August 2000 - VVG reports to clients on Vietnamese foreign direct investment.

IN THIS ISSUE
COMMENTARY: Bilateral Trade Agreement Reviewed and Updated
After four years of talk, do we now have substance? With the nation's economy at a three year low, will we now see a recovery? See our commentary (linked above) and our dispatches (linked below).
Real Property - 70 year leases possible Agent Orange Controversy Grows	Stock Market Starts, sort of.... Motorbike Helmet law..., again Comments on the BTA with the USA

Signed by U.S. Trade Representative Charlene Barshefsky and Vietnam's Trade Minister Vu Khoan in Washington on Thursday, 13 July 2000, it took five years and two days after normal diplomatic relations were opened between the two nations and four years after negotiations first began.

Clearly the BTA will favor Vietnam and investors in Vietnam. However, still needed in addition are substantial business, financial, and political reforms within Vietnam that some in the leadership of this otherwise progressive land would prefer not to see, or to put off for as long as is possible.

We do not expect the American Congress will act with any dispatch on this agreement. As the House and Senate will recess in August, there is still speculation if the President will put off a vote until after the November elections.

Only after both nations’ legislative bodies approve the BTA will NTR come into effect. There is no additional act or regulation that is needed, but for the fact that Customs Officials in both nations must be alerted to the new tariff schedules. Ancillary agreements, on airlines, particular tariff reductions, and the like, should proceed smoothly once the BTA in the main is brought into effect.

To read the full article, including points of view from America, Vietnam, Europe and Asia, click here.

Real Property 70 year leases? The General Department of land Administration has asked the Government to increase land lease terms for projects in six priority investment areas. These are: mining industry and mechanical and petrochemical engineering, urban development and industrial parks, eco-tourism development, reclamation of waste land for afforestation and plantation of commercial trees, development of hinterlands with socio-economic problems, and investment in culture, education, health and sports.

In the event this is approved, the Prime Minister's office, and not the National Assembly (as now is the case) can approve such long leases.

MOTORBIKE HELMET LAW - again. Twice before (1994 and 1996) motorbike riders were required by decrees to wear helmets. Both decrees were removed within weeks for reasons not stated. From 1 September 2000, once more helmets are required, but this time only for motorcycle riders on highways outside urban areas, according to Deputy Minister of Communications and Transport Pham The Minh.

Minh, quoting a recent decision by the Government, said the rule aimed to check the rising fatality rate that police figures show increasing by 6.88% to nearly 12,000 in the first half of this year. It is claimed that 3, 920 lives were lost and 13,000 were injured. Up to two thirds of these accidents were caused by motorcycle riders, with accidents on highways accounting for over half.

Figures provided by the health sector show most accidents caused by motorcycle riders led to serious head injuries.

Therefore, the Government has approved the project to force all riders to wear helmets on highways, Minh told the Daily. He said that the government agencies concerned were considering plans to produce so-called tropicalized helmets at affordable prices.

The Transport Ministry will also coordinate with other agencies to set up testing centers to ensure that all motorcycle riders are qualified to use the road. According to the ministry, there will be an estimated 5.9 million motorcycles and 480,000 automobiles nationwide by the end of this year. In the first six months of this year, approximately 290,000 motorcycles and 9,300 automobiles were registered.

1. Background data has been blocked from export for study. The US Embassy offered in 1995, 1998, and again last year, to jointly study issues of Agent Orange with Vietnam. However, the only official US scientific delegation to visit Vietnam for Agent Orange research had all its samples and public health records confiscated at the airport in 1995 in a major blow to cooperation. The same thing happened in July, 2000.

Scientifically and logically, one cannot sustain an argument that any substance found in the environment causes injuries to exposed people unless it can be shown that the environment is otherwise free of other elements that are as well known, if not better well known, as causative agents for the same aliments

While there is no consensus that dioxin found in Agent Orange is harmful to humans, it is reportedly well documented that parathion is highly toxic to humans, and that DDT is highly toxic to the environment, particularly birds.

It is common knowledge that other herbicides (defoliants) and pesticides (insect killers) long banned in the world (parathion and DDT to name only two) are still used as commonly on the ground in Vietnam to protect crops as nuc maum (fish sauce) is used on the tables to flavor meals.

The refusal by the government to allow the export of background samples of food, soil, and sediment is an event that cannot be understood in logical or scientific terms.

2. Background samples once again are withheld by the Government. Dr Arnold Schecter, called by some and recognized by Vietnam as an expert on dioxin, left Vietnam in late July without securing the permission expected and needed for him to take out food, soil and sediment samples for analysis at a World Health Organization-certified laboratory in Germany.

In a strange and strained twist of logic, rather than calling on the Government of Vietnam to release the data, a leading Vietnamese scientist urged Washington to make a formal offer of aid for Agent Orange research to convince those still wavering in Hanoi that the background material should be studied.

The work by Dr. Schecter "was half a success because he was allowed to bring out blood samples [only]," said Dr Le Cao Dai, director of the Agent Orange Fund of the Vietnamese Red Cross. "But unfortunately he's not been able to take [out] the environmental [background] samples."

Dai said he failed to understand why the authorities had refused to allow research that could help tens of thousands of Vietnamese, but said he suspected some people were awaiting a formal offer from Washington before authorizing full research cooperation. "If the US government can declare officially that they can help us to solve the problem, then everything can be done -- they want to have some sign from the US government," he said.

[The question is, what problem does the Vietnamese government want to solve? Are they seeking a scientific or a political solution? What if the background data does not support the long heralded but not scientifically supported claims of causation? If background sample data shows high levels of known human toxins other than - or even including - dioxin in the food, soil, and sediment (as was the earlier case), the long standing claims of causation by the government will fall flat.]

Dai has been working with Schecter collecting the samples from a suspected dioxin hotspot around a former US air base at Bien Hoa, just outside the former southern capital of Saigon, now renamed Ho Chi Minh City. During a research trip there last year, the University of Texas public health specialist detected the highest dioxin levels recorded anywhere in Vietnam since 1973, undermining scientists' previous assumption that the toxin was gradually broken down in the environment.

Reports of the findings of other agents must be ruled out if the dioxin findings are to be proven as causative.

Both US Defense Secretary William Cohen and US ambassador Pete Peterson have said Washington is ready to fund joint research. But the US administration insists Hanoi must first show greater openness amid charges from some in Congress that it is exploiting the issue for propaganda purposes and as a means of getting its hands on US tax dollars.

3. Small Payment to “victims,” provided they were on the winning side. Announced in July, the Ministry of Labor, Invalids and Social Affairs has issued an inter-branch circular on granting allowances for those people, who were affected by Agent Orange sprayed by the US during the Vietnam war, and their children.

Beneficiaries include those people who (i) took part in the fighting and other revolutionary activities in areas exposed to US toxic chemicals from August 1961 to April 30, 1975, and (ii) have [not] yet received allowances as wounded and sick soldiers.

Allowance of VND 100,000 [$7.14] per month, will be granted to people who suffer from critical diseases and have lost their working capabilities. Those people whose working capabilities have been reduced will receive monthly allowance of VND 88,000 [$6.29]. Their deformed children will receive monthly allowances of between VND 84,000 [$6.00] and 48,000 [$3.43], according to the severity of their malfunctions.

[NOTE: But what if the background data that has not yet seen the light of day shows insufficient reason to isolate dioxin as the causal agent? What if the causal agents for the injuries are other pesticides, particularly those still imported by the Government for use in Vietnam today?]

The Significance of the Trade: "The immediate point is symbolic. The government of Vietnam for the first time officially acknowledges the right of private ownership, the right to make money, and the right to independently price capital," claimed one foreign investor who has been buying into local companies for the past nine years.

The hope is that the stock market will encourage private, domestic Vietnamese to take their savings out "from under their mattresses."

The most favorite pastime for many Vietnamese is gamboling and in the absence of an organized market trading in stocks has been on-going for years in the Gray Market. In some cases, traders are coming up with their own schemes, such as selling shares of the newly listed companies at a price they hope will be higher than the price they can purchase shares in the same companies on the open market.

The First Trading Day: Trading began Friday, July 29, 2000 with only two issues being offered. They had government mandated price caps that were met in about 5 minutes. The value at the close of trading (after two hours) that first day () became the base level 100 of the new VN Index.

Refrigeration Electrical Engineering Co. (REE), previously in and out of a Joint Venture with Carrier Corp. (USA), and Cables and Telecommunications Material Co. (Sacom), both opened the new bourse with ceiling prices set by the Securities Trading Center (STC) of VND 16,000 and VND 17,000 per share against par values of VND 10,000.

While offers exceeding the capped prices were outstanding, no one showed a willingness to sell after the first five minutes. At the close of trading with both issues at their caps, 3,200 shares of Sacom and 1,000 of REE were sold, for a full day's trade of VND 70.4 million (US $ 5,000).

Two other companies, Transimex and HaiPhong Paper have received licenses to trade but had not completed formalities in time for the opening day's action.

Reportedly 40 to 50 other firms could qualify for trading on the bourse, but their managements are reluctant. In the words of one, "we will then have to disclose our financial data, and we are not convinced that our sales will benefit from that action." [Note: We wonder if he meant sale of stock or of goods?]

Five year government bonds valued at 300 billion VND ($21.4 million) were also auctioned at a 6.5% annual coupon rate.

1. Bilateral Trade Agreement. By Margot Cohen
Copyrighted by and used with permission from Far Eastern Economic Review Interactive Edition

WITH CLARITY COMES confidence. That's the bottom line in Vietnam's sweeping trade pact with the United States, signed on July 13. In return for vastly improved access to the U.S. market, Hanoi has finally agreed to provide foreign investors with some respite from murky approvals processes, dual-pricing hurdles, and bewildering obstacles to joint ventures.

But optimism is being tempered with pragmatism on both sides. While the pact provides a boost for Vietnam's credibility--signaling a willingness to push ahead with urgently needed reforms and clear the way toward membership of the World Trade Organization--dramatic gains in trade and investment may take years.

2. The War Within: Twenty-Five Years After Saigon Fell, Vietnam Is In A Mess. Imperialists Are No Longer To Blame. By Nayan Chanda
Copyrighted by and used with permission from Far Eastern Economic Review Interactive Edition

DISILLUSION IN VIETNAM is running deep. Faced with trying to understand why a resource-rich country with an educated and dynamic workforce should have become one of the poorest in the world - - and one of the most corrupt -- many Vietnamese are reaching the same conclusion. "We have seen the enemy," says a veteran of the ruling communist party. "It is us."