Vietnam and United States announced on 25 July 1999 an in principle bilateral trade agreement that is expected to pave the way for normal economic exchange between two countries.

Negotiators for both Vietnam and the US later confirmed that a Bilateral Trade Agreement could be signed by the end of the year.

The agreement was announced in a statement issued by Vietnam's chief negotiator and assist to the Trade Minister, Nguyen Dinh Luong, and his US counterpart, Joseph Damond.

It says: "Today negotiators from the US and Vietnam have arrived at an agreement in principle on the terms of a Bilateral Trade Agreement."

Three years, eight rounds.   The agreement ends three years, eight rounds and a supplemental round of intensive trade talks.

US Deputy Trade Representative, Richard Fisher, who had two-and-a-half days negotiating the in-principle agreement in Hanoi, praised it as a significant result.

Once signed, the trade accord would represent a turning point for both nations. "This agreement would, of course, represent a historical event, representing the final chapter in the transformation of our relationship from adversary to trading partners," he said.

The in-principle bilateral trade agreement deals with trade in goods and services, protection of intellectual property and investment relations between two countries.

Fisher said that Vietnam had also agreed to a series of measures to ensure the transparency of regulations and rules affecting trade.

Technical details.   Both Vietnam and the US would work to analyze the technical details of the agreement in order to submit a formal document for their government’s approval.

The trade agreement, if approved by the US Congress and Vietnam’s National Assembly, would open a new trade status between two countries under the normal trade relation which is officially called the Normal Trade Relations (NTR).

It would also take Vietnam a step closer to admission to the WTO.

In order for the agreement to become law after the negotiations are concluded, 60 legislative days would be needed for Congress to deal with the agreement. If approved, it would then be sent to the President for signing.

Two-way trade between Viet Nam and the US has heavily increased since the US lifted its economic embargo of Viet Nam in 1994. It rose from US$225 million in 1994 to about $1 billion last year.

Estimates for further increase in trade with Vietnam are that exports to America could generate from $100 million to $800 million in additional hard currency in the first year alone.

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*KOREA'S LOSS COULD BE VIETNAM'S GAIN. In its  rebound from the financial crisis, Korean companies no longer want to be rescued by foreign investors.  The reverse to the government freeze-out of foreign investors by Korea in the late 1960s and early 1970s, potential investors are now growing concerned that Korean business people believe they no longer want foreigners in positions of control, threatening the government's pledge to greater economic openness.

The expected flood of investment by bargain-hunting foreign investors has failed to materialize.  FDI totaling $4.4 billion in 1999 is about half of last year's total of $8.82 billion, far behind the expected total of $15 billion for this year.

In late June, Korea Gas Corp. said it had ended talks with BG PLC to sell a stake to that British company.  Other examples are listed in the article. 

Government officials and analysts say the rising  stock market, along with the gain in value of the won, area contributing to the lag in investment.  Investors show an equal disdain in Korea's depressed real estate market.  Foreign investors are likely to  come in, look   and leave, if they visit Korea at all.  36,183 IHT 9, July3-4, 1999.

While investment hunters are not finding any bargains in Vietnam, the growth potential for their investments is far greater here then the recovering regional nations that faltered first and created the crisis in 1997.

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The rest of this year will be devoted to resolving outstanding issues and developing the new system to implement a pilot program in 15 provinces. From 2002 to 2005 the strategy will be introduced to the rest of the country.

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American experts on huge power plan. Chicago based Harza Engineering company will work with Sweden's Sweco International and PricewaterhouseCoopers to evaluate the feasibility of the multi-billion dollar Son La hydro-electric power plant, northeast of Hanoi.

The government will pay $1.3 million for the foreign expertise for this project that has already received its own share of adverse criticism. Planned is the relocation of 100,000 residents to make way for the necessary reservoir.

Included in the evaluation will be the effects on the population, the environment, and the economic feasibility, all due by September 1999.

First announced in 1997, the plan to build in Son La province came in the wake of continual power shortages.  With a planned capacity of 2,400 to 3,000 MW, it will be 1.5 times the size of the nation's largest hydropower station at Hoa Binh built by the former Soviet Union.

Two current options cause the large cost range: from $3.5 billion to $5 billion.  Financing will prove to be among the largest challenges.   Electricity Vietnam earlier projected that 70% of the loans would come from overseas, with the remaining 30% from State funds.

Hydroelectric power currently accounts for 63% of the nation's electrify supply.

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A securities trading floor, but... what will be traded?  The State Securities Committee (SSC) in late June proclaimed that the first floor of the inaugural bourse would be open by the end of 1999.    However, the same official quickly added that the fundamental nuts and bolts of the operation still lacked substance.

There is still no secondary legislation relating to inspection, supervision, taxation, fines, or charges associated with securities trading.    However, employee training has received priority treatment with the SCC planning to hire 50 staff to work at the new stock market.

While the new recruits will be university graduates, they will lack practical experience and will need professional training which will be received with the support of international donors.

The South Korean Government has granted $800,000 over the past two years to train local securities experts.  Similar grants in aid are expected tin 1999 and 2000.

The ADB has agreed to grant $1.1 million  to train staff.   While the stock market was to have open in 1998, the regional financial crisis interfered.  While about $1 billion worth of bonds and shares are currently circulating in the market, is not possible for the SCC to calculate how much of that trading will come to its future floor, or when.

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Foreign share ownership explained.  Once more, foreigners who are not aware of world situations expect more of Vietnam than more developed nations allow.  There are challenges enough that this renewed nation is facing and needs to face.  However, a realistic expectation by the foreign invested community would help create a better sense of the dynamic investment opportunity that is now presented for the first time, ever..

Unlike Switzerland and other nations that prohibit foreign direct ownership of shares of their corporations, Vietnam will now allow (as of July 13, 1999) any foreign individual or corporation to own up to 30% of the equity issued by any Vietnamese stock enterprise. [Switzerland does permit foreigners to own non-voting certificates of ownership.]

Thirty percent participation will also allow foreign shareholders to take part in the management of those companies, and use shares as collateral for raising Vietnam bank loans.  Income from dividends and sale of shares can be converted into foreign currency for foreign remittance, of course after payment of all taxes due.

Sectors now open for foreign share ownership include: garments and textiles, footwear, leather processing, agro-forestry, aquatic products, building materials, transport, commercial services, hotels, study aids, children's toys, and machine making.  Clearly these sectors are not considered areas of national interest that need protection against foreign ownership.  However, there are exciting opportunities for investors who are aware that NTR with the US now has a good chance to be approved by the end of 1999 (see the following dispatch).

The down side to this opportunity include: (i) foreign owned shares will not be freely transferable, needing board management approval, (ii) foreigners can only purchase shares from underwriters or share issuing agents, thus limiting purchasers to large institutions (and perhaps denying foreigners play on the stock exchange -- if we can sell, we can't buy?), and (iii) time limits imposed for selling shares extend from one to three years, thus eliminating the chance of quick turnaround and speculation.

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NTR before year end?  Unofficial word from all levels of the US and Vietnam are now giving a cautious alert to investors: expect a Trade Agreement will be initialed in the next few weeks, and that the Agreement will be presented to Congress for approval late this summer. 

Excitement is now building that a senior level member of the US Executive Branch may travel to Vietnam in the early fall to officially sign the Trade Agreement.

Anti-Vietnam groups in the US (mostly small but vocal groups of disenfranchised Overseas Vietnamese and smaller groups of US Veterans) have stepped up their letter writing campaigns to attack the progress being made. 

It is important to note that most Americans have put the war far behind us.  All recent polls show the vast majority of Americans from all socio-economic and ethnic backgrounds want to move forward, not backward.

While the protesting groups claim the support just causes (human rights and democracy), we suspect not all their motives are clearly thought out.   One group wrote to us in part, " Wake-up! and open your eyes and ears! By our cause, we do not oppose the people of Vietnam."

However, it will be both the American workers, as well as the innocent people of Vietnam who will remain disadvantaged until NTR issues.   Non-US foreign manufacturers are already building component parts here to take advantage of the favorable wage levels to help sustain US manufacturing at the higher skill levels, and the Vietnamese wage earners are assured a larger, more steady income when Vietnam made goods can be freely exported.

The expected range of annual exports to the US ($140 million to $800 million) is a mere cup of tea in the ocean to the US economy. But it will be the shot in the arm this struggling nation needs as it continues to climb its own way into the 21st century.

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Vietnam Vignettes is a periodic report distributed since early 1994. It is NOT a newsletter although for the ease of linkage we have called it that.  It is a summary of domestically published  media reports from more than 17 industrial sectors that we at VVG follow and report upon for our clients. * Due to the importance of certain topics of key importance to trade with Vietnam, we will occasionally include some wire and other media reports.

Prior Issues On Line:  No. 1 - November 1997  |  No. 2 - December 1997  |  No. 3 - January 1998 | No.4 - March 1998 | No.5 - April 1998 | No.6 - May 1998 | No.7 - June 1998 | No.8 - Mid-June 1998 | No.9 - July 1998 | No.10 - Mid-July 1998 | No.11 - August 1998  | No. 12 - September 1998 | No. 13 - October 1998 | No. 14 - November 1998 | No. 15 - December 1998 | No. 16 - January 1999  | No. 17 - February 1999 | No. 18 - March 1999 | No. 19 - April 1999 | No. 20 - May 1999 | No. 21 - June 1999

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