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Issue No. 11
August 1998

A Periodic Report to Our Clients

Current Dispatches

US Congress Again Supports Trade Normalization, but not without some open conflict.* 

The US House House Of Representatives, following an emotional debate, supported trade normalization between the USA  and Vietnam.  Some members caused problems when the law blocking free emigration was used to deny trade support.

The 1070s era Jackson Vanik Amendment to the US Foreign Trade Laws, used initially to block free trade with the former Soviet Union when it blocked free emigration of people of the Jewish faith, has been used to block free trade with other Communist nations who block free emigration of their citizens, as well.

Earlier this year, President Clinton waived the Amendments requirements  He acknowledged improvements have been made in Vietnam while there is still not full and free emigration.  However, as the waiver must be reviewed annually by both houses (it passed the Senate earlier this summer), this late summer debate afforded  members of Congress so inclined to speak-up in opposition during sometimes emotional debate.

Vietnam does not fully recognize free emigration say's a congresswoman from southern California, a district that has more than 300,000 overseas Vietnamese.  She was joined by other representatives, primarily those representing other overseas Vietnamese living in America.  Some former veterans now serving in Congress joined the chorus in opposition, stating that parents, siblings and other relatives are still blocked from freely emigrating to the USA.

Overseas Vietnamese living in America have been the strongest opponents to full normalization of relations with Vietnam.   However, so have some US veterans of that war.   Most outspoken against normalization in the House of Representatives were some who were former prisoners of war.   They stated their opposition to the Communist government based upon the deception, lies and torture they suffered while captured and awaiting release.

Vietnam likes to make the point that theirs is a "new wine in an old bottle;" that the world should not judge modern Vietnam, or the pain caused by the war on both sides, by the events of the now long distant past.  More than half the population of Vietnam is under 25 years of age and have no personal memory of that war.

However, as the decade, century and millennium draw to a close, many voices inside and outside of Vietnam are not as patient as they were in the early 1990s.  They do not want to abide with talk,  outdated slogans, and symbols of the past.  They are insisting that Vietnam move forward with more rapid and open economic and political change.

It is important to note that this is a matter of open discussion in Vietnam, and not a hidden agenda.

Additionally, many Americans, particularly American veterans including those wounded and former prisoners of war, admitted they and others still have substantial "emotional baggage" they carry.  However, as some of those veterans now serving in the Congress have said in support of the waiver, it is time to move on and leave that baggage behind.

American companies wanting to trade with Vietnam can now look to the American government for support in the areas of OPIC insurance and loans, TDA grants for feasibility studies, and US ExIm Bank for low-interest loan guarantees and other financing.

Due to the current economic regional turmoil in neighboring lands (that has not yet had a similar impact on Vietnam's economy), Vietnam has an opportunity to seize the initiative the US Congress shows willing to make, even in the face of continuing strong opposition, to gain full normalization. 

General Amnesty?  Perhaps in an effort to have a positive effect on those in Congress still opposed to normal relations with Vietnam, General Secretary Le Kha Phieu announced in late July an "amnesty for 8,000 prisoners on the occasion of Vietnam's National Day (September 2), another in 1999 as a prelude to a grand amnesty in 2000."  There was absolutely no explanation beyond that  announcement.  Lesser amnesties have been granted in years past, but never before has there even been an indication of a "grand amnesty."

Vietnam at this time has a unique opportunity to present itself as an economically strong trading partner with America, and gain even greater support for full normalization.   At a time when its traditional partners are still in their long fall, or just beginning to make a recovery, Vietnam remains economically strong with a 1998 GDP projected at from 6.5% to almost 7 per cent.

By quickly agreeing to the bilateral trade agreement now, after more than one year spent in long and not always fruitful negotiations, the agreement will have a far better chance of passing approval in Congress than it might should the economic turmoil end and the voices in opposition should gain force.

Major Change In Land Use Laws.  To encourage foreign investment, Vietnam has amended the 1993 law to allow foreign residents to own, mortgage and sell residential apartments and houses.  We have not yet reviewed the full text of the law, nor have we any direct experience in how the law is now being applied. Please return to Vietnam Vignettes for updates.

Current Economic Indicators: 

• Inflation is expected to be at 8% to 9% for the year.  To keep inflation to that level, it may be necessary to keep inflation down to 3% for the remaining 4 months of the year.
• Gross Domestic Product - GDP for 1998 will be from 6% to 7% positive.  More likely closer to 6 percent, not to be lost sight of is that Vietnam remains one of the few nations of Asia showing positive economic growth, and in fact is second only to China. Singapore and Taiwan are the other two nations posting positive economic growth in Asia for 1998.
• Industrial Growth Rate - for 1998 are now set at 12% positive, down from 13.5% to 14%. However, it is also important to note this is a positive position showing a slowdown in growth at a time when other nations are showing a recession or negative growth.
• Agricultural Growth - down to 3 to 3.5%, down from 4.6%
• Export Growth - substantial loss to 10% growth, down from budgeted 26% growth.

Infrastructure Projects Halted.  Serious controls have been instituted to protect Vietnam's vaulted strength in the face of regional economic turmoil.  No doubt benefiting from its in-convertible currency and un-developed stock market, Vietnam's economic strength is being challenged from many sources.

Important but not mandatory projects will be or have been halted.  In doing so, Vietnam must be careful not to mortgage its future growth and development for the sake of reducing expenditures.  Most noticeably gone are the North-South Highway and the Trans Asia Highway.  What this means to the development of the Dung Quat Refinery is yet to be disclosed.