a Senate delegation in Hanoi. Pastusiak met with the Vietnamese president, the prime minister, parliament leader and leader of the Communist Party of Vietnam.
According to the Senate Speaker political contacts of the two countries are good, but both sides agreed that economic cooperation is unsatisfactory and mutual investments scarce. The value of trade exchange last year amounted to US$143m. "If we want to build a solid base of
Polish-Vietnamese relations we must also build a solid economic base," Pastusiak told journalists. A considerable number (about 4,500) of Vietnamese educated in Poland and speaking Polish may be helpful in establishing contacts with Polish businessmen.
According to Wlodzimierz Sobczak, deputy president of the Polish Chamber of Commerce (KIG), advanced technology which many Polish enterprises can offer may be competitive on the Vietnamese market. An agreement is to be signed soon on US$90m of Polish credit to support export of Polish investments in Vietnamese mining.
Vietnam is the last stage of a nine-day tour of the Senate delegation of the region, during which the delegates visited China and met with Poles living in Siberia in Irkutsk. The delegation was accompanied by about 40 businessmen.

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FOREIGN INVESTMENT

Vietnam and Singapore determine for closer cooperation 

Foreign investors in Vietnam and Singapore will be able to split their businesses between the countries according to the country's comparative advantages, under an integrated Vietnam-Singapore agreement designed to make them an attractive investment environment in the region. 
The first-ever fast track approval mechanism will be introduced for international project proposals from third countries to Vietnam and Singapore, which has as its basis a distribution of the value of activities according to the comparative advantages and strengths of the two countries. 
Projects will be examined and approved in the shortest time. Both countries will work closely to ensure that the total procedures for approval will only take several days or a maximum of one week.
The new mechanism was part of the Memorandum of Vietnam-Singapore Investment Cooperation Agreement signed recently between the Vietnam's Ministry of Planning and Investment and the Singapore's Economic Development Board.
The agreement also offers foreign investors free choice of investment location, be in an industrial zone or other part of each country so long as it is in line with land laws.
International investors from Japan, the US and Europe as well as business people from the two countries have praised the agreement, which is considered a break-through in regional economic and investment cooperation. 
If Vietnam and Singapore cooperate to combine their respective strengths, foreign investors like Japan will be attracted to take advantage of the benefits of each country by locating different activities in Vietnam and Singapore. 

US$1bn pledged by the US for Vietnam

A delegation of US companies has pledged to invest US$1billion in Vietnam by the end of this year. Delegation leaders met with Minister of Planning and Investment, Vo Hong Phuc, on his trip to New York in October to discuss projects in finance, banking, agriculture, consultancy and infrastructure development. 
Vietnam will consider these projects, many of which may be submitted to the prime minister for approval. Investor said they were confident the projects would go ahead if Vietnam continued its legal and administration reforms. 
American investors are very interested in large-scale infrastructure, telecom and manufacturing projects. What they require now is a stronger legal framework and more defined policies for the service sector, especially those relating to banking, property rights and insurance services. The US has been the eleventh largest investor in Vietnam so far this year, with 171 investment projects and US$1.13 billion in registered capital, of which US$634 million has been realised.

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