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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)

Books on 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military aid to South Vietnam grew through the 1960s in an attempt to bolster the government, but US armed forces were withdrawn following a cease-fire agreement in 1973.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 recent political events to happen in Vietnam in 2002 was the election held in May 2002 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.
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 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:
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. 
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.  

Politics:
The political scene in Vietnam is expected to remain stable in the period 2004-2005 with little change in the leadership of the Communist party and the government, of the current ruling triumvirate, only the Prime Minister, Pha Van Khai is affected by speculation over personnel change in the near future. The party chief Nong Duc Manh and the president Tran Duc Luong are likely to remain firmly in place. Mr. Khai has served since 1997 and has avoided any serious criticism. However, as he is 70 year-old and nearing retirement, he could step down in a possible mid-term reshuffle (between party congresses) in early 2004. Mr. Khai could still see out his full term however, partly because he appears to be keen to stay on, but more importantly because there is no obvious successor. One potential replacement is the first deputy prime minister with responsibility for economic and internal affairs, Nguyen Tan Dung. However, his recent performance has been regarded as disappointing. Another possible successor is Truong Tan Sang who heads the party's economic commission and headed the Ho Chi Minh city people's committee from 1996 to 1999. However, he may not yet be close enough to the centre of power and could instead be made a deputy prime minister and groomed to succeed to the premiership at a later date. 
Despite the likely secrecy that will surround any leadership changes, such moves will be undertaken with a minimum of fuss and fanfare and will herald little significant change in policy direction. 
There is little risk that Mr. Manh will not serve his full term in office. His determination to clamp down hard on official corruption is being fairly well received by the public, although there is some cynicism as to whether the most serious high-ranking offenders will be dealt with. However, several prominent government figures received prison sentences earlier this year for their part in the widely publicised scandal surrounding a Ho Chi Minh city gangster.
Relatively senior officials have thus been put on notice that contrary to what they might once have thought, they are not beyond the reach of law. But the age-old underlying cause of official corruption, a bureaucratic administration in which salaries are low and opportunities for bribery are widespread- also needs to be addressed. 
The process of dealing with corruption still remains high on the official agenda. The justice system has not been running smoothly, owing to corruption and a shortage of lawyers. A "cyber dissident" has had his sentence reduced, but the government harsh crackdown on dissidents continues. 
The extent of corruption in Vietnam is reflected in its poor performance in regional ranking. The Hong Kong based Political and Economic Risk Consultancy has been polling business people since 1995 on their perceptions of corruption. The most recent regional survey, carried out this year, ranks Vietnam as the third most corrupt country with a score of 8.83, the most corrupt countries were considered to be Indonesia (9.33) and India (9.30), China was not far behind Vietnam with a score of 8.33. 
The government has sent out firm messages on religious freedom. The US and the EU have been critical of Vietnam's recent human rights record. However, the country strongly rejected that accusation. The government has moved to prevent future demonstrations over land expropriation.

Economic policy:
The slow pace of reform remains a major risk to high economic growth. The private sector has continued to boom, but its development has been hampered. The pace of privatization of state owned enterprises has been slow.
The government has tried to create a more investor-friendly environment, primarily in response to demands from foreign investors. The US and the EU have been supportive of Vietnam's bid to join the World Trade Organisation but have called for greater protection of intellectual property rights. Tariff levels have fallen in accordance with commitments to the ASEAN (Association of South East Asia Nations) free trade area (AFTA).
Real GDP has grown by close to 7 percent so far this year. It is unlikely that Vietnam will be able to push its economic growth rate above 8 percent as planned in the next two years if the government does not speed up its economic reforms. The Prime Minister Phan Van Khai has acknowledged that there are problems that need to be surmounted. Although GDP growth is high, it is of poor quality because of the unduly high investment rate that is needed to achieve such rates. The trade deficit has widened rapidly, budget revenue is unstable and the administrative system is bulky and obstructive.
Industrial output, especially in the private sector has been driving the economy. Consumer price inflation has fallen below 3 percent and the dong has depreciated slowly against the US dollar. Rice exports have been robust despite problems in Iraq, a major export market. Sales of locally made cars have boomed in recent months ahead of tax increases. The US textile quota regime has constrained domestic production. The tourism sector has been picking up. 

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Update No: 028 - (01/04/04)

The ministry of Planning and Investment has urged foreign invested enterprise (FIEs) wishing to become shareholding companies to submit relevant documents for consideration. This is the first time the local government actively takes initiative to facilitate FIEs to be able to sell shares to local companies and individuals. This move will stir up the under-developed stock market of Vietnam in a not-far distant future. 
The ministry is considering the eligibility of 21 FIEs for conversion into shareholding companies, including 12 operators in the manufacturing sector. Seven applications come from agricultural and food processing industries, the remainder is in the service sector. 
The FIEs include seven wholly foreign owned companies, favourites in the FIE equitisation process due to the procedural simplicity of their transformation. The 14 other contenders are all joint ventures, with three of them having Vietnamese partners contributing capital to businesses in the form of land-use rights. 
Capital contributed as land-use rights is viewed as a major procedural obstacle for those wishing to become shareholding companies. Joint ventures in which parties lease land from the State to contribute as land-use rights will have to complete procedures for certifying their capital by calculating the value of the land-use rights. In this case, the book value of the land-use rights can be significantly different from their actual value to the enterprise, and this can distort the valuation and share price. Interested FIEs may also face difficulties relating to legal provisions on the non-refundable transfer of assets to the Vietnamese party on the termination of the projects. The law says that FIEs will not be eligible for official consideration for transformation if foreign partners or partners have pledged to transfer their assets to the State and their Vietnamese partners on a non-refundable basis. Some joint ventures have therefore had to arrange negotiations between their Vietnamese and foreign partners to amend the asset transfer stipulation in their investment license. However, this procedure requires extra time. 
In another attempt to improve the existing low competitiveness of the local economy, the government is making many efforts to restructure state owned enterprises (SOEs). However, there are some legal stipulations, which do not support this restructuring process. Considered as a weakness of the country, legal systems have not kept in line with the reforming mentality of the local officials.
The country has not put a tag on invisible corporate values such as business status, prestige and trademark. The regulation that only 30 percent of the total stake at the time of equitisation can be sold to foreign buyers after retaining shares for the State and employees will keep away those investors with capital and management expertise. Enforcers of the policy lack expertise in equitisation via financial intermediaries, which ensures transparency and corporate value. 
Large corporations are also the main targets for SOEs restructure this year. They could be transformed into economic groups and holding companies. Corporations selected will be in the fields of electricity, gas, petroleum, telecoms and cement. Vietnam has 97 corporations, which have 1,476 subsidiaries, chartered capital of $8.2 billion and working capital of $16 billion. They are spread through crucial sectors like electricity, coal, gas and petroleum, steel, chemistry, paper, garments and textiles, cement, tobacco, aviation, shipping, railway, ship building, coffee and telecommunications. 
In the first quarter of 2004, a high inflation rate has been hitting the economy and the life of the local people as their dong purchasing power is much lower. 
The latest figures from General Department of Statistics showed that the consumer price index (CPI) grew by 1.1 percent in January and 3 percent in February, driving the country's inflation rate in the first two months to as high as 4 percent. Food and foodstuffs had the highest growth rate at 8.5 percent. The inflation rate for the same period last year was 1.9 percent and the target rate set by the government for the whole of this year was 5 percent. The core reason for this is the weakness of the domestic market and the weak competitiveness of local enterprises in particular. The local market depends too largely on the international market. Raw materials of many key sectors are imported such as steel, plastic, petrol. The government is issuing some fast-track solutions for the increase by reducing import tariffs for some products. 
However, experts predict that the CPI will continue to increase in the coming months. 

'Hot places'
Politically, in the first quarter of this year, the Communist Party had set up a firm determination to fight against corruption, red tape, wastage at state agencies which have been bottlenecks in the reform process. Failure to cope with these issues especially in construction, property and state budget spending have caused worry and discontent among the public, Politburo member Phan Dien admitted.
The campaign to cleanse and strengthen the party proves to face many difficulties. 
The Party's attentiveness to public concerns has helped reduce "hot places" across the country, Dien said referring to people's discontent.
The Party has applied a solution of party posts rotation to sharpen management skills and the political orientations of party members. 
Late March 2004, two deputy ministers of agriculture and rural development had been dismissed from their posts and convicted of abetting and benefiting from the embezzlement of millions of dollars of government money.

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AUTOMOBILES

"Made in Vietnam" autos available by 2010? 

The Vietnam Engine and Agricultural Machinery Corporation (VEAM) has had the Government's nod to manufacture, assemble light trucks and commonly-used automobiles. This is the third state-owned corporation after the two state-owned corporations namely VINA MOTOR and Vietnam Coal Corporation to be eligible to produce autos, VietnamNet reported recently.
Under the roadmap, autos made by VEAM must reach localization rate of 40% by 2005 and 60% by 2010. In a bid to achieve this target, VEAM will boost investments into assembling and auto frame making plants. VEAM will manufacture engines and important parts such as gear-boxes.
VEAM, approved by the Ministry of Science and Technology, signed the technology transfer contract with Daewoo (Korea). It inked the similar contract with Belarus' Novgorod machine-building plant or Novgorodsky Mashinostroitelniy Zavod (NMZ) and MWM, an auto joint venture between Germany and Brazil.
Locally assembled autos have used up to 20% of domestic spare parts, according to VEAM's officials. To VEAM, the objective of hitting localization rate of 60% by 2010 is really feasible. 

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BONDS

Finance Ministry issues additional bonds for major projects 

The Finance Ministry issued on March 23rd a decision allowing the second issuance of government bonds in 2004 for funding the country's major transport and irrigation projects.
There will be 8,200 billion VND worth of bonds issued in Vietnam dong and 50 million USD in US dollars.
Vietnam dong bonds have denominations ranging from 100,000 to 100 million dong while US dollar bonds are issued in 500, 1,000, 5,000 and 10,000 USD denominations.
Vietnam dong bonds will be issued at State Treasury branches nationwide while US dollar bonds will only sell at State Treasury branches in Ha Noi, HCM City, Hai Phong, Quang Ninh, Da Nang and Ba Ria-Vung Tau provinces.
Bonds designed for public sale have a five-year term and will be issued from April 15 until June 15, 2004. 
Bonds issued in the bidding or underwriting forms have two types: 5-year term and 10-year term and will be issued from April 15 through December 15, 2004.
Principal will be paid when the bond expires. Interest is paid on an annual basis only when the bond becomes exactly one year old, Bvom.com reported.

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FOOD & DRINK

Vietnam ranks second among the world's coffee exporting countries 

In the 2002-2003 crop, Vietnam exported over 691,000 tonnes of coffee to 59 countries and territories, earning US$429 million with average price of US$620 per tonne, becoming the world's second largest coffee exporters, VOV/Nhandan web site reported.
The figures represented a rise of 62,8% in value and 65.08% in unit price over last year, reports the Vietnam Coffee and Cocoa Association (Vicoca).
As coffee prices slightly increased recently, Vicoca forecast that this year's output might reach 720,000 tonnes.
However, the production, processing activities in the coffee sector now face some problems including excessive increase of growing area, poor processing equipment and low quality of coffee for export.
In response to these, the Ministry of Agriculture and Rural Development (MARD) has recently put forward solutions to sustainability develop the coffee sector such as stabilising cultivation acreage, paying special attention to bean breeds, harvest, processing and building trademarks. 
The coffee sector will maintain Robusta coffee acreage yielding more than two tonnes per ha and grow other plants with higher value on low-quality coffee plantations. Growing high-quality Arabica coffee plants on concentrated zones which are near processing areas.
The ministry will replace 90,000 ha of coffee in the central highlands and another 20,000 ha in southeastern and southern central regions with cashew nuts, rubber, pepper, cacao and industrial and food crops. The central highlands' Arabica coffee acreage will be broadened from 15,000 ha as at present to 35,000 ha by 2010 in areas that are more than 800m above sea level such as Da Lat, Sa Thay and Konprong. 
Vietnam has more than 450,000 ha of Robusta coffee and around 25,000 ha of Arabica coffee. 
The coffee industry last year saw positive changes in processing. Many enterprises expanded their workshops with advanced equipment, ensuring high-quality products.
However, there is still a weakness in building trademarks and certificates of origin for coffee products. According to a MARD report, of 56 businesses producing coffee products, only five registered their trademarks.
Central highlands Dac Lac province, Vietnam's largest coffee growing area, had by March 2002 more than 254,000 ha of coffee, including 174,384 ha under commercial coffee. The province harvested 292,000 tonnes of coffee for export, accounting for 42.3 percent of the industry's output, and earned an export turnover of USD195 million, making up 45.54 percent of the country's coffee export revenues. 
Coffee is one of Vietnam's 10 main cash earners. Vietnam's coffee can now be seen in many countries and territories, mainly the European Union and the United States. 
Last year, Viet Nam exported about 352,000 tonnes of coffee to the EU and 109,000 tonnes to the US, accounting for 47% and 14.6 percent of the country's total export turnover. 

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MINERALS & METALS

Steel consumption rate drops sharply 

The Vietnam Steel Association said consumption of construction steel dropped sharply in March, to only about 60% of the beginning of the month.
The price of deformed and rounded steel rod is quoted at between VND 9.1 million and VND 9.3 million per tonne in the northern part of the country while the price for similar products in the southern part of the country is between VND 8.4 million and VND 8.5 million per tonne. This is a drop of VND 300,000 per tonne compared to the price prior to import tax relief. Many businesses have signed contracts to import steel billets at the price of between US $450-US $460 per tonne. This price will make the price of finished steel higher than it is selling now and will increase the price of steel in the future, Bvom.com reported.

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