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VIETNAM


  
   

 

In-depth Business Intelligence

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military aid to South Vietnam grew through the 1960s in an attempt to bolster the government, but US armed forces were withdrawn following a cease-fire agreement in 1973.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: 032 - (26/07/04)


Vietnam's economic growth is expected to hit 7.7-7.8 per cent in the second half of this year. The economy is projected to expand by 7.5 per cent over the entire year, given that GDP recorded around 7 per cent in the first six months of the year. 
Minister of Planning and Investment, Do Hong Phuc, said that Vietnam could achieve the growth target due to the spectacular development of the industrial and service sectors. 
Industrial and service sectors are expected to increase by 15.5 per cent and 8 per cent, respectively, in the second half of this year compared to the same period last year. The high industrial growth will be largely due to the contribution of foreign investment and the domestic sector. However, analysts expect there to be many factors that may have a negative impact on development, a record high level of consumer price index included. The slow pace of administrative reform and an expected import surplus of US$5 billion this year are also major problems.
Investment capital disbursed in the first six months of 2004 was estimated at US$7.4 billion, equal to 36 per cent of GDP. Meanwhile the figure for the whole year is projected to be US$15.96 billion. Around US$750 million of official development assistance (ODA) capital was disbursed in the first half of this year, equal to 38 per cent of the year's plan, which is considered to be moderate due to ODA project delays. 
Consumer price inflation has risen sharply in recent months, reaching around 6 per cent year-on-year in July. Inflationary pressures can be attributed mainly to higher prices for food, which accounts for one half of the basket of goods in the consumer price index, partly owing to the widespread outbreak of bird flu early in 2004. The food price is expected to continue to rise, pushing up the consumer price index. Higher wages to government workers, buoyant consumer demand, the rising level of general economic activity and the continued depreciation in the value of the dong will also continue to sustain upward pressure on consumer prices. Inflation is therefore forecast to rise to an annual average of 6.5 per cent this year, before easing slightly to 5.4 per cent in 2005. High inflation is weakening the purchase power of the dong, thus affecting living standards of local people as the income increase can not catch up with the speed of inflation. Higher costs of production inputs have negatively influenced local businesses.
Vietnam exporters continue to record strong revenue growth, although in 2004-2005 year-on-year expansion (on a customs basis) will slip from the impressive pace of 22 per cent recorded in 2003. Global crude oil prices are forecast to remain firm this year, thereby supporting overall export growth, but are predicted to contract by around 25 per cent year on year in 2005. The constraints on textile export growth resulting from a textile quota agreement with the US are also starting to bite. Offsetting some of those weaknesses is the bright outlook for the revenue from seafood and agricultural commodities export. Import demand is largely driven by greater demand for capital equipment and imported inputs used in the manufacture of goods for export, consequently, in 2004-2005, in line with the slowing pace of export growth, the expansion in the annual import bill is expected to continue to ease. However, this slowdown in import growth will not be sufficient to reverse the expansionary trend in the merchandise trade deficit, which will contribute to a widening of the overall current-account deficit to around 5.2 per cent of GDP by 2005, up from 1.7 per cent in 2002. The growth in the combined deficit of the services and income accounts, which will rise to about US$2.5 billion in 2005, will be more than offset by expanding remittances from overseas Vietnamese nationals. 

Word Trade Organisation (WTO) accession firmly targeted by end of 2005
Vietnam's WTO bilateral talks on market access with the European Union have reached the final stages, though a number of issues still remain "problematic" and "require a lot of work." The three-day sixth bilateral market access negotiation in Hanoi in mid July was reported to be very positive and intensive, with partners examining the whole range of issues concerning goods and services in minute detail. The two sides will hold the seventh round early August in Brussels and plan to complete the negotiations by the end of the year. The EU, the main player in the WTO said it would help Vietnam draw up tariff quotas on some commodities and help plan a transitional period of three years from the date of WTO accession to phase out its agricultural export subsidies. It also promised Vietnam technical assistance to implement the Agreement on the Application of Sanitary and Phytosanitary Measures. EU-Vietnam bilateral talks are keys to Vietnam joining the global trade organisation by the end of next year. Vietnam has been intensifying bilateral talks with WTO members and claims it is on track to finish these negotiations by the end of this year. Foreign negotiators said a lot of work remained in negotiating market access and other membership terms, obtaining further clarification about Vietnam's regulations and policies and putting in place the necessary laws and regulations. They also urged Vietnam to accelerate legislation saying it was imperative if the country wanted to attain WTO membership as scheduled, by the end of next year. Vietnam will hold the next round of multilateral and bilateral meetings in December when members will discuss a proper first draft working party report. 

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AUTOMOBILES

Toyota Viet Nam introduces new Camry 

Toyota Viet Nam introduced their new Camry 2004 aimed at high-income buyers recently, vietnamnews web site reported.
The Japan-invested company, which ranked top market position in the first six months with 4,000 unit sales, said it hopes to sell 100 units of the new sedan in a month.
There are two models of the new Camry, the 3.0V and 2.4G. The company said that 8,000 Camry units have been sold since it introduced the medium-sized sedan in Viet Nam in 1998.

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BANKING

VNBA admit foreign bank branches

Branches of foreign banks and joint-venture banks were admitted as members of the Viet Nam Bank Association (VNBA) on July 30, the 10th anniversary of the association's founding, vietnamnews web site reported.
VNBA Secretary General Nguyen, Trong Nghia, said the new members will be afforded all the rights and benefits given to official members except for the rights to vote and stand for election to the association's leadership.
Nghia said the new members will help to facilitate co-operation between domestic and foreign banks, prevent unhealthy competition and develop new banking services.
The new members include four joint ventures, 27 branches and 42 representative offices. Together, they account for 10 per cent of Viet Nam's capital market.
The VNBA serves as a bridge between State management agencies and its 38 official members, including five State-owned commercial banks, 32 joint-stock commercial banks and the Shipping Finance Company.

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FOREIGN LOANS

Foreign bank gives credit to coal sector 

The Nordic Investment Bank has provided a loan worth US$15 million to the Viet Nam Coal Corporation, the bank's fourth loan of its kind this year, vietnamnews web site reported.
The money, to be given to the country's largest coal producer, will be used to modernise technology and expand production in the period till 2010.
The bank's first three loans were granted to the Song Hinh Hydro Power Plant, the Bai Bang Paper Mill and the Tam Diep Cement Plant.
Nordic Investment Bank has committed a total of US$183 million in capital to Viet Nam since 1996.

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