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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military aid to South Vietnam grew through the 1960s in an attempt to bolster the government, but US armed forces were withdrawn following a cease-fire agreement in 1973.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: 029 - (27/04/04)

The first non-'party' political candidates
Vietnam held elections for members of the people's councils, the local organs of state power that operate at the commune, district and provincial level on 25th of April. More than 500,000 candidates are vying for positions for the 2004-2009 tenure. Of the total, around two fifths are not members of the communist party of Vietnam. Although, they still have to be vetted for suitability by the Vietnam Fatherland Front, un umbrella group of pro-government mass movements. A total of 6,900 candidates (25% of whom are not members of the party) will stand for election for 3,781 seats at the provincial level. At the district level, there are 40,940 candidates (29% of whom are not party members) for 23,515 seats and at the communal level there are 480,320 candidates (40.7% of whom are not party members) for 281,859 seats. This is the first time candidates must declare their property, including homes, land, business assets, financial assets and cash over VND50 million (USD3,200) in order to make it easier to monitor the performance, in terms of honesty, of public representatives. 
Despite allowing non-party candidates, in its actions and words, the country leadership has made it clear that it has no intention at this stage of allowing political pluralism. Leaders reaffirm the need for the party to play a dominant role and its aims were to "consolidate itself as pure and strong ruling party". Greater efforts are being made by the party to fight against corruption and overspending. 

Domestic Politics
The long-term challenges facing the government include maintaining national unity in the face of sporadic outbreaks of ethnic minority groups. On 10th of April, an outbreak of few thousand ethnic minority people took place in some Central Highland provinces. The government succeeded in getting it under control right away. This outbreak was said to be ignited by an overseas Vietnamese who has close links inside the country. They have been trying to replace the local government to create an independent state in Central Highlands, always a temptation to some mountain peoples and predictably doomed to failure in such a state as Vietnam.

International Relations
Vietnam's relations with key strategic and economic partners, particularly China and the US, will remain on a firm footing in 2004-2005, although there will be a degree of instability. The government is hoping that by becoming closer to both, the US and China, it will be able to limit the damage that would ensue in the event of a falling out with either side. Recent development in relations with China have been mixed. Delegations from Vietnam and China have met in recent months in an effort to resolve technical problems that have hampered the implementation of agreements covering fishing cooperation and border demarcation. Trade and investment links have also intensified. On the other hand, Vietnam's recently announced plan to commence tours to the Spratly islands reaffirming its claims for sovereignty of these islands has upset China, which also claims sovereignty. This may spark a dispute that could rapidly escalate into serious clashes. Relations with the US have also been subjected to both positive and negative developments in recent months. The US's criticism of Vietnam's human rights record largely to do with religious freedoms in addition to trade-related tensions, ensure that overall bilateral relations remain prickly.
Vietnam has been adroit at maintaining links with North Korea while strengthening its ties with South Korea. In March, Vietnam and North Korea signed an agreement that allows transactions between the two countries to be settled in a 3rd currency, the absence of such an arrangement helps to explain the minimal amount of trade between the two countries. North Korea has sent several delegations to Vietnam in recent months to study the country's transition from planned to market economy. It appears to be applying some of the lessons to its own economy. Meanwhile, Vietnamese military delegations spent four day in South Korea discussing "measures to strengthen friendly ties between the two armies". South Korean troops had fought alongside US troops during the war in the 1960s-1970s. South Korea later began to provide foreign aid to Vietnam and it is the 4th largest investor in the country. Vietnam has continued to strengthen its relations with its fellow members of the Association of South East Asian Nations (ASEAN). It has now agreed to waive visas for visitors from Thailand, Malaysia, the Philippines, Indonesia and Singapore from 1st of July 2004. Visitors from Laos will also be permitted to enter without having to apply for a visa. Vietnam has also signed a memorandum of understanding, designed to strengthen the relations between army of Vietnam and that of Laos. Ties with Thailand have also improved recently. 

Economy & Policy Outlook 
The government has yet to convince foreign donors and investors that it is fully committed to its reform pledges. Although progress has been made towards reforming key areas of the economy, greater efforts are needed to speed up reforms of the financial system and state owned enterprises (SOEs). The recent inauguration of the debt and asset trading company, which will trade in non-recoverable and bad debts of SOEs, is an important step towards faster equitisation of SOEs. After a poor performance in 2003, when it failed to meet its SOEs reform targets, the government will be under pressure to meet its latest target of equitisation (partially privatising) 713 firms in 2004-2005. However, the government is likely to continue to struggle to meet such targets owing to the intrusive lobbying by powerful political and business interests, in addition to resistance from SOE managers. 
Greater progress must be made in levelling the playing field for the private sector. The government also appears determined to implement trade-related reforms, and by 2005 it expected to be a member of World Trade Organisation (WTO). The progress the government makes in trying to achieve this target will provide a useful indicator of the degree to which other economic liberalisation measures have been effectively implemented. 
The economy is set to continue to perform well in 2004-2005, with real GDP expanding by an annual rate of around 7 percent. In line with buoyant consumer confidence, private sector consumption will remain strong. Domestic business and foreign investor confidence is also proving to be resilient and will contribute to robust growth in fixed investment. Vietnamese exporters will benefit from a pick-up in economic activity with its main trading partners, the US and Japan and will continue to record strong growth. However, rampant import growth, mainly of imported capital and inputs, will offset the impact of expanding exports on overall GDP data. In terms of sectoral trends, there is little risk to continued industrial growth of around 10 percent annually in 2004-2005. 
The government's efforts to promote agriculture and fisheries products will help to boost domestic agriculture in the next few years although the implementation of US anti-dumping measures against Vietnam's shrimps looms large. The outbreak of bird flu has devastated the poultry industry and curtailed its expansion. However, with poultry farms accounting for only 3 percent of all farms nationwide and losses officially estimated to have amounted to VND3 trillion (USD190 million), equivalent to less than 0.5 percent of GDP, overall growth in agriculture and fisheries will not be severely affected. In 2004-2005, continued growth in demand for financial and telecom services and rebound in the tourism sector suggest that services as a whole will continue to record annual growth of 6 percent. 

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