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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military aid to South Vietnam grew through the 1960s in an attempt to bolster the government, but US armed forces were withdrawn following a cease-fire agreement in 1973.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: 031 - (30/06/04)

Minister of Agriculture and Rural Development - Le Huy Ngo, one of the most important ministers of Vietnam officially resigned after a corruption scandal enveloped his ministry. The scandal is blamed for causing a loss of around 5 million USD from the state budget. He is said not to be directly involved in the case, but had failed to supervise his deputies and staffs. He has been well known as a clean and efficient minister of Vietnam. A vice deputy of the ministry was appointed on 26th of June by the Prime Minister to succeed Le Huy Ngo. 

Prime Minister, Phan Van Khai recently established an inter-ministerial group to probe the allegations of corruption in the state telecommunications provider, Vietnam Post and Telecommunication Corporation. The minister, Do Trung Ta, has been implicated in this scandal. These incidents follow a high-profile corruption case in 2003, which centred on the activities of a Ho Chi Minh City gangster, known as Nam Cam, and resulted in three senior officials receiving prison terms for accepting bribes and failing to perform their duties. Despite the progress in terms of demonstrating state eagerness to crack down on corrupt officials, the pace of bureaucratic and institutional reform is unlikely to quicken over the next few years. This ensures that efforts to bring to an end the epidemic nature of corruption remain protracted. 

The political scene remains broadly stable, with the leadership of the Communist Party and the government not expecting to experience big changes in 2004-2005. Since coming to office in April 2001, the Party Chief Nong Duc Manh, has championed a tough anti-corruption stance, primarily in an effort to shore up the public's confidence in the party. The extent to which corruption permeates through the state administration has been highlighted by a number of scandals during Manh's tenure. Although these scandals have damaged the party's public profile, they have provided the current leadership with opportunities to show publicly that it is determined to deal with any wrongdoers. 

In addition to the Communist Party's efforts to restore its legitimacy through an intense anti-corruption drive, the authorities will continue to seek to maintain political stability by suppressing anti-government forces that are perceived to be a threat to "national unity". The government recently called on its ministries and agencies to step up efforts to prevent the spread of "poisonous" information on the Internet. Along with these efforts, harsh punishments will continue to be handed down to so-called "cyber-dissidents." The government is determined to prevent any anti-government sentiment escalation. The latest incidents occurred in mid-April in Gia Lai and Dak Lak provinces in the Central Highlands. Although details about the case remain sketchy, the government blames a US-based exiled group, mainly the Montagnard Foundation led by Kok Ksor, for stirring anti-government sentiment in the region. Despite the government's claims that it is working to improve the welfare of the ethnic minorities and that it espouses religious freedoms, the security situation in the Central Highlands is expected to remain unstable partly because of the long-held distrust between the ethnic minority groups, mostly Christians and the majority Kinh people. 

International Relations
Vietnam's diplomatic and economic ties to both the US and China will deepen further in 2004-2005, but the government will avoid aligning itself too strongly with either side. There will be occasional setbacks in terms of diplomatic stand-offs and trade disputes, but these are unlikely to escalate to a level that threatens the overall trend towards warmer relations. However, the government's controversial decision recently to commence a tour to and renovate an airport on the disputed Spratly Islands in the East Sea (in Vietnamese way of calling) or South China Sea (in the Chinese way's) is worrisome as it has angered other nations that claim sovereignty over the islands, including China, the Philippines and Taiwan. Although the dispute could again result in military skirmishes (the navies of Vietnam and China clashed in 1988), the continuation of diplomatic tussles is more likely. Relations with the US will be subjected to both positive and 
negative developments in 2004-2005. Bilateral ties have been boosted by shows of military cooperation, but ideological differences and the likelihood of disputes over Vietnam's human rights record will ensure that diplomatic relations remain prickly.

Economic Policy 
The government's efforts to boost growth and reduce poverty have earned it the praise of foreign donors and investors. However, its performance in terms of pushing forward with economic reform pledges has been less impressive and there is little prospect of a marked improvement in 2004-2005. The government continues to advocate reforms of state owned enterprises, but progress will be hampered by recalcitrant managers and vested interests. Greater progress will be made, though, in leveling the playing field for the thriving private sector, with further streamlining of the private enterprise registration progress under the Enterprise Law. The government also appears determined to implement trade related reforms, and by 2005 it expects to be a member of the World Trade Organisation (WTO).

Fiscal Policy 
The government is likely to overshoot its budget deficit target of 5 per cent of GDP in 2004, owing to a combination of optimistic revenue-growth assumptions and ambitious state spending plans, in addition to recent unexpected costs associated with compensation payments to farmers affected by the bird flu outbreak earlier in 2004. On the expenditure side, state spending is rising rapidly to finance key reforms, higher salaries for state workers and much needed infrastructure developments. On the revenue side, tax revenue will be strained by the reduction in the corporate income tax rate on domestic firms (which was cut from 32 per cent to 28 per cent from January 1st 2004), in addition to the ongoing cuts in import tariffs in line with Vietnam's commitments as a participant in the Association of South East Asian Nations free trade area (AFTA). Amendments to the personal income tax regime are also planned for mid-2004, with an upward revision to the threshold and a removal of the top rate of income tax. However, assuming that the economy continues to grow rapidly and that progress is made in improving the efficiency of tax collection, the government's deficit is unlikely to get out of control. 

Despite intensifying inflationary pressures, in late May the State Bank of Vietnam (SBV), Le Duc Thuy, reiterated that there would be no adjustment to monetary policy over the next few months, with policy remaining fairly loose. Mr Thuy is intent on avoiding any upward movement in interest rates in order to avoid jeopardising the government's success in achieving economic expansion targets. However, this focus on loose monetary policy and economic growth raises some concerns. The SBV, for example, has yet to make efficient efforts to control the ongoing rapid expansion in domestic credit, some of which is of questionable quality. Therefore, later this year, and into 2005, the SBV will probably be compelled to tighten its monetary policy stance slightly, resulting in some upward movement in interest rates.
 

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WORLD TRADE ORGANISATION

Hanoi aims to enter WTO in 2005


The Vietnamese government said recently that it might be able to join the World Trade Organisation (WTO) 2005, after making what it termed a "breakthrough" offer at talks in Switzerland, the International Herald Tribune reported on June 18th.
Vietnamese officials and the working party on the nation's accession to the WTO held their first talks since December in Geneva recently. The Southeast Asian nation offered a bigger cut in average import tariffs and the elimination of agricultural export subsidies, according to the WTO's summary of the talks.
It depends on our partners, but we have quite encouraging information form Geneva," Deputy Prime Minister, Vu Khoan, said. "Our determination is to join the WTO by 2005."
The date is critical for Vietnam because the county will be subject to quotas on its garment shipments - its No. 2 export - until it joins the global trade group, while the quota system for WTO members will end next year.
Among the top 25 shippers of clothing to the United States, Vietnamese apparel exports rose at the fastest pace last year, making Vietnam the fifth biggest apparel source for America, after a tariff-cutting trade agreement in 2001 between the two countries.
Vietnamese garment exports to the United States fell 8% in the first four months of 2004 compared with a year earlier, after an American-Vietnamese accord last year set quotas on the shipments. "There is growing concern about the cost of nonmembership in the WTO," said Fred Burke, a partner in the Ho Chi Minh City office of law firm Baker & McKenzie.

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