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Vietnam Country Brief - April 2008

General Information

The Socialist Republic of Vietnam extends 1,600 km from latitude 23 degrees north to 9 degrees north along the western rim of the South China Sea. Occupying 331,114 sq km and bordering China to the north, Laos to the west and Cambodia to the south-west, Vietnam is marked by two delta regions at either end of the country (the Songkoi - or Red River - in the north, the Mekong in the south) which are separated by the narrow region of the Central Highlands. Around 16 per cent of Vietnam's land mass is under cultivation, with the remaining areas either mountainous or forested. Vietnam has substantial territorial claims in the South China Sea. Its capital is Hanoi, located in the north of the country, with Ho Chi Minh City forming Vietnam’s southern metropolis.

Around 80 per cent of Vietnam's population of 84 million are ethnic Vietnamese (‘Kinh’). Buddhism is Vietnam's dominant religion, with significant religious minorities including the Cao Dai, the Hoa Hao, Hindu, Baha'i and, notably, Roman Catholic, Protestant and Muslim religions.

Vietnam is a member of the UN, ASEAN, ARF, ASEM, APEC and the Non-Aligned Movement. Vietnam took up a non-permanent seat on the United Nations Security Council in January 2008 for the first time. Vietnam formally acceded to the WTO on 11 January 2007, becoming the body’s 150th member.

Political Overview

Vietnam is one of the world's five remaining one-party communist states. Decision-making is shared by national and provincial governments and agencies, often resulting in a slow and cautious approach to major policy issues. Political power lies with the Communist Party of Vietnam (CPV), led by General Secretary Nong Duc Manh.

The Party's peak organ, the fourteen-member Politburo, holds authority over the implementation of all major areas of policy. The Politburo is elected by the Party's Central Committee. Day-to-day policy guidance comes from the eight-member Secretariat to the Central Committee, which comprises some Politburo and Central Committee members. The Central Committee considers important policy issues several times per year, and five-yearly Party Congresses ratify major policy changes.

The Tenth Party Congress, held in April 2006, led to significant changes in the Party leadership, including a new President, Vice-President and Prime Minister, two new Deputy Prime Minister positions, and the appointment of ten new ministers or equivalent heads of agencies. The new leadership includes some relatively young ministers and is considered a significant generational change.

Administration and policy implementation is the responsibility of government ministries and equivalent agencies, although these organisations are now also playing a more significant role in policy development. The principal ministries are hardworking and systematic but remain highly bureaucratic and process-driven. Decision-making can be slow and opaque. In recent years, the National Assembly has become increasingly active and influential in setting national priorities, with members prepared to criticise the Government vigorously.

The increasing role of the National Assembly in reviewing legislation and policies and a gradually more incisive media have contributed to increasing transparency in Vietnam, but dissent can still be met with heavy-handed punishment. Individuals can incur long prison terms on broadly framed charges, such as espionage or undermining national security and propagandising against the state.  Notwithstanding some recent responsiveness on the part of the Vietnamese authorities on questions of religious freedom, a number of high-profile arrests and trials in the first part of 2007 have brought the international spotlight back onto Vietnam’s one-party political system and management of diverse political views.

Head of State and Government Ministry

State President

Nguyen Minh Triet

State Vice-President

Mme Nguyen Thi Doan

 

 

Prime Minister

Nguyen Tan Dung

First Deputy Prime Minister

Nguyen Sinh Hung

Deputy Prime Minister and Minister of Foreign Affairs

Pham Gia Khiem

Deputy Prime Minister

Truong Vinh Trong

Deputy Prime Minister

Hoang Trung Hai

Deputy Prime Minister and Minister of Education and Training

Nguyen Thien Nhan

 

 

Ministers

 

 

Minister of Defence

Sr. Lt Gen Phung Quang Thanh

Minister of Public Security

General Le Hong Anh

Minister of Industry and Trade

Vu Huy Hoang

Minister of Planning and Investment

Vo Hong Phuc

Minister of Agriculture and Rural Development

Cao Duc Phat

Minister of Finance

Vu Van Ninh

Minister of Justice

Ha Hung Cuong

Minister of Science and Technology

Hoang Van Phong

Minister of Health

Nguyen Quoc Trieu

Minister of Construction

Nguyen Hong Quan

Minister of Culture, Sports and Tourism

Hoang Tuan Anh

Minister of Labour, War Invalids and Social Affairs

Mme Nguyen Thi Kim Ngan

Minister of Transport

Ho Nghia Dung

Minister of Natural Resources and Environment

Pham Khoi Nguyen

Minister of Information and Communications

Le Doan Hop

Minister of Home Affairs

Tran Van Tuan

Politburo of the Communist Party of Vietnam

Nong Duc Manh

General Secretary

General Le Hong Anh

Minister of Public Security

Nguyen Tan Dung

Prime Minister

Nguyen Minh Triet

State President

Truong Tan Sang

Standing Member, Central Committee Secretariat

Nguyen Phu Trong

President of National Assembly

Pham Gia Khiem

Deputy Prime Minister and Minister of Foreign Affairs

Sr. Lt Gen Phung Quang Thanh

Minister of Defence

Truong Vinh Trong

Deputy Prime Minister

Le Thanh Hai

Secretary, Ho Chi Minh City Party Committee

Nguyen Sinh Hung

First Deputy Prime Minister

Nguyen Van Chi

Chairman, CPV Inspectorate Commission

Ho Duc Viet

Chairman, CPV Organisation Commission

Pham Quang Nghi

Secretary, Hanoi Party Committee

Secretariat of Central Committee

Nong Duc Manh

General Secretary

Truong Tan Sang

Standing Member

Truong Vinh Trong

Deputy Prime Minister

Nguyen Van Chi

Chairman, CPV Inspectorate Commission

Le Van Dung

Head of General Department of Politics, Ministry of Defence

Mrs Tong Thi Phong

Chairwoman, CPV Mass Mobilisation Commission

To Huy Rua

Chairman, CPV Culture and Ideology Commission

Ho Duc Viet

Chairman, CPV Organisation Commission

The Bilateral Relationship - Political and Social

2008 marks the 35th anniversary of diplomatic relations between Australia and Vietnam, established in February 1973. The opening of the Australian Consulate-General in Ho Chi Minh City in November 1994 further strengthened Australia's diplomatic representation in Vietnam.

Australia has recognised the political, strategic and economic importance of its bilateral relationship with Vietnam. During the 1980s, when Vietnam was internationally isolated, Australia provided aid to Vietnam through multilateral organisations such as the United Nations Development Programme. Australia was also one of the first countries to restore its bilateral aid program following the withdrawal of the Vietnamese presence from Cambodia and the signing of the Paris Peace Accords in October 1991.

High-level Visits to Australia

High-level visits to Australia over recent years have served to maintain and deepen the bilateral relationship. Recent visits include:

These visits have been reciprocated by high-level Australian visits to Vietnam, notably in association with APEC which Vietnam hosted in 2006.

The Vietnamese Community in Australia

The Vietnam-born community in Australia is estimated at approximately 177,000. The environment in Vietnam since the advent of doi moi (renovation) has encouraged many Vietnamese expatriates to revisit their former homeland. A number of Vietnamese-Australians have successfully undertaken, or are seeking to open up, commercial opportunities in Vietnam. However, some Vietnamese-Australians remain strongly opposed to the Government in Vietnam.

Defence, Police Relations and Regional Security

Formal defence relations between Australia and Vietnam were established in February 1999, with the opening of a Defence Attaché Office at the Australian Embassy in Hanoi. Vietnam's first Defence Attaché to Australia took up his appointment in Canberra in September 2000.

The bilateral defence relationship includes: regular Australian Defence Force ship visits to Vietnamese ports; training of Vietnamese military officers in Australia under the bilateral Defence Cooperation Program; and visits between Australian and Vietnamese Chiefs of Defence Force.

The Australian Federal Police maintains Law Enforcement Liaison Offices in Vietnam in Hanoi and Ho Chi Minh City.

Australia and Vietnam have also held senior officials-level bilateral dialogues on regional security and other issues since 1998.

Education and Training

Of all the English-speaking countries in the world, Australia welcomes the largest number of students from Vietnam. There are currently some 8000 students from Vietnam studying in Australia, and an estimated 7000-8000 more undertaking Australian education and training courses in Vietnam.

Australia supports many education and training initiatives with Vietnam, including: cooperation on education and training matters; increasing Australian participation in education, training and research; facilitating institution-to-institution linkages; and supporting Australian alumni associations. Australia is the leading provider of scholarships to Vietnamese students.

As part of the expanded Australian Scholarships Initiative , DEST administers the Endeavour Program – a prestigious scholarship program showcasing the excellence of Australia’s education, science and training sectors. Vietnam has been a significant beneficiary of the newly expanded program, going from two Endeavour awardees in 2006 to 26 in the 2007 round.

Australia's Approach to Human Rights in Vietnam

Australia and Vietnam have held formal human rights talks regularly since 2002. The most recent Human Rights Dialogue was held in Vietnam in April 2007.

Vietnam and Australia introduced a program of technical cooperation on human rights in 2006. The program provides opportunities to foster practical cooperation between institutions with human rights responsibilities and expertise.

Australia's Development Cooperation Program with Vietnam

Australia's total overseas development assistance to Vietnam in 2007-08 is estimated at $90.8 million. Amongst 40 donor countries and agencies in Vietnam, Australia consistently ranks among the top ten bilateral donors.

For further details about Australia's development assistance program for Vietnam, visit the AusAID website.

Economic Overview

Data are drawn from statistics and reports prepared by: Vietnam's General Statistics Office (GSO), Ministry of Trade (MOT) and Ministry of Planning and Investment (MPI); the Australian Bureau of Statistics (ABS); the Economist Intelligence Unit (EIU); the World Bank (WB) and the International Monetary Fund (IMF).

Key Indicators

Population (2006)

84.4 million

Exchange rate (Dec 2006)

12,635.31 dong = A$1

GDP (2006)

US$61.0 billion

GDP per capita (2006)

US$723

Real GDP growth in 2006 (% change YOY)

8.2%

Goods and Services Exports Value in 2006 (% GDP)

71.3%

Current account balance (2006)

US$179 million

Unemployment rate (2006) (GSO)

4.4% (urban areas)

Performance and Outlook

Vietnam has been in transition from a centrally-planned to a market-based economy since 1986. In the early-to-mid 1990s, liberalisation measures resulted in high economic growth and declining poverty, with real GDP growth averaging 9 per cent per year. Growth slowed in the late 1990s but the momentum has since picked up, with GDP growth averaging about 7.5 per cent per year since 2001. Poverty rates are now less than 20 per cent, down from almost 60 per cent in the early 1990s.

GDP growth in 2006 was 8.2 per cent, driven largely by construction, processing industry, retail trade and the tourism, hospitality and transport sectors (Source: GSO).

Economic development has been patchy geographically. Ho Chi Minh City (in southern Vietnam with a population of 8.2 million) and the surrounding provinces constitute the power-house of economic development with GDP per capita reaching nearly US$2000, as against a national average of US$723.

The Economist Intelligence Unit forecasts that real GDP growth for the period from 2007-11 will be in the range of 8.0 to 8.5 per cent. However, near-term forecasts for growth are being scaled down in light of rising inflation and other signs that the Vietnamese economy is overheating. FDI inflows far exceeded the Government’s expectations in 2007 and credit growth rose by approximately 50 per cent, contributing to record annual inflation of 19.4 per cent by March 2008.  The current account deficit continues to widen and was estimated to have grown to 10 per cent of GDP by end 2007. The Government has introduced a range of monetary and fiscal policy measures to tackle inflation since the beginning of 2008 and has also widened the trading band on the US dollar/dong exchange rate.  These measures have, in turn, put pressure on the banking system, capital markets and exporters.  The IMF and other international analysts have welcomed measures taken to date, but are calling for further tightening of monetary and fiscal policy and additional exchange rate flexibility to control rising inflation.

 

International trade, investment and remittances

Goods and services exports now constitute over 70 per cent of GDP, well more than double the 30 per cent share recorded in the mid 1990s. Crude oil alone accounted for 21 per cent of total merchandise export revenues in 2006. Other major export items include textiles, garments and footwear, seafood, timber products, rice, rubber, coffee, cashews, pepper and coal (Source: GSO).

Vietnam's major imports are machinery and spare parts, refined petroleum products, urea, steel ingots, pharmaceuticals, textile and garment inputs, plastics and chemicals. (Source: GSO). The top five sources of imports in 2006 were China, Singapore, Taiwan, Japan and Korea.

Total disbursed foreign direct investment (FDI) in 2006 topped US$4 billion. Total approved FDI in 2006 was US$10.2 billion, US$7.8 billion of which was from newly established projects and US$2.4 billion from expansion of operational projects.

The State Bank of Vietnam estimates remittances from overseas Vietnamese in 2006 were US$3.8 billion.

Economic and corporate reform

Since 2000, Vietnam's Enterprise Law has fostered the creation of over 200,000 registered private domestic enterprises, accounting for around 10 per cent of the economy and a smaller proportion of the labour force. Over time, the new Enterprise Law (2005) and Investment Law (2005), which came into effect in July 2006, should gradually contribute to an improved business environment and a more 'level playing field' in all economic sectors.

As part of its effort to maintain the momentum in foreign direct investment, Vietnam has undertaken an equitisation (semi-privatisation) program for its state-owned enterprises (SOEs), aiming to complete its program by 2010 which would leave around 550 enterprises fully in state hands. However, while the Government planned to reduce the number of SOEs to around 2000 by 2005, there remained 2176 enterprises unequitised as at August 2006 (Source: State Committee for Enterprise Reconstruction and Development). The state continues to maintain controlling shares in large number of enterprises following equitisation. This, combined with the technical challenges associated with valuing an SOE’s assets to prepare for sale, has to date limited the positive impact of equitisation on FDI inflows.

In December 2006, the Vietnamese Government released a new and ambitious plan to extend the equitisation process to larger SOEs in sectors such as banking, insurance, aviation, cement, steel and textiles. Implementation will be challenging but the intention behind this plan is encouraging.

Financial sector

The Vietnamese Government has approved a banking reform roadmap which includes moving the State Bank of Vietnam (SBV) towards only two functions: monetary policy and supervision. This importantly complements the plans to equitise the largest state-owned commercial banks, which the SBV currently both regulates and 'owns'. Challenges in this reform process include: addressing tensions arising from the SBV’s dual regulatory and ownership role; resolving the legacy of directed lending to SOEs, and consequential bad loans; addressing deficiencies in the banking system in such key areas as assessment of credit risk; and developing a greater understanding of international banking practices and products.

The stock market witnessed spectacular development during 2006, with capitalisation of shares reaching the equivalent of over 20 per cent of GDP by the end of 2006, compared to only 2-3 per cent at the end of 2005. This growth was driven by more liberal foreign ownership caps, a strong increase in the number and size of listed entities and strong interest from domestic and foreign investors (Source: State Securities Commission). More recently, the share market has settled back to be between 10 and 15 per cent below its late 2006 peaks.

Business operating environment

Apart from protection afforded the large number of SOEs, and a 30 per cent cap on foreign ownership in unlisted equitised SOEs, the main limits on trade and investment are: high average tariffs; a lack of transparency and consistency in the legal system; complex taxation and foreign investment laws; a high level of corruption, especially in infrastructure projects; the underdeveloped state of the financial system; and increasingly strained infrastructure, and consequent high transport, power and telecom costs.

The Vietnamese Government is gradually loosening current foreign investment limits, for example, by lifting the listed company foreign ownership limit to 49 per cent. The legal system is also undergoing major change to better align commercial statutes with international norms. The implementation of WTO commitments will also gradually contribute to a better operating environment over the medium and longer-term as tariffs are cut, investment restrictions loosened still further, and a more transparent and predictable commercial legal and administrative system comes into place. This process will take some years to begin to show real benefits.

Vietnam has many economic strengths, not least the skills and entrepreneurial bent of its youthful workforce. It also is a member of a growing network of free trade agreements, both individually and as part of ASEAN, and located in the most dynamic part of the globe. However, the country faces challenges in maintaining current high growth rates over the long term, including poor coordination between central and provincial authorities and the risk that the bureaucratic and administrative structures will not be able to keep pace with the rapidly growing sophistication of the economy.

More information on the business operating environment is available at Austrade or the Australian Trade Commission in Vietnam.

Vietnam's Trade Policy

Vietnam is committed to the long-term objective of global economic integration through participation in APEC, the ASEAN Free Trade Area and the WTO. Vietnam successfully hosted APEC through 2006.

Vietnam and the WTO

Vietnam became a member of the WTO on 11 January 2007 and is making progress in implementing its WTO accession commitments, including: adopting implementing legislation; improving transparency of trade regulations; and clarifying consistency of treatment for private companies and state-owned enterprises. While such changes will no doubt present challenges to Vietnam in the short term, WTO membership is expected to be accompanied by significant expansion in trading opportunities, and Australian exporters stand to benefit considerably.

The Bilateral Relationship - Economic

The Ministerial level Australia-Vietnam Joint Trade and Economic Cooperation Committee met for the seventh time on 16-17 July 2007 in Canberra.  The meeting provided an opportunity to discuss how to build on the important gains offered by Vietnam’s accession to the WTO in January 2007, particularly in the areas of financial services, education and training, and mining and related industries.

Australia and Vietnam are party to negotiations towards the ASEAN-Australia-New Zealand Free Trade Agreement.

Merchandise trade

In 2006, two-way goods trade between Australia and Vietnam totalled A$6.6 billion. Australia's merchandise exports to Vietnam in 2006 totalled A$1.6 billion, representing a yearly increase of 137.4 per cent. This increase was overwhelmingly due to an increase in exports of non-monetary gold, much of which was previously exported to Vietnam through other countries.

Australia's merchandise exports to Vietnam are diverse. In addition to strong exports of gold, copper and wheat, they also include paints and pigments, plastic sheeting, malt, dairy products, cereal preparations and live animals.

In 2006, Vietnam's merchandise exports to Australia totalled A$5.0 billion, a 47 per cent increase on the previous year. The majority of the increase came from another large surge in the value of oil imports. Crude oil constituted 82 per cent of Vietnam’s total merchandise exports in 2006. Other significant items were fish and crustaceans (A$151m), furniture (A$79m) and fruit and nuts (A$75m).

Services trade

Two-way services trade between Australia and Vietnam in 2006 totalled A$696 million. Services exports to Vietnam in 2006 were worth A$298 million. Education and training remains Australia's single largest services export, worth A$137 million per annum. Services imports from Vietnam in 2006 were valued at A$398 million, dominated by tourism-related spending (A$278m).

Australian investment in Vietnam

According to official statistics, Australia ranks 18th in overall foreign direct investment in Vietnam.  Cumulatively, to the middle of 2007, there were 146 currently valid Australian-funded projects with disbursed FDI valued at US$491 million. Over the past five years, the most significant Australian investments have involved expansions by established Australian companies, which continue to diversify their operations. Prominent examples include BlueScope Steel, ANZ Bank and QBE.

Export and Investment Opportunities for Australia

Vietnam's rapid economic growth over recent years has led to large demand for imported goods, creating significant opportunities for Australian exporters of metals, wheat, dairy produce, machinery, petroleum-based products and live animals.

The continuing shift towards a more market-based economy and strong economic growth in Vietnam have increased demand for education and training services, and education sector reforms are under way with support from the Government of Vietnam and donors including the World Bank and Asian Development Bank. Demand for training in areas such as English language, business and management and information technology is high, especially in the major urban centres of Hanoi and Ho Chi Minh City.

Vietnam has large deposits of oil and gas, and a wide range of exploitable mineral deposits. Many Australian companies have expressed interest in minerals development in Vietnam, but most are waiting for legislative reform before proceeding and none have operational projects.

Australian companies are generally well received in Vietnam. Australia is regarded as a modern, technologically advanced and friendly country located within Vietnam's immediate sphere of interest. Long-term trade and investment opportunities should increase in line with Vietnam's progress in implementing its legislative and administrative reform program following its entry to the WTO in January 2007.

If you would like more information on specific export opportunities in Vietnam, or more information on export assistance, go to the Austrade website.

Examples of Recent Successes in Vietnam

Commonwealth Bank to open its first branch in Vietnam 

January 2008: On 14 January the Commonwealth Bank announced it was to open its first branch in Vietnam. The move comes after the bank’s licence application was approved by the State Bank of Vietnam. Commonwealth Bank has had a long-standing interest in Vietnam, having established a representative office there in 1995.

ANZ Bank buys into Vietnamese securities company

 July 2007: ANZ Bank announced it had reached agreement to acquire a 10 per cent stake in Vietnam banking and securities business Saigon Securities Incorporation (SSI) for a total investment cost of $102 million. ANZ currently has one of the largest foreign financial services operations in Vietnam.

English language joint venture in Danang

June 2007: The English Language Institute, a joint initiative of the University of Danang, Vietnam, and the University of Queensland opened in Danang.

QANTAS invests in Pacific Airlines

In April 2007, QANTAS signed an investment agreement with the State Capital Investment Corporation, the investment holding arm of the Vietnamese Government, to purchase a 30 per cent share in Vietnam’s second largest airline, Pacific Airlines.

JetStar flies into Vietnam

In late November 2006, Australian budget carrier JetStar undertook its first direct Sydney-HCMC flight.

Santos Signs Exploration deal with Petrovietnam

October 2006: Santos signed a Production Sharing Contract (PSC) with the Vietnam Oil and Gas Corporation (Petrovietnam) and the Singapore Petroleum Corporation (SPC) for a venture in the Song Hong Basin, continuing its plans to expand its operations in Vietnam. Santos announced its first entry into Vietnam in April 2006 with commencement of drilling at Dua in the Nam Con Son Basin.

TradeWatch Contacts

If you would like more information on the trade and economic conditions in Vietnam, please email the Department of Foreign Affairs and Trade.