OK, let’s be honest: we’ve been in Vietnam for ten years. We understand what “self-censorship” means, and we try to practice it. It means that writers should be a bit more than just honest. It means being fair and writing good things BEFORE we write about what needs improving.

Clearly, some writers are much less than honest when writing about good things in Vietnam.  And just as surely those who have a political or personal ax to grind, or those who must suitcase in, often present a picture that is far more negative then is real.  And there are those who paint a far too rosy picture for their own economic and/or political reasons.

We publish this journal so that readers who are not in Vietnam can rely on what we say.  Often our prognostications are proven correct; often our cynicism is annoyingly accurate, if not funny. 

Never have we been approached by any authority, much less muzzled about what appears here. Most often the complaints we  receive are from VK who object to the national flag being part of our logo. 

Infrequently we receive complements. It appears that, for the few who read these pages, we are doing a good job.

And you who are reading these words are few among the many thousands who view our web  site every month.   While the total number of readers swell to over 15,000 and keep growing, the most popular among the 330+ pages on our web site are about handicrafts for purchase and our Cua Lap Resort Project.  The economy, investment articles, investment opportunities, and strangely this page, are far less popular,

We write that is strange because the handicraft pages were added on Sunday afternoon in 1997 when there was little to do and just for fun we published a few photos of some of the furniture and ceramics our founder had in his Saigon home.  Within one week, we had inquiries about buying the stuff!

Our web pages that show furniture, ceramics, and stonework pages provide a steady stream of new clients and opportunities for VVG to serve those who want to bring home from Vietnam a few bits and treasures.

We find that our own growth these past ten years has mirrored that of our host nation and second home: we are not quite booming but the noise we make is loud and positive. We will keep writing these pages to keep telling our story the way we do. Thank you for the time you spend to read our words.

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Cell or “Mobi” Phones -  After 11 years of development, Vietnam now has approximately 2.3 million mobile phone subscribers. As forecast by the Ministry of Post and Telecommunications, the number of mobile phone subscribers will reach 13.5 million by 2010.

Paging service was first introduced in HCM City at the end of 1988 under the name of MCC, and messages were made via the Operator 130.  A paging subscriber had to buy a beeper for VND2-3 million (at that time converted to US$ 200-$300) and pay a monthly subscription fee of VND110,000 (US$ 10.10), and a message from a fixed telephone cost VND1,200 ( $0.083) a minute. Only foreigners and “high income earners” were able to afford that price at that time.

In mid-1992, HCM City Post Service ventured with Singapore Telecom International to launch Call-Link, a seven-digit mobile phone service using Advanced Mobile Phone Service (AMPS) technology. Within seven months, Call-Link attracted 1,000 subscribers. A user had to buy a cell phone worth more than VND10 million (then worth US$ 952), and pay monthly subscription fee of hundreds of thousands dong and a call charge of US$0.15 a minute. Only the well-off or foreingers could afforded such prices.

Paging services continued to grow along with the development of this first mobile phone service. In 1997, the number of paging users amounted to 120,000.

The establishment of MobiFone (1993) but really Vinaphone in 1997, with more attractive functions and prices, attracted quite a few customers. In 1998, Vinaphone and MobiFone expanded their coverage to many cities and provinces nationwide, and allowed users to use short messaging service (SMS) free for some time before charging VND500 (now 3 cents) a message. Using SMS was much more convenient and cheaper than paging services.

Cityphone, an inner-city cell phone network, was put into operation last year.

Presently, paging services are still operating with less than 10,000 users, though the monthly subscription fees are just VND20,000 ($1.30) for local messaging and VND25,000 ($1.61) for national messaging. Call-Link now has only 3,500 subscribers though monthly subscription fee fell  to VND80,000 ($5.16), a local message to VND900 (5.9 cents) a minute, and inter-provincial message VND1,800 11.9 cents).

According to the market survey company GfK Asia Pte. Ltd., Vietnamese users will buy one million cell phones this year, up 32% year-on-year (though sales dropped by 7% in the first quarter due to Dong Nam Co.'s smuggling and tax evasion case).

Nokia, Samsung, Motorola, Siemens and Sony Ericsson are the favorite cell phone brand names in Vietnam. The strategy to increase market share of these manufacturers is to market new products with nice designs and multiple functions to meet mobile phone service advanced technology. Cell phone makers also launched attractive sales promotion programs and provide after-sale services to expand market share. About 130 cell phone models are now available on the market, up 30% year-on-year.

The new S-Fone mobile phone network operates using the Code Division Multiple Access (CDMA) technology, the most advanced third-generation technology in the world. Theoretically, CDMA has a data transmission speed of 2Mbps, but due to Vietnam’s current lack of full support, S-Fone's is transmitting its signals at just 144kbps.

Such a speed, however, is 15 times faster than that of the Global System for Mobile Communications (GSM) technology used by Vinaphone and MobiFone. S-Fone provides a higher-quality telephone service and multimedia messaging service (MMS - messages with moving pictures and sounds), and can help users hook up to the Internet to watch movies or listen to music.

In a bid to compete with S-Fone, Vinaphone and MobiFone, will replace the GSM with General Packet Radio System (GPRS) technology, where the data transmission speed is 115kbps. In the first phase, Vinaphone and MobiFone will raise their speed to 44kbps, 4.5 times faster than the current speed. Vinaphone and MobiFone are considering the use of CDMA technology in the near future, as new technology application is vital for all mobile communications providers.

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Vietnam's GDP growth - Vietnam must reach a GDP growth rate of 8.2-8.5% over the next two years if it is to fulfill the socio-economic targets set in the 2001-2005 plan. The Government predicted that economic growth in the second half of this year could reach 7.4-7.5%, raising the rate of the whole year to 7.2-7.3%. Export for the whole year is estimated to increase 16.3% over last year to US$19.5 billion. Inflation for the whole year should be 3.5-4%, and investment should be equivalent to 35.6% of the GDP.

Growth targets for 2004 include a GDP of 7.5-8 per cent.

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The Asian Development Bank .  Loans amounting to US$ 975 million will be made to Vietnam over the next three years to implement 19 projects concerning water, power, education, and health care. The funds will come from the bank's annual commitments of US$225 million from its Asian Development Fund and US$100 million from its ordinary capital sources. Between 1993 and 2002, the bank offered Vietnam 39 loans totaling US$2.5 billion and 132 technical assistance grants worth US$92.1 million.

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Finance Ministry plans overseas bond issue – Following the success of the first bond by PV, the Government is now considering the issuance of bonds abroad as it is in a favorable position to do so.

According to Finance Minister Nguyen Sinh Hung, the time is now suitable to issue bonds overseas as interest rates on the world market are falling and the credibility of Vietnam is improving strongly. He said international credit rating agencies had a positive view on Vietnam, with the credit rate set at BB-, which was an advantage for Vietnam to instill confidence in foreign investors.

Between 2003 and 2007, the Government plans to issue bonds totaling VND34,000 billion, averaging VND7,000 billion (US$460 million) a year. According to the Finance Ministry, the Government plans to issue dong bonds worth VND4,000 billion (US$258 million) and foreign currency bonds totaling US$80-100 million from October 1 this year. The bonds will have terms of between three and 10 years. The annual interest rate will not be lower than market levels.

In recent years, Vietnam has spent an average US$12.3 billion annually on development and investment projects, but the funds meet only 80% of the demand. The country will need huge capital to develop and upgrade infrastructure to boost economic growth. However, if gross domestic growth (GDP) is maintained at an annual rate of 7% over the next 10 years, international donors may not treat Vietnam as one of the world's poorest countries and trim aid for the country. Meanwhile, foreign exchange holdings of the banking system are not large enough to meet demand. Therefore, bond sale is seen as a new channel to attract capital from foreign investors and the public.

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Formosa injects more capital - Taiwan's Formosa Group will invest an additional US$ 212 million to expand operations and diversify business in Vietnam.

The Taiwanese subsidiary in Vietnam, Hung Nghiep Formosa, will use the funds for various operations. About US$ 57 million will go to making BOPP film for the plastics industry, US$ 21.3 million to yarn factories, US$ 56 million to a polyester plastic resin plant, and US$ 46 million to a PP plastic resin plant. Another US$ 25 million will be spent on infrastructure construction of the Nhon Trach 3 Industrial Park and housing compounds for the company's staff in Dong Nai Province.

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Auto tax hike  The import tax on complete knocked down (CKD) vehicles has been raised by an average 5% from September 1.

The Finance Ministry announced that the import tax on CKD vehicles will be hiked from 20% to 25% for vehicles with 5-15 seats, from 10% to 15% on vehicles of 16-25 seats, and from 5% to 10% on those with more than 25 seats.

The ministry explained that the tax hike was aimed at encouraging automakers to increase the local content, which currently makes up only 2% to 8%.

Also from January 1, 2004, the value-added tax on CKD imports will be raised from the current 5% to 10%, while the special consumption tax will be increased from 5% to 40%.

The Ministry of Science and Technology has introduced new requirements on CKD vehicle assembly. Accordingly, CKD vehicles assembled in Vietnam must have the body parts un-joined, un-welded, and unpainted.

In the first eight months, Vietnam imported 14,608 completely built-up vehicles, 14.6% lower than the same period last year. Meanwhile, import of auto parts for assembly increased 43.3%, valued at US$308 million. Locally assembled cars amounted to 24,509 units, up 41.1% year-on-year.

Auto prices in Vietnam are 70% higher than in Europe and 30% than in other Asian countries.

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Motorbike assembly in the first eight months
Total 553,760 units, up 12.9% year-on-year
State enterprises 36,360 units, down 45.4%
Foreign-invested enterprises 472,820 units, up 3.1%
Non-State enterprises 44,580 units, up 145%

Honda Vietnam has shifted its business strategy to export and rural market as it is facing setbacks in urban areas due to the one-bike policy to avoid traffic congestion.

The company expects to export 50,000 bikes this year, mainly to the Philippines. It has set up a research & development center to study rural consumer demand and make its products more attuned to their taste. In the first seven months, Honda Vietnam sold 205,000 bikes, down 7% on a year ago. Since starting operation in 1999, it has sold 1.1 million units on the local market.

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TRANSITIONS

Mr. Tran Ngoc Canh, 55, deputy general director of PetroVietnam, has been appointed general director. Canh has replaced his predecessor Nguyen Xuan Nham, who was dismissed for delaying the construction of Oil Refinery No.1.

[Note: was that a recent delay we missed? The project was to have been completed by Total way back in 1995; then it was later to have been completed by Conoco in 199?  And by others, when?  We are loosing count and track, but hope the new bonds will be sold so that the plant can finally be up and running, by when?  But then, will the product be sold at a price that is so much less than current market price as to make the construction and interest costs on the bonds to be floated, worth the effort? Stay tuned.]

 Professor, Doctor Nguyen Xuan Oanh, director of Investment Management Company, passed away on August 29 at the age of 83. Oanh, a Harvard graduate and noted economist, worked in several international financial institutions. He made valuable contributions to economic reform in Vietnam. 

[NOTE: We met with Mr. Oanh several times over the years.  While his informative web site for a very long time was blocked by the government firewall, he was always very well informed and engaged us in lively discussions on matters of substance.]

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