Economic growth will come mainly from ODA funds.  In spite of the great economic progress made by Vietnam in the middle and late 1990s, realistic projections for the early years of this new decade remain bleak. Worse, there is not likely to be any rapid improvement of the economic climate in Vietnam. 

Many expect that things will most likely hit bottom later this year or early in 2001.  But that depends wholly upon Vietnam’s senior policy makers.  Their failure to act soon will project Vietnam’s recovery out for several more years.

It is expected that when the policy makers prepare for the next 5-year plan (late this year and early next), the pragmatists in Vietnam will once more take control as they did in 1986.  That is necessary for matters to once more move forward.  Failing that, the local economic decline will only escalate. Vietnam will then suffer a continued decline in its economic standing.  

Competitive Alternatives.  As of this writing, Vietnam’s neighbors are already recovering their “tiger” economies thus depriving Vietnam of the earlier chance to quickly move ahead of them.  If there is no improvement soon, absent some unthinkable disaster, Vietnam might never catch up.

With few alternatives, Vietnam’s only choice today for economic growth is to access and utilize the wealth of ODA  (overseas development assistance) earlier granted by donor nations. Vietnam’s earlier and current inability to meet the auditing requirements of the largest donor nation, Japan, has been a major reason that funds have not been spent.

Vietnam’s next step, going from planning to utilization, is a mighty big one.  Billions of dollars have been available for years.  Some funds have expired.  Large grants are becoming smaller.  It is time that Vietnam moved forward.

As detailed in the dispatches below, huge plans are now being talked about. They include now old plans being re-cycled as new, and versions of some new plans. The emphasis on growth in the next two to five years can only be in the Infrastructure Sector.  The Foreign Investor Sector has gone to ground, if not home.

Cost of Progress.  Talk is... well, not very costly. Recently the quantity and the volume of that talk are both increasing. 

Vietnam’s new Enterprise law is designed to have teeth, but we wonder if they are only dentures? Prime Minister Khai recently decreed that 84 separate licenses are no longer needed.  All other licenses not justified before July 1, 2000 are to be stricken from the books in Hanoi.  The challenge is to get that information and direction to the provinces, cities, towns, and more local authorities. That is not a new challenge for Vietnam.

For more than 2000 years it has been recognized that Vietnam is run from the Provincial and not the Central level of authority.  Recent examples abound to support the due concerns that directives by the Central Authorities are not sufficient to bring the sought after changes to the operating levels of Vietnam.  There is as yet no national consensus on matters deemed important to the economic growth and economic well being of the nation.

Many remember the 1998 law banning the two-price system on many but the most protected areas of commerce.  Hotels were among those directed to stop charging different (higher) prices for foreigners.  However, few foreigners today pay the same rate as domestic Vietnamese, except in the 4 and 5 star hotels that refuse to charge less to locals. 

Some may also remember the law enacted in early 1998 mandating that only Vietnamese dong denominated sales are allowed. All hotels and many other enterprises are still charging foreigners in US dollars. 

In one recent experience, a foreign client was charged four times the cost to spend one night in the same room our domestic staff stayed in the night before. Armed with a Vietnamese copy of the appropriate decree and Vietnamese language newspaper accounts of its effect, the hotel manager claimed that he received no direction from his boss, and therefore the existing rates still applied.

The new Minister of Trade, reportedly a man with a strong international background, reportedly now wants to open the “stalled” BTA (bilateral trade agreement) negotiations between the US and Vietnam.  How strange it must seem to the US team who thought an Agreement in Principal meant that talks were concluded. 

Perhaps there is a desire for more talks in order to seek “clarification” on some points?  Whatever the reason, talk is better than silence.

However, while talk comes at a rather low cost, the Vietnamese side has already demonstrated that their representations cannot be relied on as having any authority. 

Practice vs. Policy.  It is possible that the policy wonks in Hanoi want to move forward, or at least not fall further behind.  The annual renewal of the Jackson Vanik Amendment will soon be brought to the Congress.  What a shock and pity it would be to have Congress now reject that waiver in response to Vietnam’s rather peculiar negotiating habits.

The Chief Speaks: 000202 Vietnam - Vietnamese Communist Party head Le Kha Phieu spoke out Feb. 2 at a patriotism celebration against the tendency of global liberalization of trade and investment to widen the gap between rich and poor nations. Phieu said he had doubts about whether Vietnam can make economic changes needed for both a trade deal with the United States and for the country’s entry to the World Trade Organization.¹

Caution, Please. We may be conservative in our short-term outlook. We still believe in the strength and the future of the good people of Vietnam.  We are also still firmly committed that Vietnam in the long term is a favorable place for foreign investment. 

However, broad and long experience in Vietnam tells us that projecting what will happen in Vietnam is like reading tealeaves.  It becomes a habit, if not an art form.  Accuracy is always a chance encounter.  

index | home page

A comfortable Business Spot - Vietnam.  The political and Economic Risk Consultancy asked foreigners working in Southeast Asia to rank the nations in terms of many criteria.  With a grade of zero (0) for best and ten (10) the worst, the respondents were asked to rate the regions countries as to how nationalistic they are.  This was defined as "a sense of devotion promoting that nation's culture or interest at the expense of others."

In general, nationalism in most countries has stayed the same or improved with foreign direct investment and the spread of the Internet helping moderate nationalistic tendencies.  The ranking as recently reported:

1. Singapore 2.33 - While generally seen as welcoming foreigners, a "patronizing attitude towards other Southeast Asians" was noted.
2. Hong Kong 2.81 - Nationalism seen here is a form of regionalism and directed not so much against foreigners as against people from other parts of China
3. Vietnam 4.0
4. Japan 4.5
5. Taiwan 5.33
6. Thailand 5.9
7. Malaysia and the Philippines tied at 6.0
8. India 6.8
9. South Korea 8.0
10. China 8.75 - cited were the US bombing and the resulting anti-US demonstrations.

index | home page

NEW HANOI COMMUNITY - Prime Minister Phan Van Khai has approved the construction of a US$42 billion residential area in Hanoi.

The new area will be situated in the northern Hong (Red) River region along the western side of West Lake. Designed to house 750,000 people, it encompasses 8,830 ha and includes 21 wards, communes and towns in the Dong Anh, Tay Ho and Cau Gay districts.

"The new urban area will be the core of Hanoi’s development plan," said Ha Van Que, deputy chief of the project’s steering committee.  Que said the capital’s development plan through 2020 would restore and upgrade the old capital city, while developing the new Hanoi urban area.

The residential area will contain housing averaging 18sq.m per resident in size, schools, universities, a research and development center, health care clinics, business and industry centers, transportation, parks, sports areas and ponds.

Of the $42 billion total price tag, land and infrastructure construction account for more than $10 billion.

According to Que, financial support for the project will come from loans from domestic and international organizations with repayment terms of 20 to 25 years.

"Raising capital for the project is difficult because Vietnam is able to meet only 30 per cent of its investment needs for development," Que said.

As per Government guidelines, the project will commence next year, with compensation for the local residents, site clearance, resettlement and construction of the technical infrastructure as the primary tasks. Phase one of the four-phase project will cost $514 million, with the Government contributing up to 40 per cent from the State budget. Several housing and public space projects will also begin during this period.

The Hanoi People’s Committee has proposed the Government allow it to use Official Development Aid funding for the project. Other additional support will come from joint-stock companies, incentive loans, investors, bonds and commercial bills.

index | home page

HCMC TO BUILD HIGHWAYS  Authorities are planning major improvements to HCM City’s transportation system.  New road routes and the nation’s first metro system on now being planned.

Director of the city’s Department of Transport and Public Works, Vo Dung, says the key urban development projects worth more than US$1.5 billion are set to be launched this year.

He says the funds will be sourced mainly through loans granted by the Asian Development Bank (ADB), World Bank (WB) and the Japan Government.

The East-West Avenue project will be the largest of these at $520 million, funded by the Japan Bank for International Co-operation as the main financier.

Others include sewage projects worth $400 million funded by the Japan International Co-operation Agency (JICA), the upgrade of the Nhieu Loc-Tho Nghe Canals with $150 million from the WB, environmental improvement projects that will receive loans of about $100 million from the ADB, a project to improve public transportation worth $72 million and a $25 million waste treatment project.

Dung says his Department is in charge of a further 18 key projects with a total investment of over $200 million. A number of the projects have already started and are expected to be completed by June this year.

Un-named officials claim that preparations are also underway for building the city’s first metro network but no details have been provided.

Interestingly, there is no mention of the “planned” tunnel under the Saigon River connecting the new District 2 with District 1, or of the new highway connecting HCMC to Vung Tau.

index | home page

GDP Targets...., Optimistic plus.  For the first five years of the decade, comprising what will be the first four years of the next five year planning cycle, MPI figures show ODA pledges of $12 billion with a target disbursal of $9 billion in the same period.

Contrast the prior four years when about $5 billion of the $15 billion pledged was disbursed, and  the current plans seem at best optimistic.  There is no similar forecast for Direct Foreign Investment, but few expect the disbursals to reach even that level unless there are dramatic and sweeping changes to Vietnam's basic economic controls and systems.

The government talks of increasing GDP from an inflated $340 per capita to over $600, which will require an annual growth rate of 7.2 per cent for each of the next five years.

index | home page

The Ho Chi Minh Trail - will soon be the Ho Chi Minh National Highway, thanks to the approval of a massive road-building project last week by Prime Minister Phan Van Khai boasts the local media. This project was first proposed by former PM Kiet in his last months in office in 1996.  Originally planned at $5.5 billion, the target was reduced to $.18 billion before being scuttled in July 1998.  

At the time it was scrapped, one third of the highway's cost was to come from ODA funding, one third from the national budget, and one third from "national labor,"  The nations youth were asked to spend a full year or two in donation to their nation's progress by working on the building of the new roadway.  The reaction to that concept was no doubt  its kiss of death where fully one-half the nation's population is under 25 years old.

In it's current incarnation, the cost is vastly reduced as is the scope of the project. No longer a 6 lane highway, the two lane road is still projected to go through the underutilized western highlands.  

Viet Nam’s second trans-national north-south highway will connect Hao Tay Province’s Ho Lac village west of Hao Nai and HCM City’s Binh Phuoc Cross Road via the historic path used for decades by freedom fighters along the western border of the country.  

While there is no longer any talk of needing the donation of youthful labor, there is a large community of interest about the hot air being used to pump up a project of questionable value at a time when so much more is needed elsewhere.

Construction is projected to begin in the first quarter of 2000 and last three years.

Under the Ministry of Transportation plan approved by the PM, a total capital investment of VND 5,300 billion (US$378 million) will be needed to build the roadway for the first phase. Money for the project will be mobilized from the State Budget and overseas development aid (ODA). The projected cost of the full project is $678.6 million.

Construction of the 1690 km-long national highway named after late president Ho Chi Minh, will follow the roads and trails of the wartime trail along the Truong Son mountain range, and then proceed through the central and Tay Nguyen (Central Highlands) provinces.

Construction of the legendary trail began on May 19, 1959, the birthday of President Ho Chi Minh, with the establishment of the Military Transport Division 559 or Truong Son Division.

From the first footpath crossing over the mountain range to the victorious Ho Chi Minh Campaign of 1975, this strategic road developed into a network of five axial roads running along the Truong Son on its eastern and western flanks and 21 lateral roads leading to the major battle fronts.

The total length of the extensive Ho Chi Minh road measured 16,000 km, of which 3,140 km was shaded by tropical forest to make traffic possible even in daytime. In addition, there were 500 km of waterways and 13,000 km of pipeline that transported gas and diesel fuel through the mountain range. Because of its strategic importance, the trail attracted heavy aerial bombardment from US forces during the war.

Authors of the new project’s feasibility study said that the new national highway will not only help alleviate heavy traffic on National Highway 1 but also spur development in the 20 provinces it will traverse.

The MoT said that the 1,070km first phase of construction will stretch from Ha Tay Province on the south-west outskirts of Hanoi through the Tay Nguyen province’s Kon Tum District.

The PM’s decision dated February 3, 2000 also urged relevant ministries, agencies, and especially the localities through which the highway will run to co-ordinate with the MoT so the highway can be completed in 2003.

There are many who say trying to build such a road at this time is folly. But the Ho Chi Minh Trail has already accomplished the impossible, enabling Vietnam's heroes to walk 1600 km through jungle, crossing mountain ranges and rivers, carrying tons of ammunition and supplies, as well as relief forces, to defeat the south and the American forces. 

As others have said many times, if the nationalistic Vietnamese had always listened to foreign critics, they would have given up without a fight long ago. Stay tuned.

index | home page

NO NEED TO LICENSE....  The Prime Minister implementing important elements of the new Enterprise law, removed the need for obtaining certificates or licenses in 84 separate categories of domestic businesses.  

Emphasis is to be applied: this projected to apply to domestic companies, not foreign invested ones. A careful review of the list shows that it may be far more broad than intended, that other restrictive regulations are in place that make the need for a certificate or license redundant, or that at the central level some real reform is intended.

It yet remains the challenge to see if, and how long it will take, for the local authorities to follow the central directive.  The list follows:

I. Science, Technology and Environment sector: 
1. Environmental pollution control certificate 
2. Informatics equipment trading license 
3. Scrap iron trading certificate

II. Commercial sector: 
4. Hostel service certificate 
5. Pawn shop certificate 
6. Property and assets security service license

III. Maritime sector: 
7. Fishing relocation license 
8. Deep-water fishing license 
9. Fishery trading license 
10. Animal domestication, cross-breeding and hybridizing license 
11. Registration certificate for animal feed production 
12. Mollusk netting certificate
13. Certificate of origin for netted mollusk

IV. General Department of Customs: 
14. Registration certificate for customs declaration service

V. Ministry of Finance: 
15. Financial consultancy license

VI. Industrial sector: 
16. Certificate for electricity project development consultancy 
17. Industrial and handicraft manufacturing and sub-contracting license. 
18. Industrial trading license

VII. General Department of Post and Telecommunications: 
19. Post and telecommunications equipment sales agent license 
20. Post and telecommunications services license 
21. License for being an agent of foreign express forwarding services 
22. Internet networking and Internet provider license 
23. Registration certificate for post and telecommunications project construction (exclusively for corporate applicants)

VIII. The Vietnam, Tourism Administration: 
24. Domestic travel tour operator license 
25. Tourist transport license 
26. Hostel and hotel service license

IX. Ministry of Health: 
27. Standard food hygiene certificate 
28. Certificate for private trading in medical equipment

X. Ministry of Labor, Invalids, and Social Affairs: 
29. Employment service license

XI. Culture and Information sector: 
30. Prized sale promotion license 
31. Computer service license 
32. Typing service license 
33. Photography and billboard design license 
34. Music performance license 
35. Package printing license 
36. Block-printing license
37. Gold and silver plating service license 
38. Stencil printing service license 
39. Photocopying service license 
40. Book binding license 
41. Printing materials trading license 
42. Printing mechanical equipment manufacturing and repair license 
43. Printing material making license 
44. Gallery business license 
45. Painting reproduction license 
46. Computer games license 
47. Music tutor license 
48. Dance teaching license 
49. Audio equipment rental license 
50. Video filming and recording license 
51. Music entertainment services license 
52. Outdoor camera recording services license 
53. Portrait drawing license 
54. Musical instrument repair license 
55. License for selling photographic materials 
56. Photographic mini lab license 
57. Calligraphic carving license 
58. Photo development license 
59. Fashion designing license 
60. "Electrical painting" sales license 
61. Computer rental license 
62. Translation service license 
63. Billiards license 
64. Souvenirs sales license  

XII. Transportation sector: 
65. Motorized public transport license 
66. Territorial expansion permit for construction business 
67. Transport project construction license 
68. Waterway transportation license 
69. License for building and repairing vehicles 
70. Maritime operations license 
71. Maritime service license 
72. Ship-building and repair license 
73. Passenger and cargo transportation license 
74. Registration license for domestic waterway transportation 
75. Road transport license 
76. License for motorized vehicle conversion 
77. Domestic water route access license 
78. Transport-related industrial products manufacturing license

XIII. Construction sector: 
79. Construction business license 
80. Construction consultancy service license

XIV. Agricultural and Rural Development sector: 
81. Veterinary drugs sales license 
82. Lumber yard and forestry products processing 
license 83. Food milling and processing license

XV. Investment and Planning 
84. Foreign investment consultancy service license.