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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military aid to South Vietnam grew through the 1960s in an attempt to bolster the government, but US armed forces were withdrawn following a cease-fire agreement in 1973.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: 030 - (01/06/04)

First Five Month Review
Vietnam's ambitious economic growth targets for 2004 will not be met without all-out government's efforts. Vietnam needs to obtain 7.8-8.3 percent of economic growth in the remaining months of the year to achieve the year's targets. Economic achievements in the first five months of the year are below target, therefore the tasks for the remainder of the year are quite heavy. Vietnam's growth rate in the first quarter was 7 percent, less than the 7.5-8 percent mark set for this year. In the context of the avian flu outbreak and global economic uncertainty, even this 7 percent was considered remarkable. However, certain targets were not met such as traffic accidents, HIV transmission, market prices and food poisoning. If the country fails to reach higher growth rate for the rest of the year, it can not ensure the quality and sustainability of the economic growth and achieve the full year's target. The government will soon scrap the 30 percent cap on foreign ownership for most privatised state owned enterprises as part of requirements to join the World Trade Organisation (WTO). 
The government of Vietnam set a target to resolve some economic problems this year, including bad debts, low state budget revenue and weak international commodity prices which are blamed to cause economic instability. 
Ho Chi Minh city formerly known as Saigon receives special attention from Prime Minister, Phan Van Khai, in May due to its disappointing growth rate in the early months of the year. The PM pointed out that the economic sluggishness was caused by red tape, bureaucracy and cumbersome administration. This biggest economic hub of Vietnam was blamed as having the wrong economic structure which did not succeed in producing competitive high quality products. 
The fifth session of the National Assembly's (NA) 11th legislature which took place during May was expected to adopt seven draft laws that were debated earlier, and debated another six draft laws to be approved in the next assembly session. 
The NA's deputies put high inflation in the first five months of the year high on the agenda, since the trend has been to negatively influence the people's life quality due the increasingly weak dong purchasing power. 
Deputies also showed their worries about declining foreign investment flow. 
Other Asian countries have shown improvements in attracting foreign direct investment (FDI) since the dark day of the 1997 crisis. Not so Vietnam, many investors here say who blame investment policy inertia for the problem. 
The importance of this is that Vietnam has benefited in the past and will continue to benefit from opening up its economy to foreign investment. FDI provides the country with access to an important source of capital, new technology and knowledge, training and development of the work force, and best practices in business development and management. 
FDI allows multinational companies to have ownership of their business and investment, so they can and will apply the best management practices and maximise their investment capacity. In addition, foreign owners who set up plants in Vietnam know how to react quickly to changing economic circumstances and this improves the international competitiveness of local firms. Firms that work for overseas markets have to subject themselves to the discipline of the world market, meaning that productivity of the work force and quality of output have to agree with international norms. 
Vietnam was an attractive FDI destination a decade ago, but the situation has changed. Vietnam began to attract reasonable FDI in the early 1990s and had a particularly good year in 1997 which recorded 40% increase of FDI . The country's FDI began its downward slide in 1998 and this continued through to 2002. This is alarming as it show that the slide was not a one-off event and that the slide was most probably due to entrenched factors such as uncertainties, lack of transparency and reliability in the legal and fiscal operating frameworks, ineffective FDI promotion strategies resulting in high business costs and falling investor confidence.
Other regional countries have had a more roller-coaster ride, but many of them are showing or had shown signs of improvement, indicating that measures had been put into place to respond to FDI crisis. 
Vietnam's flat rate of growth is an indication of inertia, a sustained lack of workable remedies and a lack of responsiveness by investors to Vietnam's recent measures to allure FDI. 
Competition for the investment dollar has heated up and more developed countries in the region such as Singapore and Malaysia, responded quickly by introducing tax concessions and cost-of-labour reductions. The key to sustained high growth is a continual upgrading of economic institutions and policies: legal reform, regulatory improvements, deepening of the financial system, regulations that allow efficient infrastructure investment, thus reducing transaction costs. There are suggestions that Vietnam has opted not to follow such an overhaul of the fundamentals of tax regulations, administration and banking reforms. 
The country's strong hope for foreign investment flow comes from the US. However, tough challenges for trade and investment relations between the two countries have reduced the interest of both sides. 
Vietnamese exports to US have increased more than four-fold over just two years, growing from $1.05 billion in 2001 to $4.55 billion in 2003. The Bilateral Trade Agreement has helped US enterprises take advantage of benefits of the cheap labour force in Vietnam to conduct contracts for outsourcing products. The important thing the agreement has brought is that Vietnam has succeeded in attracting foreign direct investment from the US to make products in Vietnam, then export to the US whereas other countries have not done that.
However, the boom of the last two years is unlikely to continue. In the last six months of 2003, the rapid increase in exports to the US reversed abruptly, falling from a peak monthly level of $514 million in July 2003 to $304 million in December 2003.
All of this decline can be attributed to a precipitous reduction in clothing exports, which occurred as a result of the implementation of the US-Vietnam textile agreement that placed import quotas on most Vietnamese clothing exports to the US. 

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ENERGY

Tekhnopromexport wants to build 3 power plants in vietnam

The Tekhnopromexport federal enterprise will participate in tenders for the construction of three power plants in Vietnam, Tekhnopromexport CEO, Sergei Molozhavy, told the Vietnamese Minister of Industry, Hoang Trung Hai, RIA Novosti reported.
"We attentively follow the development of Vietnam's energy and plan to participate in the tenders for the building of Bao Loc and Bac Bing hydroelectric power stations," Molozhavy said.
According to him, Tekhnopromexport will participate in the second tender for the construction of the Cam Pha thermoelectric power plant in Vietnam.
In addition, the company is interested in the building of the Son La hydroelectric power plant with a capacity of 3,600 megawatts, Sergei Molozhavy noted.
The Silovye Mashiny (Power Machines) concern can be also involved in this project, he added.
Tekhnopromexport is building energy facilities in 50 European, Asian, African and Latin American countries, including hydraulic, thermoelectric, and diesel power stations, power lines and substations. Over 50 years Tekhnopromexport built 9 hydroelectric and 6 thermoelectric power plants in Vietnam.

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