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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military aid to South Vietnam grew through the 1960s in an attempt to bolster the government, but US armed forces were withdrawn following a cease-fire agreement in 1973.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: 026 - (01/02/04)


Domestic politics
The domestic political scene will continue to be dominated by the Communist Party in 2004-2005 although the party's control over the National Assembly will be tempered slightly by the growing assertiveness of assembly deputies. The party's central focus remains that of clamping down hard on official corruption, this is driven mainly by its concern that the public's confidence in the party is deteriorating. Other concerns will centre on the challenge of maintaining national unity in the face of sporadic outbreaks of rural instability among ethnic minority groups. Condemnation by Western governments of the alleged repression of religious freedoms in Vietnam will also command the leadership's attention.

International relations 
Relations with the US were boosted in November by highly symbolic diplomatic events--first, the meeting in the US between the minister of defense, Pham Van Tra and the US defense secretary, Donald Rumsfeld, and second, the docking of a US naval vessel in the port of Ho Chi Minh city for the first time since 1973. Despite these signs of closer military cooperation, US criticism of Vietnam's human rights record will ensure that relations betweeb the former foes will experience occasional setbacks. in recent months, the US and the EU have been particularly vocal about the harsh treatment of leading religious figures. The government has responded by strongly accusing the US and the EU of interfering in its domestic affairs. There will also be trade-related tensions between Vietnam and US despite the signing of a bilateral trade agreement in late 2001, but the long-term trend towards closer economic ties will not be seriously disrupted. Vietnam will endeavour to strengthen diplomatic and economic ties with China, partly to counterbalance similar developments with the US.

Policy trend 
The government's progress in implementing its Comprehensive Poverty Reduction and Growth Strategy was scrutinised in December 2003 by Vietnam's Consultative Group of international donors. Even though the government's positive reform rhetoric has not been reflected in actual changes on the ground, donors have been supportive of the government's reforming efforts in recent years. This support is unlikely to diminish in 2004-2005. One area where the government will continue to struggle to meet its targets is in the programme of state-owned enterprise (SOE) reform. However, this will be balanced by the progress that is being made in improving the operating environment for private enterprises. The Enterprise Law, which came into effect in early 2000 and has been credited with contributing to the rapid growth in the registration of private businesses, is likely to be amended to meet demands for further improvements to the business environment. Despite the improvements that have been made in easing regulations facing the private sector, limited access to finance and land continues to prevent the sector from fulfilling its potentials. The government determined to join the World Trade Organisation (WTO) by 2005. However, the government reform-minded leaders will face opposition to the implementation of trade-related reforms from protectionist lobbies and conservative members of the party. 

Monetary policy 
The State Bank of Vietnam (SBV) is becoming more adept at utilising indirect monetary instruments and this trend will continue in 2004-2005. Last year, SBV lowered its refinancing rate from 6.6 percent to 5 percent and eased compulsory reserve requirements in a fairly successful attempt to reduce the upward pressure on interest rate. However, this policy easing has done little to lessen concern about rapidly expanding domestic credit, particularly given the generally poor quality if new loans. International Monetary Fund (IMF) has warned that the banking system will be taking on too much risk if lending rises more than 20 percent for the whole year while Vietnam surpassed this number in 2003. 
In an effort to help reduce credit risks, the SBV has decided to make banking credit information more widely available from January 2004. 

External sector:
As Vietnam's economy becomes more open o international trade, particularly in line with Asian Free Trade Area (AFTA) commitments, the merchandise trade deficit will widen. This deficit will not greatly concern the authorities, however, as the rapidly expanding import bill is largely being driven by greater demand for capital equipment and imported inputs used in the manufacture of goods for exports. Last year, export revenue will jump by around 20 percent. The outlook for exports in 2004-2005 is less bright. A textile quota agreement with the US will halt the recent rapid growth in garment exports to the US and crude oil prices will contract by around 30 percent year-on-year in 2004. The service deficit will also widen in 2004-2005, partly owing to expansion in import-related services in line with the rapid growth in imports. However, the widening deficit in the services and income accounts will continue to be offset by rising current inward transfers, mainly consisting of remittances from overseas Vietnamese. The trend in the merchandise trade account will therefore dominate the overall current account and the current account deficit will widen to around 5.8 percent of GDP by 2005, from 1.7 percent in 2002. 

FDI prospects
Ministry of Planning and Investment (MPI) has set a $3.3 billion target for freshly committed foreign direct investment (FDI) capital this year to fulfill the country's five year plan due to end of next year. 
This figure would be an 8 percent year-on-year rise for newly registered FDI capital. MPI said it also anticipated foreign investors would disburse around $2.75 billion to $2.8 billion of committed capital, up 3.8 percent from last year. Vietnam expects to see larger sums of foreign capital invested in property, new urban and leisure areas, post and telecommunication services, port building, electricity and cement production. These remain the most attractive areas of interest for foreign investors in Vietnam.

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MINERALS & METALS

2004 to be a challenging year for steel manufacturing industry 

To promote the implementation process of investment projects, to stabilize steel prices and to prevent speculation are among key objectives set this year for steel manufacturing sector, according to the Vietnam Steel Corporation (VSC), bvom.com reported.
During the past three years, production capacity of steel rolls and steel billets made by VSC recorded annual increases of 18% and 21% respectively, revealed VSC's general director, Dau Van Hung. Thus, the total turnover enjoyed an annual rise of 15%. However, VSC has coped with many impediments, especially slow growth rate of basic targets. For example, steel roll output rose 21% in 2001, yet this reduced to 14.8% and 14% in 2002 and 2003 respectively. Also, steel billet productivity grew to 14.8%, 28.2% and 32% in 2001, 2002 and 2003 respectively. Nevertheless, it is expected to plummet to 10% this year. What is more, last year, profit gained by JVs with whom VSC joined hands was equal to 70% of that gained in 2002.
Distributors of VSC's products also bumped into difficulty as they have not yet set up long-term plans. They have no qualified professional experts and businessmen when the country is engaged in regional and international process of integration, added Hung.
From 2001 up to now, VSC initiated 140 projects capitalized VND2.730. But the investment realization process has been very slow, thus affecting VSC's production and trade plans.
To date, VSC completed only one project namely Thai Nguyen Iron Improvement - the first phase. The corporation has poured capital into Phu My Steel project. Three other projects are forecast to miss implementation speed as planned.
Meanwhile, budgetary finance and development - investment capital only meet 30% of VSC's demand.
2004 is estimated to be a challenging year for the steel industry as the world market continues to see volatility in steel prices while domestic steel producers have largely depended on steel billet imports. Moreover, domestic supply cannot satisfy demand. Thus, competition is about to be fiercer.
Therefore, boosting investment via various channels of mobilizing capital is among VSC's targets, according to Hung.
So as to facilitate steel enterprises, VSC petitioned the Government for releasing regulations on steel scrap imports as well as simplifying customs procedures of importing this product.

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TOURISM

Hanoi receives 850,000 foreign tourist arrivals 

In 2003, Hanoi tourism alone received 3.88 million visitors of whom 850,000 were foreigners, accounting for 38.6% of total foreign tourist arrivals to Vietnam, bvom.com reported.
The overall revenues of the local tourism service was posted at VND4,600 billion, a year-on-year increase of 2%. 
The number of foreigners coming to the city saw a sharp rise in the final quarter, when Hanoi hosted the Hanoi international tourism festival and the 22nd SEA Games. The capital's tourism service successfully organised the second meeting conference of the Council of Tourism Promotion of Asian cities. 
During the 22nd SEA Games and second Para Games, Hanoi's tourism welcomed more than 5,000 officials, referees and athletes from 10 other countries in the region. 
Hanoi was also rated as the 2nd tourism city in Asia and 13th city in the world.

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