Introduction by b07i7k


									Table of Contents

Introduction                                                      5

Chapter I Vietnam and Accession to WTO                            8

Opportunities and Challenges

I. Fundamental Principles of WTO and Compliance                   9

Requirements for Vietnam

1. Non-discrimination Trade Principle: MFN and NT                 10

2. Trade liberalization                                           11

3. Trade protection by tariff barriers                            12

4. Establishment of Stable Trade Environment                      13

5. Fair Competition Principle                                     14

6. Principle of non-limits on quantity of imports                 14

7.The right to waive and safeguard an obligation in               15

8. Recognition of regional trade agreements                       15

9. Incentives given to developing nations                         16

II. Opportunities and Challenges when joining WTO                 17

III. Impacts of WTO Accession on trade, investment and            22
production structure

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Chapter II Impacts of WTO Accession on some key                     24
economic sectors

I. Relation between agriculture sector and development of           24
processed food grains industry

1. Position of the agriculture sector and relation between the      24
agriculture sector and development of processed food grains

2. Commercialization policies on agricultural products              25

3. Rules and commitments in agriculture agreement and               30

food processing industry

4. Some agricultural produce as key exports of Vietnam              35

II. Industry Sector                                                 68

1. The role of Industry Sector in the course of industrialization   68
and modernization of Vietnam.

2. Policies relating to industry.                                   73

3. Protection of domestic market and production                     80

4. Guidelines and Commitments of Agreement on some                  85
industrial sectors

5. Trade policies and some industries                               88

III. Trade and Telecommunications Sectors                           152

1. Trade                                                            152

2. Telecommunication                                                171

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   Chapter III - Vietnam in the WTO: recommendations              180

I. Formulating principles for joining WTO                         180

1. Out line of the Uruguay round                                  180

2. Direction for the formulation of commitments and               182
negotiation requirements for Vietnam

II. Lobby supports and relations paving ways for multilateral     184
and bilateral negotiations.

1. The determination of the Government of Vietnam in              184
external policies.

2. Appropriate steps toward the accession to WTO                  184

3. Good will and supports that GATT/WTO and its members           185
has reserved to Vietnam

4. The importance of consensus from senior members of the         187
WTO on the accession of Vietnam

III. Conveniences and difficulties of Vietnam accession.          187

1. Conveniences                                                   188

2. Difficulties                                                   188

IV. Main issues asking for high attention in the negotiation      190
schedule for the accession of Vietnam into the WTO..

1. A market economy is the primary and embracing condition        191
for the WTO accession.

2. Appropriate policies and mechanism in foreign trade            191

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3. No discrimination between domestic and imported goods          192

4. Custom procedures and its appropriate custom valuation         193

5. Intellectual Property Rights (TRIPS)                           193

V. Main recommendations for some above-mentioned                  194
industries that require high attention in the schedules for

1. Agricultural and food processing goods: (including rice,       195
coffee and cane sugar)

2. Fishery                                                        197

3. Some industries of Vietnam enjoining certain position in its   198
accession into the WTO:

Reference Books                                                   202

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       “The Impact of Trade liberalisation on certain economic sectors of
Vietnam” is an integral part of the Project VIE/95/024 UNDP titled:
“Developing the Integration Capacity- Effectively and Sustainable- of
Vietnam into the World Trade System and Enhancing Trade Efficiency”.
Authors Professor-Doctor jointly elaborates this report. Bui Huy Khoat,
Dr. Nguyen Quang Thuan and Dr. Dao Le Minh

       This report is for the following objectives:

   - Evaluating impacts of Vietnam accession to the WTO and
       implications of trade liberalisation policies on the main trading
       sectors of Vietnam in terms of trade opportunities, efficiency,
       development perspectives as well as emerging challenges.

   - Evaluating impacts of Vietnam accession to the WTO on the
       investment in some economic sectors of Vietnam

   - Submitting to the Government proposals regarding policy reforms
       and accession strategies.

       The evaluation of impacts of Vietnam accession to the WTO and
implications of trade liberalisation policies on the Vietnam economy needs
time in order to have a comprehensive and in-depth results. As the time
constraint, this report only embarks on primary impacts of Vietnam
accession to the WTO on some sectors in the fields of industry, agriculture
and services in the view of drawing primary proposals on macro-economic
policies that ensure the efficiency of Vietnam participation in the WTO.

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       This report is comprised of 3 chapters:

       Chapter 1: “ Vietnam and her accession to the WTO: opportunities
and challenges” which outlines the basic principles of the WTO and the
obligations of Vietnam to comply with those principles; analysis possible
benefits that Vietnam may draw from her participation in the WTO and
the costs she has to pay for that integration; and primarily evaluates the
impacts of Vietnam accession to the WTO on trade, investment and
structure of productions.

       Chapter II: “ Vietnam accession to the WTO and main economic
sectors” which focus on the impacts of trade liberalisation policy on
sectors such as agriculture, food processing, industry and services,
especially in sub sectors like rice, coffee, sugar, sea food, textiles, motor
vehicles, electronics and basic telecommunication. In each sector, there
are proposals of trade and investment policy adjustments in the manner of
WTO consistency; commitments and rules to be uphold in trade
liberalisation agreements; advantages and challenges for each sectors in
the process of WTO accession.

       Chapter III: “Vietnam accession to the WTO: recommendations”
which proposes ways to draw up commitments and negotiation
requirements during the course of Vietnam accession; supportive
preparations to be taken into account and main points in the schedule of
negotiation of Vietnam.

       The authors sincerely thank the Multilateral Trade Policy
Department of Ministry of Trade of Vietnam, especially Mr. Dao Huy
Giam, deputy Director-General and Mr. Truong Quang Hoai Nam,
National Project Manager.

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       Due the time constraints, this report may be exposed to some
drawbacks and imperfection, the authors would highly appreciate
constructive feed-backs.


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                                     Chapter I



       Vietnam's economic renovation has been initiated since 1986 and
over 10 years the renovation has resulted in many significant
achievements in all economic and social aspects. Vietnamese economy
has been gradually transferred from bureaucratic and centrally planning
economy to a market one regulated by the State towards socialism
direction. Regarding foreign affairs, the State has pursued foreign policies
of multilateralism and diversification and integration into world economy.
Such policies have facilitated/supported the country to integrate rapidly
and effectively into the world economy.

       In early 1990s significant political and economic changes in Eastern
European countries and former Soviet Union affected forcefully
Vietnamese economy in general and its foreign economic affairs in
particular. Traditional export-import markets of the country were suddenly
reduced. Foreign-invested capital were decreased dramatically and
overdue foreign debts rose annually. In such context the country was
firmly resolved to continue its policies and directions made from the
beginning and was ready to face the big challenges. Vietnam's total
foreign trade figures increased by nearly 30 per cent a year over the past 5
years, from USD 5.2 billion in 1990 to USD 20 billion in 1997.

       During seventh Congress of the Communist Party (in June 1991)
multilateralism and diversification policies of foreign affairs were
affirmed by the following guideline: Vietnam wishes to make friends with
all nations for sustainable peace, independence and development. Political

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report of the eighth Congress of the Communist Party reaffirmed that:
Vietnam would continue foreign policies of independence, multilateralism
and diversification of foreign affairs in the spirits of Vietnam's willingness
to make friends with all nations in the world for sustainable peace and
development. Vietnamese policies on multilateral trade organizations were
defined concretely in the Congress report on directions and tasks of
economic development: accession to ASEAN and preparation for entry
into AFTA, APEC and WTO.

       WTO is a worldwide trade organization. There are presently 132
members and 30 applicants for accession. Accession to WTO is an
important step to ensure that the country's economy will work in a firm
environment with stable rules to increase efficiency of trade activities and
integrate actually into the world economy. The Government of Vietnam
submitted an official accession application to WTO and the Trade
Memorandum of Vietnam in January 1995 and in August 1996
respectively. The first session of Vietnam's accession to WTO was held in
Geneva in July 1998.

       I.      Fundamental Principles of WTO and Compliance

Requirements for Vietnam

       WTO Agreements consist of 29 main and separate legal

documents covering all economic sectors from agriculture to textiles, from
services to government procurement, rules of origin and intellectual
property rights. In addition there are 25 supplemental statements,
decisions and understandings at ministerial level. All these documents set
out obligations and benefits of WTO members. Accession to WTO means
that Vietnam firstly to comply with basic WTO principles and then
overcome a number of bilateral and multilateral negotiations with WTO
members. Vietnam will have to make certain adjustments in its trade and

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economic policies to be in compliance with the fundamental principles
and regulations of WTO during negotiating process or a certain period
after its accession to WTO. The following are fundamental principles of

       1. Non-discrimination Trade Principle: MFN and NT

       Under this principle all trading activities between WTO
members(which may be a nation or a customs territory) have to be done
on the non-discriminative and equal basis:

       - All WTO members have to grant each other MFN treatment under
which any WTO member has to grant the best treatment that it is applying
to a good or service of one member to others on the basis of non-
discrimination. However there are some exceptions in the MFN principle
(see attached appendixes).

       - All WTO members have to grant each other NT treatment under
which imported goods have to be treated equally with local-produced ones
of the same kind.

       - MFN and NT principles are mainly shown in policies and
regulation related to non-tariff barriers, tariffs, payment, transportation
and insurance. In addition they are also extended to trade in services,
investment and intellectual property rights.

       Although non-discrimination principle is the most basic

and compulsory/obligatory to all WTO members WTO Agreements have
some exceptional MFN provisions that WTO members can apply in
special circumstances.

       Simply speaking that after accession to WTO goods of WTO
members imported into Vietnam will be treated equally with Vietnamese
ones of the same kind within Vietnamese territory and vice versa.

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       Under WTO norms developing countries enjoy some preferences,
especially    implementation        periods.    Nevertheless,     protection   and
development of weak domestic production branches should be urgently
taken into consideration along with steps of economy openness. As a less
developed country, NT principle will probably a big challenge to
Vietnamese economy, particularly in initial period of industrialization.

       2. Trade Liberalization

       One of the important WTO objectives is trade liberalization. As a
result the first and extensive condition for accession to WTO is that a
nation or customs territory have to a nearly stable and firm market

       In order to achieve the objective of trade liberalization set by WTO
Agreements an applicant or a member has to reduce tariffs and non-tariff
barriers or they may be eliminated in a certain time in the future to
develop trade. However trade liberalization process does not mean that the
State management will be eliminated and it shall be done in
compliance/accordance with all existing laws and regulations of a country.
A world economy development direction must be recognized that
economies become increasingly interdependent and trade negotiations of
countries aim at reaching multilateral trade arrangements to facilitate
international trade. Although Vietnamese economy has gained some very
important achievements over the past years of reform the national
economy is still in the process of transition and is having many
shortcomings to have a full market economy. Russia and China also
undergo these difficulties in the process of their WTO accession

       Trade policies should be adjusted in accordance with WTO norms.
Main implication of WTO Agreements is tarrification of non-tariff
measures and simplication of export-import procedures. Companies of all

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economic sectors, whether big or small and foreign or local, shall be
treated equally in international markets. In the process of transfer from the
State monopoly of foreign trade to a market-oriented mechanism the
foreign trade of the country has achieved some vital progresses.
Nevertheless such process is still improving slowly and distinction
between the State management and self-regulation is not clear. Some of
points not in compliance with WTO norms are described as follows:

       - The current foreign trade management mechanism still has many
characteristics established by the former State monopoly of foreign trade,
for example, appointment of export or import focal points of certain
goods. Business enterprises in WTO members are all treated equally in
importing or exporting goods and services or WTO members are allowed
to apply quotas to some certain goods.

       - Although shipment-licensing procedures were abolished export-
import procedures are still cumbersome and even discriminative among
companies of all economic sectors or of the same sector or between local
and central companies. One WTO principle states/prescribes that all
businesses are free to run export-import activities legally.

       3- Trade protection by tariff barriers

       Although the WTO objective go to trade liberalization WTO
recognizes necessary trade protection measures when taking into
consideration of a fact that different development levels among nations in
the world always exist. However recognized trade protection measures
have to be done by tariff measures but non-tariff or administrative
measures. In addition WTO members have to establish a mechanism to
run regular and continuous negotiations to reduce gradually tariff rates on
the basis of mutual benefits.

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       Vietnam has now a tariff sheet applied imports from all origins.
When implementing AFTA Vietnam has just worked out a preferential
tariff schedule granted to AFTA members. Presently all WTO members
have a tariff schedule consisting of three types of tariff, namely: common
tariffs, MFN preferential tariffs (applied to WTO members) and special
tariffs (given to free trade area or customs union members).

       4- Establishment of Stable Trade Environment

       WTO has a general direction of establishing a stable and clear trade
environment. So WTO sets out the following regulations:

       An applicant has to set up its own binding tariffs schedule through
negotiations and has no right to increase these binding tariffs. Although
any WTO member is allowed to re-negotiate its binding tariffs higher ones
are not encouraged, except for certain circumstances and increase in
binding tariffs have to be made in parallel with compensating measures for
affected members.

       A comprehensive study should be now done to specify appropriate
binding tariffs. This involves directly calculation of specific tariff rates
and establishment of tariff reduction schedule. Vietnam cannot use
existing tariffs as binding rates for WTO negotiations.

       Trade policy regime should be made public, transparent and stable
for a long term. Each WTO member is required to provide others with
latest information on its current trade policy regime. WTO established a
review mechanism of trade policies under which each WTO member have
to submit its periodical report on trade policies and current commercial
situation for other WTO members‟ review.

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       5- Fair Competition Principle

       Under this principle a fair and healthy competition environment in
which competitiveness of goods must be determined by price, quality and
other market considerations is encouraged to meet growing requirements
of consumers. Discretionary power of the State to distort fair competition
in international trade is prohibited.

       To ensure this principle WTO Agreements include regulations on
anti-dumping, production subsidies and countervailing measures against
dumping and subsidies in certain circumstances.

       Therefore subsidies and preferences given to the state-owned
enterprises should be eliminated step by step. However in certain
circumstances, for example, supporting and protecting weak industries or
businesses these measures can be maintained but informed to WTO
members for review. An anti-dumping law has not been promulgated in
Vietnam. As a result some difficulties may appear if dumping activities by
foreign giants damage heavily a certain good or service in the domestic
market. In accordance with an anti-dumping law the authorities has the
right to investigate or apply necessary measures against dumping activities
by foreign companies to maintain healthy competition environment. So an
anti-dumping law in Vietnam should be issued soon to protect local-
manufactured goods.

       6- Principle of non-limits on quantity of imports

       Quantitative restrictions on imports are seen as less transparent,
problematic and distorting measure to trade mechanism. This is an
important content prescribed in the WTO Agreements. As WTO
recognizes difference in economic development levels, financial and
competitive position of Members both developing and less developed
countries are allowed to apply certain quantitative restrictions in

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exceptional situations. For example, importing country is facing
difficulties of payments balance, foreign currency shortage, excessive
supply of an item or imported goods that have negative impacts on human
ecology, environment or national security. However these restrictions are
only applied for a definite time and will have to be eliminated in the end.

       7- The right to waive and safeguard an obligation in

       Any WTO member has the right to waive an obligation if it has
right reasons that are accepted by other members under WTO norms.
Application of emergency safeguards are allowed if a WTO member‟s
production industry or certain market is damaged seriously by imported
goods. But enforcement of these measures shall be complied with strict
regulations. Such enforcement and clear explanations shall be reported to
the WTO Secretary and Members within a specified time. These measures
are also temporary and equally and publicly applied.

       8- Recognition of regional trade agreements

       Although WTO is a worldwide organization regional trade
Agreements based on characteristics and balance of benefits among
countries in that region are approved by WTO provided that they have to
comply with WTO principles and do not create trade discrimination and
barriers to nations outside the organization. There are an increasing
number of economic organizations in the form of free trade area or
customs union. For instance, under AFTA Vietnam will levy more
preferential MFN rates on imports from ASEAN members that are even
lower than WTO committed ones.

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       9- Incentives given to developing nations

       Owing to lower development level of developing countries over
developed ones and two thirds of WTO members are developing countries
Part IV of WTO Agreement emphasizes that developing countries should
be given certain incentives in both trade in goods and services. Special
preferences are also granted to less developed nations and nations in
transition. So commitments of tariffs and non-tariff measure reduction of
developing or less developed countries shall be not the same as those
made by developed countries. As for “capacity building assistance”
prescribed in WTO Agreements the developed countries are committed to
grant general special preferences to developing countries and other special
incentives to less developed ones.

       Vietnam is a developing country and in transition process of its
economy. During its negotiations for accession to WTO Vietnam should
take advantage of possible incentives, especially transition periods.

       In addition to the above-mentioned 9 principles, GATT/WTO
Agreements have exceptional regulations on garment and textiles under
which trade in textiles and garment shall be regulated by Multifibres.
       Arrangement (MEA). MFA is not an integral part of set of
GATT/WTO Agreements. MFA prescribes that developed countries can
impose quotas or quantitative restrictions on garment and textiles from
developing nations. After the success of the Uruguay negotiations round
WTO has also come to an agreement that the garments and textiles will be
gradually negotiated within WTO framework.

       In summary, accession to WTO means that Vietnam will has to
adjust its economic and commercial policies and regime in accordance
with the above principles. Further procedures and requirements on
applicants are more and more strict. For example, China and Anger have
both undertaken many negotiations over decades but not to be admitted as
official WTO members. The more slow accession to WTO the more

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disadvantageous conditions and economic losses that applicants will have
to suffer. Therefore Vietnam will have to be actively prepared for both
accession negotiations and restructuring of domestically economic and
commercial laws, policies and regime.

II. Opportunities and challenges for Vietnam when joining WTO

       To implement open door policy, strengthening the relationship with
all countries, region in the world, joining WTO has the important
significance and is vital requirement at that time. However, joining WTO
presents opportunities as well as challenges for Vietnamese economy - a
less developed economy in transition process.

       - Joining WTO allow us really integrate into the common tempo of
the world economy, approach to trade environment with global scope,
which is firmly, has sustainable system and rather stable, set premise for
economic development and for Vietnamese enterprises doing business in
Vietnam and abroad. More over, participation in the WTO will allow
Vietnam to strengthen its position in trade negotiations by having access
to more effective, just, and fair rules for the settlement of trade disputes.
Some issues now just dealing in bilateral relation, which are discrepancy
and unstable, will enable to deal in multilateral and systematical

       - Allow Vietnamese economy integrate into the world economy.
When become WTO member, Vietnam would has opportunities to expand
export markets, enjoy Most-Favoured-Nation (MFN) treatment, Nation
Treatment (NT), would not be discriminate in international trade, would
be enjoyed the negotiation outcomes of GATT and WTO which have been
negotiated over few decades, such as strongly reduce tariff and non-tariff
barriers, enable for some Vietnam‟s intensive products such as textiles
products, agricultural products, food and manufacturing products would
access into the world market, particularly the large market as the U.S,

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Japan, EU markets. The benefits from enjoying MFN avoid the
discrimination clearly display in tariff rates and another export regulations
and rules such as food hygiene standard, rules of origin... Without MFN, it
is hard to competitive and access to market.

       - Being a member of WTO, Vietnam could enjoy special
preferences like GSP which is the highest preferences for developing
countries with out reciprocal condition.

       - WTO has close and mutual relation with international financial
organizations such as World Bank, ADB, IMF. In the past, while Vietnam
has negotiating with those organizations about preferential capital, they
always attached with conditions on trade policy mechanism according to
WTO principles. If Vietnam does not has commitments and policy
mechanism accords with WTO norms, having preferential capital would
be very difficult. It is the same in case of getting the aids, ODA and other
bilateral credit aids resources if Vietnam is not a member of WTO.
Therefore, joining WTO Vietnam will has close relation with the
international financial organizations and their strong supports, because
together with WTO, they are belong to the mutual development system of
the United Nations and having the same objective. More over, the break
through the relation with IMF, WB, ADB is very important element,
create the faith from the enterprises and foreign investors to develop trade
and investment with Vietnam. Benefits from those activities are greater
compare with total of money from international financial organization.

       - Joining WTO, Vietnam will has chance to discover the world
markets mechanism and its playing rules, to learn experiences from other
countries. Vietnam will has opportunities to negotiate and dealing trade
disputes to protect national interests as well as to train the officials
improving their abilities and experiences for the economic reforms and
integration process of Vietnam. As a developing country, Vietnam can
receive the technical assistance and consultation from WTO Secretariat on
the trade statistic and trade policy as well as creating the good conditions

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for Vietnam to participate in the WTO's negotiations. Country which is
not WTO members can not involve in the markets and benefits share
negotiations, has no information, no right to discus or speak out its views
when the arrangements prejudiced to national interest.

       The world situation have been critical change, there are favorable
opportunities for the nations implement open markets policy. The strong
development of technologic science revolution is specific of current era,
the world economy is being globalization, so developed or less-developed
nation can not separate, isolate or stand aside exchange economic relation.
Integrate, participate in mutual playing ground of the world economy is a
requirement for all countries in this era. With all developing countries,
integrate in the world economy allow them make the most of power of era
bring into play the internal power, shorten development phases become
developed economies in short time. Through foreign economic
development, less-developed and developing countries can have capital,
technologies, management experience and expend markets. This is
essentially element for effective use of the internal power sources as labor
and natural resources for economic development.

       The decision to join WTO is very important significance step in all
international integration process. Joining WTO process not only involve in
foreign economic but also effect to all our internal development strategy,
to short term and long term developing environment and also social
economic and implement socialist oriented policy.

       It is need to be confirm that Vietnam engage in integration to global
economy is necessity step, conform to trend of the world as its
development interest. Joining WTO with a view to develop, participate in
playing common rules, angle for expending trade market, attract capital...
as well as limit the discrimination in bilateral relations, and strive dispute
settlement mechanism of WTO for protect its real interest. Through the
experiences of the other countries, consider on general and long term
national interest, joining WTO bring more advantages than disadvantages,

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however, there are many challenges need to be deal by the right and
careful measure.

       The biggest challenge of joining WTO is that Vietnam is
developing country with very low economic level compare to many
countries in the world. In the other side, Vietnamese economy is in the
transition from a centrally-planned economy to a market economy, the
elements belong to market economy have not been taken an integrated and
exist a lot of mistakes. The goods markets have not unified over the whole
country, it separates many local markets, and they can not reach to the
regional and global market. Labour markets, capital market just
commenced establishment, it is difficult to call for capital to invest in
production because we do not have stock markets. Interest rate and
exchange rate were not conform to market mechanism. Legal system,
important state management instrument in market economy, insufficient,
segregated and overlapping, it has not made a legal environment for
enterprises of all economic sectors. Financial, monetary and export,
import policies are in the same conditions.

       Joining WTO, integrate into the world economy, Vietnam have
gradually reduce tariffs and non-tariffs barriers, Vietnamese products have
to compete with foreign products in domestic market and abroad. Because
of less developed economy and backward technologies, if Vietnam does
not have the right strategies, developing competitive advantages of
country, enhance effectiveness and competition power of domestic
products, Vietnamese products can not compete with products from
developed countries. Vietnam will not explore the advantages,
opportunities of international integration and will not manage domestic
market with the accession of foreign goods, foreign companies will
control domestic market, Vietnamese labourers have to work hard for
foreign companies right in Vietnam.

       In the last few years of economic reforms, the Vietnamese economy
grew rather high. GDP increase average 8.2%/year in the 1991-1995

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period, and 9.2% in 1996-1997. However, the effectiveness and
competitive power of Vietnamese economy still low. Vietnamese export
products are mainly natural products, unprocessed and preliminary
treatment agricultural, forestry and fishery products. The style of Industry
products are poor, low quality, high price due to 2-4 generation backward
technology compare to the average in the world and used 2-3 times more
materials, power compare to the same kind of products if produce in the
other country. This real situation is a not small challenge for the
integration process.

       Due to the low developed of the economy, the critical and
unbalance competition of developed countries, Vietnam need to have the
effective policies and protection means for domestic products. In order to
negotiate and joins WTO, Vietnam has been committed selective,
conditional protection measures in certain time. Vietnam also committed
time schedule to reduce those protection barriers. However, the reduction
of tariffs would effected to budget‟s income sources of Vietnam which
were very tension. Therefore, tariffs reduction process is needed to take
into account to find the other new sources to supplement to budget. More
important, Vietnam has to restructuring its economy, renew economic
management mechanism in order to raise productivity, quality and effect
of each enterprise, sector and of the whole economy. This is a huge and
not ease task.

       The huge challenges to us is how to manage the state economic
sector in order to keep its leading role to compete equally with the other
sectors in the economy. In the fact, many state owner enterprises are
suffering losses and less effective. While finding the good measures to
increase their effectiveness, many of them need to have subsidies and
preferences to be existed and developed. Vietnam now finding the
measures to renew state owner enterprises, management mechanism, to
gradually cut subsidy and place them into equal competition environment
with the other enterprises. In order to implement WTO‟s requirements,

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Vietnam may wish to brought into the open, transparent relations between
state and state owner enterprises.

        At the present time, the trend free trade and integration growing
very fast, to cover broad areas, not only trade in goods but also trade in
services, investment, intellectual property rights... Many countries tend to
shorten the schedule to implement commitments, it make Vietnam‟s
negotiation and integration process more difficult, the obligations will be

III. The effect of joining WTO trade, investment and production

        Globalization and regionlization are necessity trend that every
economy has been attracted. However, countries having different
implementation policies according to the levels of economic development,
so the effect of the implementation is very different. The assessment the
effect of joining WTO have to depend the specific economic development
conditions and the ongoing economic relations.

        Joining WTO directly effect to trade and trade will effect to the
production. So, the essence of the examining the effect of WTO to the
domestic production sectors is assess the competition abilities of
Vietnam‟s products compare to foreign products in free trade
environment. The competition abilities of products depend on many
elements, the most important is quality, categories, samples and price of
products. The reduction of tariffs, simplifying trade procedures will
directly effected to prices of products. The quality and samples also will
be changed because of the pressure of competition.

        Regarding exports, joining WTO can create advantages for export,
especially to markets of developed countries because Vietnam could enjoy
MFN and NT. At that time, goods of Vietnam are hard to access the WTO

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countries markets because of the discrimination aside categories, samples
of goods, reasons. On the other side, we should know that, the production
sectors have to compete very hard because joining WTO Vietnam have to
manage by tariffs instrument and gradually reduce barriers, limit non-
tariffs barriers. Obviously we should protect some kind of goods but just
through tariffs and to meet the WTO requirements.

       Regarding imports, Vietnam imports materials for the production
and industrial products such as: aluminum, cement, chemical, electronic,
chemical fertilizer, medicine, papers, petrol, pesticide, plastic, steel, means
of transport... More than haft of them has tariffs rate lower than 5%. They
are materials for the production or necessary consumer goods. If the
import structure the same as now, joining WTO would not affect domestic
production and trade.

       However, joining WTO Vietnam has to undertake free trade,
eliminate tariffs barriers, giving MFN and NT tariffs for the WTO
member countries. So those countries will take a part of Vietnamese
market, this is their first interest, because Vietnamese market has big
capacity potentiality, and requirement for goods quality not high. Foreign
goods will flood the market not only materials and necessary goods but
also processed industrial goods, particularly high technology content
goods, which are Vietnam unable to compete yet. Currently, some
Vietnamese goods less competition power to ASEAN goods because of
quality, category and quantity.

       Having reason to concern that because Vietnam has less economic
development level compare to other the WTO member countries,
competition power of goods very weak, so Vietnam will has fierce
competition right in its market when joining WTO. At that time, import
goods are flooding the market, many domestic industrial sectors are
miserable such as: textile, shoes, mechanical goods, electronic appliances,
porcelain, glass, steel sheet...even tariffs barriers still high, so when tariffs
barriers will be eliminate, the pressure would be bigger.

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                                        Chapter II

                          IMPACTS OF WTO ACCESSION

                      ON SOME KEY ECONOMIC SECTORS

I- Relation between agriculture sector and development of processed
food grains industry

1. Position of the agriculture sector and relation between the
agriculture sector and development of processed food grains industry

       The close relationship between the agriculture and food processing
industry in the course of industrialization of the country is indispensable in
such a nation as Vietnam with high population, low average cultivated
land per head and majority of labor force locating in rural area.

       In one hand, food-processing industry is always going along with
agriculture and rural economic sector. The food processing industry
contributes to the development of agriculture as it raises demand and
quality of agricultural products in international and domestic markets. In
addition, the food processing industry directly increases employment,
attracting labors for rural economic sector as most of the industry was
established near rural raw material areas at small and medium size with
some certain favorable treatments.

       In the other hand, the food processing industry heavily depends on
agricultural production result, as it is the unique source of raw materials
for the food processing operation.

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       Therefore, assessments to the development of the food processing
industry should be put in the particular circumstance of raw materials
production for this industry.

2-     Commercialization policies on agricultural products:

       After some years of implementation of renovation of the state, the
agriculture and food processing industry have recorded certain results, for
which the social covering cause lies in the fact of synchronized effect of of
open policies and mechanism in agriculture and food processing industry.
Thanks to these policies in agriculture and food processing industry,
production capacity was freed, economic structure initially transformed in
the right direction, economic efficiency were on the rise.

       In line with the growth of agriculture and food processing industry,
consumption market allocation especially rural outlet network has been
widely developed and thus strengthens goods circulation. Market of raw
materials for food processing industry attaching with households
continuously operates ensuring the operation of rural processing utilities
and food processing factories. Price of agricultural products and raw
materials for food processing industry will be gradually stable.

       The state has united the administration and investment for the
agriculture and food processing industry.

       These matters have been expressed through a policy system to bring
the agricultural and food processing products to market.

2.1.   Encouragement measures to producers:

       - The development policy for the multi-sector commercial economy
in agriculture with the main content of recognizing household is an self-
control economic unit, renovating collective economic sector and state

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enterprises, encouraging private economic sector. This economic model
has clearly been reflected through the raw materials production for the
food processing industry.

       - The price and consumption policy of agricultural and food
processing products: the state has taken markets nationwide as a whole,
utilized the single price mechanism, erased every kinds of limitation and
assisted producers of agricultural products for food processing industry.

       - Policy on providing loans to producing households to develop
agriculture, forestry and fishery and rural economic sector: High attention
was paid to raw material processing utilities for food processing industry.

       - Policies on agriculture, fishery, applying science and technology
to production, employing qualified technical staff and skilled workers,
setting priority to female workers in agricultural and food processing

       - Policies on forestation of vacant lot and bare hills, exploiting and
utilizing wasted land, coastal alluvial ground and water surface in delta
areas have been brought into full play and supported by farmers.

2.2.   Trade policies on agricultural products:

       Mentioning the trade is talking about goods and market. Under the
direction of renovation to market economy, the trade policies on
agricultural products (and food processing industry) were expressed as

       - Policies on diversification and multilateralization to goods and
market: for the food processing industry, diversification not only
diversified trees and animals but also developed priority products made by
trees and animals.

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       - Policies on market orientation: The present market is now
different from that of subsidization period, which mainly focussed to local
market. It has now moved to the open export market orientation and
considered exportation is of first priority and center point of the foreign
trade. In this strategic policy, goods and market are two essential factors,
which govern trade operation in agriculture, fishery and food processing
industry. 9 out of 10 major exports with current high export value are
goods of agriculture, forestry, fishery or related sectors. Target of this
policies is to increase the export proportion in GDP as of 1996-2000 to
40% or 50% or higher in following periods.

       - Investment policies on agricultural development are always going
along with investment and development of food processing industry.

       - The strategy for development of the agriculture and food
processing industry as of 1996-2000 is of “harmonized combination of
various scale, technology standard with the full participation of all
economic sectors at home and abroad, ensuring the processing of most of
agricultural and fishery products in different regions, intensified
investment, enhancing capacity and renovating technology in existing
units as well as establishing of new production facilities with advanced

       - With these guidelines of the state, a series of new policies have
been enacted, amended and supplemented to form a relatively
synchronized policy system in agriculture and food processing industry.
Main investment policies in this field are presented as follows:

       + Putting in priority list investment in agricultural, forestry and
fishery and other technical assistance directly serving the production of
agricultural, forestry and fishery products and exports.

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       Beside favorable treatments stipulated in laws and regulations on
tariff, investment projects in processing industries in agriculture, forestry
and fishery under the law on encouragement of domestic investment are
enjoyed further favorable treatment in tariff as follows: Newly established
trading and producing enterprises will be extended exemption from
revenue tax from one to two years; particularly for those in far distance
areas will enjoy this exemption from one to two years and a decline of
50% in revenue tax in the following one to two years. Trading and
producing enterprises investing          more or utilizing their revenue for
reinvestment will enjoy an exemption from revenue tax on added revenue
in the following year brought about by that new investment. Investors are
put in first priority under consideration of providing long and medium-
term credits from investment assistance funs.

       + Putting in priority list investment in technological renovation
which accounted for a remarkable proportion in the total investment in the
processing industries of agriculture, forestry and forestry. In a situation of
serious lack of capital, the state paid attention to investing in infrastructure
for these processing industries in the directions of renovating and
increasing the number of equipment, putting utilities processing raw
materials for agricultural, forestry and fishery processing industries in
priority list of providing loans to renovate their equipment.

       + Further investing in raw material areas for processing industries
through forestation programs in vacant lots and bare hills (program no.
327), program on utilization of deserted land, coastal alluvial ground
(program no. 733) to grow forest and long-time industrial trees; investing
in expanding growing areas of special trees of high economic value;
investing from the growing stage to harvesting stage of agricultural and
fishery products.

       + Attracting foreign investment in agricultural, forestry and fishery
processing industries under processing contracts. These processing forms
are aimed at creating more jobs for workers, but will be step by step

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narrowed, as the capital proportion in each product is not raised. It is
therefore encouraging the investment form like joint ventures which are
both attracting capital and providing more employment.

       From 1995 to 1997, investment in agricultural, forestry and fishery
processing accounted for 37% to 39% in the total investment in agriculture
(for 1995 only, investment in agricultural, forestry and fishery was VND
73811,1 billion, making up 37.7% in total VND 20.719 billion investment
capital in agriculture).

       Up till now, some export-oriented agricultural, forestry and fishery
processing establishments have been built up at medium size that serve
central goods production such as vegetable, meat, sea product, coffee ...
with the total investment capital of over USD 300 million and a numerous
number     of    administrative     staff   and    technical      workers   meeting
requirements of present export production. Some industries assume a
fairly completed organization including different units of raw materials
producing and processing, circulating and marketing, equipment
production and research and training. These units are closely and
synchronously linked. This is the premise for the establishment of
specialized industry in the future.

       Encouragement in foreign cooperation and investment has initially
attracted foreign investment capital with many big projects. The ODA
disbursement for 5 years (1991-1995) for the food processing industry was
USD 200 million, in which USD 68 million for investment and USD 52
million for credit. Under the FDI for 1996, 28 projects were granted
licenses with total capital of USD 504 million (accounted for 5.8% total
FDI in 1996) investing in the food processing industry and 34 projects
with the total capital of USD 136.7 million investing in agriculture,
forestry and fishery. FDI attraction into agriculture agricultural, forestry
and fishery processing industries has increased over 40% per annum over
the last few years.

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       Up to May 1997, foreign investment in the agricultural processing
industry has unfolded 57 projects with the total registered capital of USD
750 million, in which 38 projects with the invested capital under USD 5
million per project, 7 with invested capital from USD 5-10 million, 8 with
invested capital from USD 8-20 million and 6 with invested capital over
USD 20 million per project.

       FDI investing in agricultural processing sector over the year:

       1990:       2 projects with total invested capital of USD 44.7 million

       1991:       7 projects with total invested capital of USD 296 million

       1992:       2 projects with total invested capital of USD 1.4 million

       1993:       10 projects with total invested capital of USD 16.7

       1994:       11 projects with total invested capital of USD 73.6

       1995:       12 projects with total invested capital of USD 85 million

       1996:       9 projects with total invested capital of USD 217.3

       1997:       4 projects with total invested capital of USD 15.3 million

       3.      Rules and commitments in agriculture agreement and

food processing industry:

       3.1     Marketing agricultural and food processing products:

       + In one hand, we should maintain old markets and traditional
partners through which Vietnam has gained certain mutual understanding
about trading issues which we mastered. Advantages and challenges gave

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Vietnam somewhat experience in the world competition. These markets
attracted attention by markets Vietnam has not reached.

         Markets for agricultural and food processing products in 80s were
mainly former Soviet Union and Eastern European countries on the basis
of exchanging of planned agreements by requesting countries. In 90s,
foreign markets system of Vietnam is sifting to open economy
mechanism. The former markets narrowed and new and active outlets
extend to Hong Kong, Japan and Singapore, South Korea, Taiwan and
Thailand, EU, Middle East and South America, which accounted for a
fairly big proportion in the agricultural and food processing products.

         In the other hand, Vietnam should seek for new markets to promote
its exports that have advantage competitiveness such as America, Latin
America.. ..

         The current status of markets for agricultural and food processing
products will be mentioned in following section as we study some main

         + Raising partners‟ prestige is a dispensable factor to occupy market
in sound competition. It is necessary for us to make our partners trusted in
the business operation of Vietnam in all aspects such as administration and
management, transaction and time keeping, goods quality and payment ...
pledged in agreements.

         + In marketing we should carefully consider instant and long-term
interest. Maintaining traditional markets and at the same time actively
expanding to new markets which may be fastidious required us to raise
processing quality and considered it as fatal element for the existence of
processed products of Vietnam in the world markets.

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       3.2     Providing domestic assistance in developing main exports

effectively through a sound policy system, active implementation and
encouraging workers to have a correct view in production and investment.
Export subsidization is necessary for market stability but should not
resulting distortion of market price and sound competitiveness in the
market. However we should subsidize workers to ensure their benefits.

       Production subsidization is not only for trading purpose but also a
larger sense of the socialism of ever raising knowledge and living standard
of the people.

       3.3     Clear    and     concise     guideline     and     construction   of

       + Developing the administration system: there should be systematic
organization and a wise brain to administer and make decision duly and
correctly and to avoid unnecessary challenges and make full use of
advantage. To fulfill that duty, each ministry and industry should be
serious and responsible, ensuring sacred interest of the country when
making any decision. Try one‟s best to avoid hurry and local impatience
and miss the stake of the society and the national community.

       + Correctly applying standards: In agreements, standards, which
are signed by both parties, are binding. Therefore, applied standards
should be clear, unequivocal and not under pressure. In the competition
and benefit-motivated operation, it could hardly avoid pressure by either
party hence the acceptable reality should base on clear application of

       In the momentum of growth of the economy, Vietnam took part in
CEPT of AFTA since 1996 and is actively accessing into the WTO and
APEC but lack of adequate adjustments in economic structure and trade

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regulations. This would set up quite a few obstacles on the road to
integration in the future.

       3.4     Strengthening prompt and sensible measures in adjusting
               trade policy on agricultural and food producing goods under

       The strategic target of the trade policy of Vietnam in the course of
industrialization and modernization is to raise proportion of processed
goods in exports structure. Currently, agricultural and raw materials still
make up a big proportion in exports structure of Vietnam. Though having
big potential in the production and exportation of these goods, the
economic effects and their long-time impacts to economic structural
change remained limited. Therefore, endeavor contributed in the following
period is to make a big change in export structure and increase processed
goods up to 50% in 2000 and 70% in 2020. To achieve that goal, it is
necessary to strengthen prompt and sensible measures in adjusting trade
policy on appropriate agricultural and food producing goods and yield real
impact on producers and foreign markets.

       Close monitoring is required during the implementation trade
policies on agricultural and food processing goods. Scientific summarizing
the current status and studying measures of other countries that shared the
situation with Vietnam to effectively adjust trade policy in a best time.

       The cutting of subsidization and protection of agricultural products
are matters that required cautious consideration so that agricultural trade is
not distorted by the cutting subsidization and protection. In the other hand,
subsidization for domestic production is not adequate to make adverse and
negative effects pushing production into the standstill status or
encouraging surplus production of goods. Agricultural agreement should
clarify assisting program that will directly encourage production with
program that is considered not to have direct impact to production.

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         + Ensuring the food security and food safety: Generally, cereal
production (in which rice made up for a very big proportion) is always
playing the most important role in agriculture with a desire to ensure

         Firstly, ensuring the national food security, increasing quantity of
stored cereal, meeting consumption demand in any case; Secondly
ensuring enough food for growing industry with the growth rate of 8-10%
annually and enough food for processing industry; Thirdly increasing high
value exports. The growth in both cereal quality and quantity has actively
diversified and improved its former monopoly and monotonous situation
and overcoming export cereal for the past years now.

         3.5   Opportunities and challenges for Vietnamese agricultural

produce and processed food products

         Direction of industry development in 1996-2000 is described as
follows: “Development of food processing and consumer goods industry
to meet domestic needs and increase exports, especially highly
competitive and effective goods”. Strategy for developing a large-scale
food and small and medium-sized agricultural processing industry in rural
areas will be an integral part of strategies for agriculture and food
processing industry development.

         Much Vietnamese agricultural produce, especially processed ones,
can enter the world market and presently these products are being
encouraged and turned out increasingly to meet large demand from the
markets. In the future in the course of industrialization of the country
macro-economic policies will continue to give strong preference for these
industries. However, Vietnam face some challenges as follows: supply of
materials for agriculture, forestry and aquaculture processing industries is
not enough in needed quantity, quality, types, and not in time, sensitive in

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crops as well. There are many reasons for this some of them are those
linkage stages have not been invested properly, inappropriate planning and
establishment of processing units, particularly imbalance between raw
produce area and processing units. In addition there are other difficulties
such as lack of working capital, high banking interest rate, poor
infrastructure, outdated or patchy equipment and machinery... Such
situations have caused some following difficulties for the enterprises:

         Access to the world market;

         Unstable production development and job creation

         Low economic growth rate, high inflation rate, and low
commercial reputation of Vietnamese goods.

4. Some agricultural produce as key exports of Vietnam

        4.1 Rice

        Rice is a strategic item of the country and main food item.

        4.1.1 Paddy output accounts for a large amount in food composition

        Actual figures of paddy output were 80.8% of total food output in
1980, 87.2% in 1985, 89.5% in 1990 and 91% in 1995.

        The aggregate food grains volume of the country were not enough
for domestic consumption and 1 additional tone of food grains had to be
imported annually during the period of 1940-1988. Since 1989 Vietnam
achieved an excessive food grains output for national needs satisfaction,
reservation and exporting. An average of food grains equivalent to paddy
per person was 332.6 lios in 1989, 372.8 kilos in 1995 and 398.4 kilos in

        During 1991-1997 food produce output (mainly paddy) increased
rapidly and stably annually, specifically is 21.98 million tones in 1991,

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27.57 million tones in 1995, 29.22 million tones in 1996, and 30.56
million tones in 1997. Annually average growth rate of food grains was
4.5% higher than that of population during this period.

       1983-1993 average growth rate of paddy output of Vietnam was
quite higher than that of some other countries in the Asia-Pacific region.

                              Rice productivity          Average growth rate
                                                              in 1983-1993
                            1983     1990      1993

Vietnam                      26.3      31.9      34.5             2.7

Thailand                     20.4      19.6      21.3             0.3

The Philippines              23.2      28.1      27.6             1.7

Malaysia                     26.0      28.9      31.6             2.1

Indonesia                    38.5      43.0      43.8             1.4

Laos                         15.9      23.4      23.2             3.0

Cambodia                     11.7      13.2      13.8             1.9

China                        50.9      57.2      59.6             1.3

Myanmar                      30.7      29.3      30.1             -0.8

Srilanka                     31.9      30.6      31.0             -0.2

Iran                         28.3      37.8      37.8             2.3

Nepan                        20.7      24.1      25.0             2.0

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Pakistan                     25.1      23.2     26.4              0.1

Australia                    67.4      80.9     80.6              3.5

Japan                        57.0      63.3     45.8              -1.2

       The main reason is that Vietnam has improved much agricultural
polices, especially land assignment policy number 10. Improved policies
expand the rights of farmers and make them feel assured to plough and
restore virgin soil, improve land and increase the number of crops.
Independent role of household economy is assured and both rural
individual and private economy are also encouraged.

       Before 1989 the State had an exclusive right to distribute food
grains. As a result “virtual” supply appeared and exceeded the actual
demand. The State abolished food subsidies in 1989 and farmers have the
right to enjoy the fruits of their assigned farming land after they have had
paid their full taxes and other social welfare funds.

       Some other important reasons are those macro-economic policies
such as price policy under which prices are established by market supply
and demand; policy on free circulation of food and foodstuffs; and
investment, credit policy etc. Consequently food grains production has
grown, food supply enjoys the needs of areas, prices have been kept
stable, types of goods are various and their quality has been enhanced.

       4.1.2 A great deal of jobs in rural areas have been created and
appearance of the countryside has been more dynamic and full of life

       Rural workforce is focused in the agricultural production, mainly in
paddy production. Agricultural laborer ratio of the total workforce has
been on the move: in 1980 the ratio was 67.9%, in 1985-72.3%, in 1990-

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70.9%, in 1995-72.7% and in 1997-nearly 73.2%. Agricultural laborer
growth rate was 104.3% in 1980, 115.2% in 1985, 104.8% in 1990,
103.5% in 1995 and 104.7% in 1997. A sudden increase in 1985 resulted
from an supplement of grown-up youth and workforce from economic
branches which were changed in economic transition process.

       Knowledge level of the agricultural workforce has been also
enhanced especially absorption of new technology and science, intensive
cultivation    methods,      seed    selection     and    treatment,   excavation
earthworking, and product maintenance.

       Team of agriculture scientists who make their efforts to study at
Scientific Research Institutes on the one hand and conduct surveys with
farmers at fields on the other hand. Many scientific research programes on
agriculture have become effective in production.

       4.1.3 Agriculture development has been developed in the direction
of cultivated surface expansion by intensive farming and multicropping.

       The engineering and agriculture machines industry has contributed
significantly to excavation earthworking, product harvest, and irrigation.
Chemical fertilizers industry has also developed. These industries supplied
the agriculture sector with 31.6 thousand of tractors in 1985, 16.9
thousand of pumps, 1.8 million of chemical fertilizer tones (of which 1.4
million tones were urea fertilizers), and 17.8 thousand tones of insecticide.
In 1996 38.4 thousand of tractors, 23.2 thousand of pumps, 3.4 million of
chemical fertilizer (of which 2.7 million tones were urea fertilizers), 18.3
thousand of insecticide etc turned out could not meet the demand and a
great amount of these products had to be imported.

       Number of food grains processing units has been on the move and
production technology has been innovated to enhance quality of exports.
Until 1997 the network of food grains processing units has been developed

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nation-wide including 4.977 husking machines with total capacity of
25,936 rice tones per shift of which 977 units with total capacity of 8,636
rice tones per shift belonged to the State-owned sector. The private sector
had small-sized 4,000 units with total capacity of 17,300 rice tones per
shift. Further there were 162 polishing and reprocessing machines with
total capacity of 9,419 rice tones per shift or of 2,264 thousand of rice
tones per year.

       Vietnam can husk 15 million of rice tones annually, 4.5 million
tones more than the figure of 1990 of which 75% were high-quality rice.

       An increasing demand for export rice makes tremendous demands
of reprocessing, grading or polishing machines. A range of high-quality
rice processing units has been innovated technologically by importing
modern machinery, particularly those based in the Mekong delta (rice
bowl of the country). Total husking capacity of the units in the southern
region was some 10 million tones per year, accounting for nearly 67% of
the whole country‟s capacity.

       Foreign investors have paid more attention to agricultural
processing industry including rice processing. There were 57 foreign-
invested projects with a total of USD 750 million until 1997 of which 6
projects had a capital of USD 20 million each, 8 projects with USD 10-20
million, 7 projects with USD 5-10 million and 38 projects with USD under
5 million each.

       The development of food grains sector has affected substantially
industries of food, biscuits and confectionery, beer and other eating and
drinking products. Annually 70-80 thousand of biscuits and confectionery,
370-420 million of beer liters and thousands of food produce were

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       4.1.4 Comparative advantage of rice plantation in Vietnam are
shown in following characteristics

       - Wages paid in the agriculture is low. The agriculture sector has
still attracted the most laborers from rural areas for the economy.
Agriculture laborforce ratio is high in the whole economy. Since
population growth rate of labor age is still higher than general population
growth rate, pressures on jobs in the countryside is increasing and wages
of the agriculture sector is falling.

      Some comparison figures between Vietnam and ASEAN nations

                           (figures calculated in 1991)

                 Agriculture             Agriculture land          Average
                 laborer                                          agriculture
                                                                   land per
                 Quantit       Over       Quantit      Over
                     y                       y         total
                 (thousa                               area       (hactares)
                             laborforc      (ha)
                                 e                      (%)

Vietnam           18459        71.9        7009        21.3          0.21

Indonesia         41206        53.9        22200       12.3          0.27

Malaysia           1580        23.3        4880        14.9          0.90

The               10403        41.2        7980        26.8          0.27

Thailand          18777        58.7        23160       45.3          0.69

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       - Since Vietnam opened the economy the number of skilled or
qualified laborers has increased they can invent highly effective processes
and measures on intensive cultivation with a combination of traditional
experience and modern techniques. Presently cultural background of
agriculture labourforce has been improved much. The team of scientific
and technical workers of various stages such as production, harvest,
product maintenance etc has been strengthened both in terms of quantity
and quality.

       - Land area used for agriculture increased from 5,653 thousand
hectares (or 17% of the total natural land area) in 1943 to 7,367 thousand
hectares (or 22.3% of the total natural land area). Of which 5,463.8-ha or
74.2% was used for tree plantation and 4,230 thousand hectares or 77.4%
was used for rice plantation.

       - Another advantage is that agriculture land is distributed in 7
agricultural economic areas. In these areas crops can be grown in different
times. 3 crops can be cultivated on rice plantation land (see box).

       - Weather and climate in farming areas of Vietnam are usually more
favorable for rice growing than in other nations.

                         Area, Productivity and output of rice

                                     Area          Productivity    Output

                                  (thousand          (picul/ha)   (thousand
                                   hactares)                       tones)

Total crops

1985                                  5704              27.8       15875

1990                                  6028              31.9       19225

1995                                  6766              36.9       24964

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1997                                  6766              36.9      27646

Winter-Spring crop


1990                                  1765              35.0      6131

1995                                  2074              37.8      7846

1997                                  2421              94.3      10737

                                      2683              49.6      13309

Summer-Autumn crop


1990                                  857               33.3      2855

1995                                  1216              33.8      4110

1997                                  1742              37.3      6501

                                      1867              35.1      6550

Winter crop

1985                                  3082              22.2      6828

1990                                  2738              26.5      7269

1995                                  2602              29.7      7726

1997                                  2542              30.6      7787

       All the above advantages have resulted in increased crops, high
productivity and rice output.

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        4.1.5 There are now some 40 countries of importing Vietnamese
rice of which Asian trading partners account for nearly 58%

        Major importing markets for Vietnamese rice are ASEAN, EU, the
United States, Japan, China, Middle-East Africa, India, Taiwan, and South

      Increased volume of Vietnamese exported rice to other countries

                                     1986             1990        1995

Total     exported      rice        132.0            1624.0       1987.8
(thousand tones)

Of which


                                       -                 -        111.8
                                       -                 -        152.9
                                       -               0.2        217.0
                                       -                 -         78.4
                                     11.6              8.0        277.2
                                     10.0              45.0        20.0
                                       -               15.0        0.4
                                       -                 -        209.3
                                     49.1             161.0       124.5
                                       -                 -         57.7

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UK                                     -              147.0               28.4

Iraq                                  8.2              11.0               159.6

                                       -                 -                13.2

                                       -                 -                91.2

       The figures show that the total quantity of Vietnamese export rice
has increased annually in each major market but in general the markets for
Vietnamese rice are unstable.

                           Volume                                 Value

                      (thousand tones)                        (USD)

    1986                      132                                 21623

    1990                     1624                             304637

    1995                    1987.8                            530028

    1996                     3003                                   -

       Before 1989 Vietnam used to be in shortage of food grains with an
average of 1 million imported food produce (mainly wheat and
undermilled rice) yearly. Since 1991 Vietnam has gradually overcome
food produce difficulty, not only assured domestic consumption of 72
million people (annual increase in 1.5 million people) and national food
grains preservation, but also exported some. Vietnam has been the third
largest rice exporter in the world since 1995.

       According to predictions of foreign economists Vietnam will be
able to get ahead of the United States and Thailand in exporting rice. In
fact Vietnam exported 3 million tones of rice in 1996 and 2.8 million
tones of rice for the first 7 months of 1997, became the leading rice

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exporter (for the same period the United States exported 2.3 million tones
of rice, Thailand-2.27 million tones and India-1.5 million tones).

       However rice processing technology of Vietnam has been very
poor, especially those of harvest, maintenance, transportation, husking and
drying. Although several production lines or machines have been imported
from Japan, Taiwan, German and France or manufactured locally almost
all of the production stages still depend on manual work.

       4.1.6 Commercial potential of Vietnamese rice

       Vietnam is trying to increase exported rice volume to 3-3.5 million
tones per year in 2000 with sale prices equal to those of Thailand. To
achieve this objective Vietnam should increase processed export rice
volume such as special rice, rice packed in bags, parboiling which
5% broken rice and 5-15% broken rice should account for 30% and 70%
of total export volume respectively.

       More foreign investment should be attracted into large rice
plantation areas such as the Mekong and Red deltas. Investment
cooperation with the United States partners in the form of joint venture or
100% foreign-invested company should be paid more attention to process
export rice. In addition big and effective projects on technology transfer,
agriculture infrastructure, food grains the rural areas should
be further raised.

       4.1.7 Advantages and disadvantages of rice exporting as Vietnams
accession to WTO

       a. Advantages: rice production of Vietnam has developed
substantially to assure both domestic consumption and demand for export
rice. Also Vietnam has had some experience on organization, management

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and control of international trade agreements on rice. Rice has been
controlled exclusively by the State.

        b. Disadvantages: as a WTO member Vietnam shall comply with
certain regulations and commitments of WTO, face fierce competition
from others‟, and have to innovate its existing technology to produce high
quality rice. Vietnam should overcome difficulties in lack of capital and
technology as well as rural market stagnation by mobilizing absolutely
capital from both domestic and overseas sources.

4.2 Coffee

        Coffee is one of Vietnamese key exports. Domestic consumption of
this item accounts for a little amount of some 5-10 thousand tones per

4.2.1 Growth of coffee plantation in Vietnam

        Coffee tree area has increased annually, namely: in 1980 there was
22.5 thousand hectares, in 1985-44.7 thousand hectares, in 1990-119.3
thousand hectares, in 1995-186.4 thousand hectares, in 1996-254.2
thousand hectares and in 1997-270 thousand hectares. Owing to this
coffee output also has been up from 8.4 thousand tones in 1980, in 1985-
12.3 thousand tones, in 1990-92 thousand tones, in 1995-218 thousand
tones and in 1996-320.1 thousand tones, in 1997-400.3 thousand tones.

        The total coffee tree area in 1997 increased 20 times and its output
up 40 times more than those in 1996 and 10 times and 39 times
respectively more than those in 1980. For the period of 1976-1980 the
coffee output rose a little but in 1980-1997 it had a record growth with
average capacity of 1.4-1.6 tones per hectare, a high figure in the world.

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             Coffee productivity of Vietnam and other countries

                                Productivity             Average growth
                                   (kilos/ha)                     rate

                           1983     1990     1993          In 1983-1993


Vietnam                      751     1544       1125              5.7

Thailand                     724     1184       1019              3.8

The Philippines             1070      937       776               -1.2

Malaysia                     704      551       549               -5.2

Indonesia                    567      553       544               -0.2

Laos                         646      305       403               -3.8

Cambodia                     444      762       720               5.8

China                       1000     1650       1905              7.0

Myanmar                      441      412       373               -1.5

Srilanka                    1904      567       615               -7.0

Tonga                       3333     3571       3375              0.0

       4.2.2 The coffee sector requires much of modern technology and

       Presently the coffee processing are done in the following ways:

       - Households use sedimentary machines or manual labor with
average capacity of some 100-200 tones per year.

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       - Medium-sized coffee processing with capacity of some 300-1000
tones per year. Total capacity of this method was 22,000 tones yearly.

       - Large-scale coffee processing with capacity of over 3000 tones per
year. For example, 333 Enterprises Association, Viet-Duc, Phu Quy,
Thuan An and Song Be Enterprises apply this technology.

       At present Vietnamese coffee is substantially exported in raw
material. Amount of processed export coffee was so small. Bien Hoa
enterprise was only a dissolved coffee plant in Vietnam with a capacity of
200 tones per year.

       In the near future science and technology should be applied much
more in coffee tree growing to achieve higher efficiency in production
stage. More capital from the public, the State and foreign investors should
be mobilized to grow new 50-60 thousands of coffee tree hectares in
focused areas such as Dac Lac, Lam Dong and Dong Nai provinces and to
build processing enterprises with modern technology. There should be a
capacity of 200 thousand tones of processed coffee in the year 2000.

       Recently OFD funds from the French government helped
Vietnamese coffee sector develop coffee trees in such some northern
provinces. To strengthen preliminary coffee processing stage, 6 lines of
dried coffee processing with a capacity of 200 kilos per hour were
imported by an amount of Germany ODA capital. This cooperation kind
will be expanded with UK, the United States, EU in the future.

       4.2.3 Impacts of the coffee sector on other industries

       - Help the engineering industry to produce new products such as
excavators, pumps etc and hand agriculture tools.

       - Help the chemicals industry to produce chemical fertilizers and
effective inticides for the coffee sector.

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       - Stimulate development of agriculture produce processing industry.
If quality of coffee is enhanced quality of food grains processed products
such as biscuits, confectionery will be better.

       - Serve daily demand from eating and drinking sector because
coffee is a daily consumed item at restaurants, bars, hotels or families.

       4.2.4 Comparative advantages of the Vietnamese coffee sector

       Land and weather in Vietnam is very favorable for large-scale
coffee development. In addition to traditional coffee plantation areas such
as Dac Lac, Lam Dong, Dong Nai there have been some new areas,
namely Giai Lai, Kon Tum, Song Be, Nghe An, Ha Tinh, Quang Tri ...The
total coffee tree area in Vietnam will be 300 thousand hectares soon.

       With a combination of traditional techniques and modern
technology in coffee tree cultivation, Vietnam‟s coffee capacity has
increased from 700-800 kilos per hectare to 1.2-1.3 tones per hectare now.
Vietnamese coffee is quite competitive in the international markets owing
to its quality and low cost.

       However many problems remain, for example, outdated machinery,
low quality processing with high ratio of black and broken seeds, so
sudimentary drying stage and less careful coffee selection stage. Not large
coffee growing area with poor management skills has resulted in harvest
difficulties. All these problems partly affect competitiveness of
Vietnamese coffee in the world market.

       4.2.5 Vietnamese coffee export markets has expanded increasingly

       In 1990s nearly a half of Vietnamese coffee volume was exported to
other countries through Singapore, but accounting for some 18% in 1994-
1995 and for a little now.

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        Main markets for Vietnamese coffee are German, Poland, UK,
Italy, China and especially the United States which has imported more
than a half of exported coffee volume.

        A lot of famous coffee giants in the world has set up their trade
relations with Vietnam such as Neuman, NestlÐ, E. Dand Man...

        In recent years coffee export volume always has second position
behind rice in the list of key agriculture exports of Vietnam.

            Coffee export situation of some countries in 1986-1995

                   Exported coffee volume              Coffee export value

                   1986       1990        1995       1986         1990    1995

    Total         24,020     89,583     248,087 61,474 92,193 598,147

Singapore          7074       17631      69940      20184     14557       167839

Thailand             -           -       13477         -           -      32879

Japan                -         300       15458         -          263     41041

Malaysia             -           -        2182         -           -      5549

China                -           -        2201         -           -      5953

Belgium              -           -        7401         -           -      17529

South                -           -        3382         -           -      8275

Canada               -           -        2782         -           -      6655

German             807        1603       15011       1907         4003    36234

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UK                   -           -       12602         -           -      28610

Italy                -           -        2720         -           -      6465

US                   -           -       38578         -           -      90119

                      Volume and value of exported coffee

                                     Volume                       Value

                            (in thousand tones)         (in thousand USD)

          1986                        24.0                        61.5

          1990                        89.6                        92.5

          1991                        93.5                         763

          1992                       116.2                        91.5

          1993                       122.7                        110.8

          1994                       176.4                        330.3

          1995                       248.1                        598.1

          1996                       293.7                        613.1

        1986 was considered as the basic year. 372.9% and 113.5% were
increased percentages of coffee export volume and value respectively in
1990. These figures were 1032.8% and 934.2% in 1995 and 118.2% and
752.3 % in 1996.

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       4.2.6 Commercial potential of Vietnamese coffee

       Although Vietnamese coffee is competitive in terms of quality and
prices but its markets are still unstable. To enhance its competiveness we

       - launch immediate and proper solutions on credit and price
subsidies for both producers and exporters.

       - strengthen management of harvest, collection, maintenance,
transportation and processing stages to secure coffee outputs.

       - issue more attractive policies on domestic and foreign capital
mobilization, especially OFD of the French, ODA from German to
increase processed coffee output and enhance the quality of export coffee
to EU and UK.

       - train a capable team of skilled workers so that they can undertake
the work of management, production as well as sale of products.

       - also restructure industrial trees composition so that each kind of
industrial tree will have the highest efficiency.

       4.2.7 Advantages and disadvantages of coffee export activities as
Vietnams accession into WTO

       a- Advantages:

       - Coffee trees are now grown in many favorable areas in Vietnam
with quite high productivity compared to that in other nations.

       - Vietnamese coffee has had certain share of the world market and
trust in some groups of consumers.

       - Vietnamese coffee will not only enter into traditional markets but
also into new markets such as UK, the United States, German, France...

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        b- Disadvantages:

        - Vietnamese coffee shall face fiercer competition from others‟ in
compliance with certain regulations and commitments.

        - Modern technology and machinery are not much and integrated
among various stages. Investment capital for technology innovation from
domestic and foreign sources has been small and slowly attracted.

        - Management or organization skills and international marketing
activities for this product are still so weak.

        4.3 Sugar industry:

        Previously, the Vietnam‟s sugar industry did not meet the demand
of domestic consumption and it therefore had to import sugar at a relative
big volume.

        4.3.1 Considering the sugar-cane growing for sugar production of

        - In 1975 the sugar-cane growing area of Vietnam was only 52.700
ha, that rose to 109.800 ha in 1980 (double than that of 1975) and
increased to 143.200 ha in 1985 (grew by 130.4% against 1980) but
decreased to 130.600 in 1990 (felt by 8.9% against 1985). Since 1991 it
has shown a stronger development tendency in the growing area: 143.700
ha in 1991, 224.8 in 1995 and 237.000 ha in 1996 and up to 251.100 ha in

        - The sugar-cane growing capacity of Vietnam stays low and
unstable: 374.2 piculs/ha in 1975, 397.1 piculs/ha in 1980 and 388.3
piculs/ha in 1995 but felt to 375.7 piculs/ha in 1990. It started to increase

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considerably since 1991 from 6.130.900 tons to 10.711.100 tons in 1995
and 11.371.800 tons in 1996 and up to 11.428.200 tons in 1997.

       In northern provinces the growing area of sugar cane is limited with
the largest area in Hoa Binh province of about 2 thousand ha.

       In middle and southern provinces, this area is somewhat larger but
mainly concentrated in Quang Ngai province with 10 thousand ha, Dong
Nai province with 9 thousand ha and Tay Ninh province with 12 thousand
ha, Long An province with 12 thousand ha. Ben Tre province with 9
thousand ha and Can Tho province with 12 thousand ha.

       In term of sugar-cane growing productivity, Long An province has
reached a rather high level of nearly 700 picul/ha but the area is lack of
further development. For provinces that have considerable large farm (as
mentioned above) the productivity remains approximately 500 picul/ha.

       4.3.2 Sugar processing capacity remains bantam and backward

There are 14 sugar factories, in which 6 units under the central and the
remainders under the local administration. Some big factories have the
capacity of 1000-2000 tons of sugarcane per day. The total designed
pressing capacity is 12350 tons of sugarcane per day but the real pressing
capacity accounts for only 83% of the total designed capacity. Most of the
factories were installed with synchronized equipment long time ago hence
the technologies were all backward except the La Nga and Nuoc Trong
factories‟. Some factories corporate with farmers in investing in growing
area for raw sugar cane has initially gained good results but these areas
were still limited as lack of capital.

       The sugar cane output reaches over 8 million tons a year, out of
which not more than 10% is for people‟s daily direct consumption and the
remainder for production of cane sugar. However, due to minor processing
capacity, the real consumption accounts for only 20-30% of total output

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(approximately 1.5-2 million tons of sugar cane). The remaining sugar
canes that are grown scattered into small areas and not convenient for
transportation to factories should be manually pressed. Hence the
extracting result remains as low as 50% of which processed industrially
with poor quality and unsanitary.

       The general sugar output (including cane sugar and processed
sugar) often vibrates at 360 thousand tons in 1990, 463 thousand tons in
1994 and 610 thousand tons in 1995, 747 thousand tons in 1996 and 70
thousand tons in 1997.

       4.3.3 The demand for domestic consumption of Vietnam is rising
directly and indirectly in recent years especially for the production of
diary, soft drinks, confection, alcohol... This trend is on the rise in the
coming years with the estimated average demand for consumption of
about 850-950 thousand tons, in which 650 thousand tons for direct
consumption and 300 thousand tons for food production. As a result, it is
still needed for Vietnam to import sugar every year.

       The sugar importation of Vietnam over periods: 40.6 thousand tons
worth $12284 thousand in 1986, 23.8 thousand tons worth $8906 thousand
in 1990, 145.5 thousand tons worth $60.900 thousand in 1995, 15.9
thousand tons worth $7194 thousand in 1996. Recently Vietnam imports
from Thailand, Singapore, Hong Kong, South Korea, Japan, and France . .

       4.3.4 Trade policies in sugar industry of Vietnam:

       Tax policies stipulated by the state to encourage sugar areas for raw
sugar canes for big sugar factories appear to be reasonable and favorable
to other industries. Cooperation between sugar factories and sugarcane
growing areas are appreciated to bring stability to sugar processing and
sugar cane production.

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       The investment for expanding and renovating in sugar producing
establishments with advanced technology should be paid greater attention
by a fairly remarkable share in the total capital invested in the sugar and
sugar cane industry.

       Strongly attracting foreign investment capitals into sugar production
industry constitutes a necessity for high attention. This source will quickly
help the sugar production of Vietnam renovate its equipment to boost its
output meeting the domestic demand and gradually achieving abundant
amount for export.

       This policy has worked. Since 1994, there have been some projects
with remarkable scale as sugar processing joint-venture with Taiwan in
Thanh Hoa province with the total capital of USD 66 million, sugar
processing factory of Bourbon Corp., France in Tay Ninh province with
the capital of USD 95 million...

       4.3.5 Strongly promoting the sugar industry should yield effects to
its sub-contractors:

       Firstly, the sugar-growing sector will be developed to supply sugar
cane – a “unique” raw materials for factories to reach the stability and
prosperity (as mentioned above).

       Once the sugar cane growing areas develop, there arises demands
for agricultural tools for sugar production, irrigation, fertilizer and
pesticides. The agricultural mechanism, fertilizer and pesticides industries
will develop accordingly. Besides the development of sugar processing
industry will facilitate the domestic food processing machinery industry
growth in manufacturing medium and small capacity machinery.

       The growth of the sugar industry will also facilitate the public
catering services in expanding its operation in food production and trade.

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       4.3.6. Investment orientation and prospect for the trade and
production of the sugar and sugar cane industry of Vietnam:

       a.      Investment orientation:

       Sugar industry is a eco-technological sector should be developed in
the inter-link conjunction between agriculture, biology, processing
technology and markets.

       Investment for development of the sugar industry is firstly to satisfy
the increasing demand of people at home, and at the same time put in the
close relationship with markets abroad.

       Investment orientation for the sugar and sugar cane industry of
Vietnam is as follows:

       + Reserving raw materials to ensure the production. The state has
paid attention to develop the infrastructure for raw sugar cane areas and to
extend favorable policies for lands to future raw sugar cane areas and to
strengthen the agricultural encouragement, to shortly apply science and
technology achievements to raw sugar cane production with a view to
raise productivity and quality.

       + Creating network for the sugar industrial production in
combination with primarily treatment in appropriate raw material areas
both for increasing employment and income in rural areas and for
contributing to structural transformation of rural economy and gradually
promoting rural industries.

       + Investing in establishing sugar-processing establishments of
appropriate scale, which locate near raw sugar cane areas. Great attention
should be paid to facilities of small and medium size to make full use of
the seasonal capacity of the raw sugar cane. However we can not help
concerning for big scale factories that could utilize modern sugar
processing technology keeping up with industrialization tendency

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       5-year investment orientation (1996-2000);

       Increasing capacity of 2 sugar factories of Binh Duong and of Hiep
Hoa from 1500 tons to 2000 tons of sugar cane per day.

       Fulfilling the investment raising the capacity of 2 sugar processing
factories of Bien Hoa and Khanh Hoa from 60.000 tons to 90.000 tons and
40.000 tons to 60.000 tons per year respectively.

       To the year 2000, constructing 19 new sugar factories with the total
design capacity of 44050 tons of sugar cane per day or pressing capacity
of 6.6 million tons per year. From the year 2000 on, it is planned to build
and expand some factories with total capacity of 120 thousand tons per
day or pressing capacity of 2 million tons of sugar cane per year.

       It is estimated that the investment capital for 5 years (1996-2000)
will be about VND 500 billion in which foreign capital accounting for
USD 300 million equivalent to VND 3000 billion.

       Vietnam has cooperated with Taiwan, France, Britain, America,
Philippine and India in sugar industry.

       Investment by various forms by all economic sectors:

       The state should quickly improve procedures for providing loans;
applying reasonable exchange rates under the orientation of expanding
loans through government bonds, creating self-mobilized capital for
enterprises; raise the indirect investment portion by private sectors in
primarily treatment, processing and selling of products.

       b. Production prospect and trade of sugar and sugar cane
industry of Vietnam:

       We may be aware that the sugar and sugar cane industry of Vietnam
currently appears to be weak, fails to satisfy domestic consumption
demand and hence it has to import sugar products. Therefore the prospect
and trade of sugar industry of Vietnam should come inward. After the 21th

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century, the sugar industry of Vietnam will ensure for the demand of
domestic direct consumption and supply enough sugar for food processing
industry and public catering services.

       In the other hand, we shall not show less respect for export market
when the sugar industry grows so strong that yields abundant amount,
which could be reserved for export to countries in the region and the rest
of the world when the chance comes.

       4.3.7 Advantages and challenges during the sugar production of
Vietnam in the accession to WTO:

       a. Advantages:

       Now Vietnam has engaged in joint ventures with some corporations
and countries in its sugar industry such as Germany, France, Taiwan,
Britain, America, India and the Philippines.

       Vietnam      has    also    established     cooperation    relations   with
international market for sugar importation for years hence earned
experiences in trading in this sector.

       Furthermore, though its sugar industry remains minor, Vietnam
enjoys favorable land and weather conditions, an abundant workforce, low
labor costs than that of many other countries. Vietnam will therefore
attract many countries seeking for joint ventures in the industry when it
offers more favorable conditions in its commitments and assistance than
other economies of developed sugar industry.

       b. Challenges:

       Vietnam will also be facing with quite a few challenges in the
industrial management and administration of the industry in accordance
with WTO agreements as well as with pressure by market competition and

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terms and conditions when engaging in join-ventures with foreign partners
in the industry.

       It is necessary to keep regular monitoring on policies both benefit
Vietnam and please potential partners.

       To develop the sugar industry of Vietnam, it is required to
restructure its agriculture in order that the development of sugar cane
growing will not affect other major crops.

       There should be a team of staff and technical labor qualified enough
to master advanced technology.

       Ensuring interests and increasing living standard of farmers in raw
sugar cane areas and primarily treatment facilities in rural areas to let them
feel settled and assured to cultivate for the sake of a stable source for the
sugar industry.

       4.4 Fishery:

       Fishery has been developed to be a sharp edge of Vietnamese

       4.4.1. The growth of Vietnamese fishery:

       The sea products catching and growing output is developing

                                                             Unit: Thousand tons

                                1990            1995              1996      1997

Total fishery output:             1094.5         1584.4            1701.0    1636.1

 sea fish

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 Growing fish                     615.8           722.1          808.2   817.8

 Growing shrimp                   129.3           209.1          255.9   241.1

                                     32.7           55.3           49.7    45.5

       Major sea-products catching provinces (mainly sea fish) are:

    Kien Giang (93.8 thousand tons in 1990, 131.1 thousand tons in
       1995 and 130 thousand tons in 1997);

    Ba Ria - Vung Tau (25.2 thousand tons 1990, 65.2 thousand tons in
       1995 and 77.2 thousand tons in 1997);

    Binh Thuan ( 43.5 thousand tons in 1990, 55.3 thousand tons in
       1995 and 78.5 thousand tons 1997);

    Binh Dinh (20.1 thousand tons in 1990, 53.3 thousand tons in 1995
       and 59.8 thousand tons in 1997);

    Quang Ngai (13.3 thousand tons in 1990, 35.0 thousand tons in
       1995 and 40.0 thousand tons in 1997);

    Tien Giang (14.0 thousand tons in 1990, 35.7 thousand tons in 1995
       and 40.0 thousand tons in 1997);

In the total GDP of Vietnam, the fishery industry accounted for 2.99% in
1995 (or VND 6664 billions), 2.86% in 1996 (or VND 7392 billions) and
2.64% in 1997 (or VND 7811 billions).

       The 1995 development index (by comparative 1994) is 109.3%,
1996‟s of 104.5% and 1997‟s of 99.1% (against the previous year).

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   4.4.2.      The fishery of Vietnam has approached science-technologies
over various fishery catching and growing sectors

    In the fishery catching and growing sectors, it has approached such
       sciences as ocean ecological, brackish-water fishery growing
       ecological, oceanagraphy, sea vessels, hydrography, aqua-sea
       products catching, preservation, working health protection ...

    In the fishery processing, it has approached such sciences as
       microorganism, food safety, refrigeration, drying, package,

    Besides it has also approached other sciences in synchronical
       management and administration various links in the production -
       circulation - consumption of products in the most appropriate way
       by advanced technology in order to ensure good quality for fishery

   4.4.3. Industries to be affected by the growth of fishery:

    The shipbuilding mechanism will have more opportunities to
       expand its operation to building vessels for catching, freezing
       carriers ...

    The net making will develop in producing appropriate nets for
       different categories of sea products and locations. This sector can
       not only grow in the orientation of modern net-making technology
       but also expand the manual production of small size nets that help
       creating jobs for rural laborforce.

    The feed production and growing services will be on the rise when
       the fishery expands its growing scope. Demands for specific feeds
       for each kind of growing sea products in each area, requirements for
       studying and producing of immune and curing medicines will then

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       emerge in to meet new requirements of modern growing

    The sea products processing will strongly develop that would
       facilitate application of science-technology achievements in the
       links of production line for each processing type such as freezing,
       drying or canned... mainly to raise the quality and keep up with
       sanitary requirements for exports.

    The public catering will enjoy more favorable condition for making
       various dishes such as fast food for tourists, site-making food for
       restaurants, hotels and expanding the fresh food shops network for
       people‟s daily consumption.

       The annual domestic consumption of sea products accounts for 70-
75% of fishery output through the public catering services.

       4.3.5Advantages of Vietnam in comparison with the world in fishery

       Vietnam has a thousand-of-kilometer-long coach and a vast
offshore shell and varieties of lakes and rivers with big potential for
developing catching and growing aquatic products.

       There are 30 out of 61 cities and provinces of Vietnam having
traditional coach for sea products catching. They are Hai Phong, Nam
Dinh, Thai Binh, Ninh Binh, Quang Ninh, Thanh Hoa, Nghe An, Ha Tinh,
Quang Binh, Quang Tri, Thua Thien-Hue, Da Nang, Quang Nam, Quang
Ngai, Binh Dinh, Phu Yen, Khanh Hoa, Ho Chi Minh city, Ninh Thuan,
Binh Thuan, Ba Ria-Vung Tau, Long An, Tien Giang, Ben Tre, Kien
Giang, Can Tho, Tra Vinh, Soc Trang, Bac Lieu, Ca Mau; in which the
most significant provinces lie in the Me Kong river delta, Southern East
and Middle coastal areas.

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       Regarding the aquatic products growing, as Vietnam has so many
lakes and rivers, big and small, most of provinces develop the aquatic
products growing with dozens of categories of fish, shrimp, trionychid
turtle that give high output. Cities and provinces invested in large growing
scale and produced good results are Hai Phong, Thai Binh and Nam Dinh,
Thanh Hoa, Nghe An and Ho Chi Minh city, Dong Nai, Dong Thap and
An Giang, Tien Giang, Ben Tre and Tra Vinh, Ca Mau, Bac Lieu, Soc
Trang and Kien Giang and Vinh Long.

       In addition to those favorable natural conditions, Vietnam also has a
potential rural workforce. It has formed sea products catching groups with
many traditional inherited experiences. They are now eager for advance
technology and professional skills.

       The aquatic products growing is highly organized in areas
applicable to central production and combined with different occupations
in other areas, accounting on the product basic and exploiting the
advantage of low labor cost.

    4.4.5.     Export markets for Vietnamese products:

       The main export markets are ASEAN countries, EU, China and
Taiwan, Japan, America and Canada.

       Every year the export value is ever rising from USD 239.1 million
in 1990 to USD 427.2 million in 1993, from USD 551.2 million 1994 to
USD 621.4 million in 1995 and from USD 696.5 million in 1996 to an
expected height of USD 750 million in 1997.

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                           Volume of some key exports

                                                             Unit: thousand tons

                        Frozen Fish        Frozen cuttle-fish      Frozen shrimp

       1990                   4.4                   3.7                 37.6

       1991                  10.1                   6.6                 41.6

       1992                  17.4                   6.3                 39.7

       1993                  14.7                   11.2                42,0

       1994                  15,7                   14.6                53.9

       1995                  26.2                   14.3                44.8

       1996                  29.7                   20.2                51.1

1997 (estimated)             32.0                   21.5                53.0

       Among 3 above key products, frozen shrimp makes up a relative big
portion then to frozen fish and frozen cuttle-fish. These products have
been exported to over 20 countries and regions in the world, especially to
ASEAN and Asian countries. The biggest market is Japan (accounted for
50-70% of exports turnover). North and East European countries and
Australia Constitute important markets over the last few year.

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       4.4.6. Investment orientation for the development of fishery industry
of Vietnam:

       Developing the fishery industry on a firm and synchronized
background. A harmonized combination should be taken to properly
arrange the catching, growing and processing of aquatic products in
particular areas for specific products in the trend of applying advanced
technology to improve their competitiveness in the regional and
international markets.

       Attracting investment from various domestic economic sectors,
loans at home and abroad to promptly boost up the fishery to be one of the
powerful industries of Vietnam

       The exportation of aquatic products is a sharp edge of the industry
itself and a momentum for attracting and expanding the inputs and
developing a stable market at home and abroad.

Targets of the fishery industry:

    Strengthen the production to ensure the seafood supplying ability
       for the people at 12 to 15 kg per head per year in 2000 and 20-25 kg
       per head per year in 2010.

    Boosting export value of the fishery industry with a view to
       increase internal speculation, raise its producing and trading ability
       and constructing technological infrastructure for the industry. The
       investment orientation is focussing on renovating its equipment and
       machinery, improving infrastructures of exiting freezing factories in
       order to produce sea products of high quality eligible for
       international competition.

    Investment for the processing of sea products in 5 years (1996-
       2000) is estimated at VND 1500 billion aimed at 3 targets: firstly,

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       improving some existing factories and building 15-20 new factories
       equipped with IQF gathering in Ho Chi Minh city, Soc Trang and
       Hung Yen, Dong Ha, Ca Mau and Bac Lieu, Ben Tre, Dong Thap,
       Can Tho and Ninh Thuan; secondly, establishing centers for
       marketing and selling exports at site in some big cities as Hanoi, Ho
       Chi Minh city, Ha Long, Da Nang....; Thirdly setting up the quality
       and aquatic sanitary control.

   4.4.7.      Trade prospect for the fishery of Vietnam:

       As being considered as a sharp edge of the industry, attention and
consideration should be paid to the protection of its production and
exportation with regular revisions in order to encourage the safe and stable
development in its production and exportation both in quality and

       Exploiting every resources of the community at home and abroad
for the growth of the industry, on the basic of consideration related laws
and regulations such as the law on the encouragement of domestic
investment, law on foreign investment in Vietnam, commercial law,
value-added law, law on the import and export of goods, law of the state
enterprises ... and sound implementation in the fishery industry.

       Setting new labor distribution and transforming of rural economic
structure in a proper manner and bringing into full play advantages of sub
regions and territories as Cuu Long river delta, Southern East and Middle
coastal provinces...

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       4.4.8. Challenges in sea products exportation arising in the course
of accession of Vietnam into WTO:

       Though making some positive steps, the fishery of Vietnam remains
weak and short of science and technology standard of some countries in
the region. The quality is for that reason limited and strongly influent to its
competitiveness in the world market.

Retaining old markets at high confidence and at the same time expanding
to new and favorable markets. It will make quite a few challenges in many
sectors when Vietnam enjoys full WTO‟s membership.

       The management and administration should be correctly and duly
improved in consistence with agreement commitments.

       Once being the WTO member, we would act in conformity with the
unity of the organization that are in favor and disfavor of Vietnam‟s
interest from time to time of trade.

II. Industry sector

1. The role of Industry Sector in the course of industrialization and
   modernization of Vietnam.

       Vietnam is still in the transitional process to market-oriented
economy when it accelerates the course of industrialization and
modernization. Even though Vietnam has broken with the centralized
economy, the new structure of market economy has not yet
comprehensively built. After 10 years of implementing economic reform,
there still 70% of labor force around country are involved in the
agricultural sector.

       There only way to develop Vietnam's economy is that the industry
sector has to reach new demands to serve other economic sectors. Industry
sector has to play important role to change Vietnam's economy from

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underdeveloped agricultural economy to new industrialized economy
which would has the same level of development with other countries in
the region.

       In the process of establishment and development of new economy,
the Congress number 6 of the Vietnamese Communist Party has been
recognized as a milestone to change the direction of economic
development. That Congress has a decisive significance for the
establishment of new macroeconomics structure which are more adequate
with the reality of Vietnamese economic situation and objective rules.

       Up to now, the economic reform process has been undertaken for 13
years with 3 five-year plans, namely: 1986-1990 plan, 1991-1995 plan and
1996-2000 plan.

       The period of 1986-1990 is the transitional one from highly
centralized economy to market-oriented economy with the management of
the State directed to socialism. In that period, the Vietnamese economy
had not only paid the cost for mistakes and shortcomings of the past, but
also gained some achievements. The economy had initial growth even it
grew up quite slowly. The most important significance of those
achievements in the period of 1986-1990 is that Vietnam had overcome
most severe challenges in the situation of crises and chaos in some areas in
the world.

       The period of 1991-1995 is the period of new development of
Vietnamese industry sector. Vietnam restructured and rearranged its
industries to be more effective. In this selective period, besides some
branches of industry had developed with high rates, there some branches
had lost their competitiveness as well as effectiveness. However, in
general, this period is very active, growth and stable and it also set up a
positive ground for the development of Vietnamese industry in the next
period of time.

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       In the end of 1995, Vietnamese Industry comprises 526 thousands
enterprises and facilities (foreign invested enterprises are not included),
2.35 millions laborers and roughly VND 60.000 billions capital. In this
period, private sector grew very fast. Annually, there were 26500 new
enterprises established, around 20000 laborers employed and VND 7,5
billions capital mobilized (including savings and new investment). The
number of state-owned enterprises were reduced from 2782 enterprises in
1990 to 2010 enterprises in 1995. The number of laborers in state owned
enterprises were also reduced from 744000 to 68000. The capital of state
owned enterprises, however, was increased from VND 17200 billions in
1990 to VND 42800 billions in 1995. The number of collectives and
producing groups was reduced from 13100 to 1600. In the same time, the
number of private enterprises was increased from 770 to 4900 and the
number of family-running facilities was increased from 377000 to 493000.

       With the increasing in the number of private enterprises and the
capital of state owned enterprises, Vietnamese industry had been grown
very fast. The average growth rate of this period of industry sector was
13%, in which the growth rate of state owned enterprise sector and other
sectors was 15,2% and 10% respectively.

       It should be noted that this period is the fastest economic grow
period since 1976. The growth rate of the period 1976-1980 was 0,6%, of
the period 1981-1985 was 9,5%, of the period 1986-1990 was 5,9%. The
annual growth rate of the period 1991-1995 was also stable, reflecting the
firm economic development (the annual growth rates were ranged from
10,4% to 17,1% in this period).

       Industry sector is continuously developing in the beginning years of
the period 1996-2000. There are 626000 industrial enterprises as of
beginning of 1997 (among which are 587 foreign invested enterprises).
State owned enterprises have been being rearranged and the number of
state owned enterprises is 1880 as of beginning of 1997. The number of
other enterprises (including private enterprises and family-running

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facilities) is increased to 624000 in 1997 in comparison with 613000 in

Industrial manufacturing value (calculated on comparative price of 1994)

                                                                       (VND billion)

                                             1995                  1996         1997

Total industrial value                    103374,7            118096,6        133685,1

I. Domestic Industry                       77441,5                86534,7      95518,2

1. State owned industry                    51990,5                58165,6      64456,3

- Center                                   33920,4                38411,0      42174,9

- Locals                                   15070,1                19754,6      22281,4

2. Non-state owned industry                25451,0                28369,1      31061,9

- Collectives                               650,0                  684,3        725,0

- Private                                   2277,1                2791,9       3215,0

- Families                                 18190,9                18977,4      19722,1

- Mixed                                     4333,0                5915,4       7399,9

II. Foreign invested industry              25933,2                31561,9      38166,9

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       Total industrial value in 1997 grew up by 129,3% in comparison
with the one of 1995. Domestic industries grew up by 123,3% (state
economic sector grew up by 124,1% while non-state economic sector
grew up by 122,1%). The growth rate of foreign invested sector was
147,2%, higher than the growth rate of domestic industries.

         The ratios of each economic sector in total industrial value

                                                      1995 (%)      1997 (%)

Total value                                             100,0           100,0

I. Domestic Industries                                   74,9           71,5

- State economic sector                                  50,3           48,2

- Non-state economic sector                              24,6           23,3

II. Foreign invested economic sector                     25,1           28,5

       This table indicates that the ratio of foreign invested economic
sector in total industrial value increased while the ratio of domestic
industries (both state economic and non-state economic sector) felt down

       The above mentioned growth rates and changing in ratios of
economic sectors in total industrial value reflecting that the Vietnamese
industry is going to right direction. When domestic resources are limited,
the development of foreign invested sector is encouraged.

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2. Policies relating to industry.

2.1.   Stimulating investments to export-production industries.

       State economic sector is deemed as the key and fundamental sector
in multi-sector economy. Therefore, the Government has been issuing
many measures to strengthen and develop state economic sector,
particularly state owned enterprises.

       Some important measures which undergone are: equitizing some
state-owned enterprises, rearrange or dissolve or declare to go bankrupt
state owned enterprises which doing business at a loss chronically,
merging small enterprises with benefit yielding enterprises. However, the
implementation of these measures is facing with lots of difficulties.
Equitization process is implemented slowly. Most of state owned
enterprises are small and medium enterprises which having out of date
technologies, lacking capital and management skills, low productivity and

       Many state-owned enterprises had not made progress in the
beginning of 1997 after few years of development in domestic market.
Under the pressure of fierce competition, enterprises have to be more
invested if they want to be existence. The renovation of production
technologies is urgently demanded as ASEAN Free Trade Area
Agreement come into force next 9 years. In 2006, tariff rates of Vietnam
imposed on ASEAN goods will be ranged from 0% to 5%. It means that
the protecting methods based on tariff barrier will be abolished. If
enterprises are not invested to renovate their technologies, they will not be
able to compete in international market and even lose their domestic
market. This is a serious challenge that Vietnam has to deal with. Vietnam
needs to have investment incentive policies for state owned enterprises
and have to have priorities for investment when state budget is very
limited. The capital market of Vietnam fails to keep up with the economic
development in recent years and not yet integrate to world capital market.

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Up to now, the bond and share markets have not been developed. There
are only bond markets that are small sizes in short-term and not resale
markets. The transaction mainly implemented by the means of the banks
and credit institutions that mobilize credits for loan. This capital
mobilization mechanism reflects a monopoly in loan and not satisfies the
various needs of borrowers. This mechanism prevents the flow of capital
from savings to enterprises and explains why commercial banks have
abundant capital but can not and dare not provide loan. In the same time,
enterprises are facing with the lack of capital but can not borrow or dare
not borrow.

       Therefore, the most important development of new investment
policy of Vietnam is the establishment of comprehensive system of
investment policies. Among which, investment by state budget plays the
key role for the growth of national economy.

       Even though the exports of Vietnam have been increased in recent
years, there is a need of regulating policies for encouraging exports in

       Among those policies, the investment encouragement to main
export sectors is most important to change the economy to export-oriented
economy. Based on the analysis on the demand of world market,
production capacity and advantages of Vietnam, the main export industrial
sectors of Vietnam from now until 2020 are expected as follow: textile
and clothing, shoes and leather products, electronics, IT and
telecommunication products, manufactured products, chemical, steel,
ceramic, glass and construction materials. The strategic target of trade
policy in the course of industrialization and modernization is to increase
the ratio of manufactured products in exports. The expected ratios of
export goods in total export value in the year of 2000, 2005, 2010 and
2020 are as follow:

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                                           2000       2005        2010    2020

raw and preliminary products               30%        22%         14,3%   10%

manufactured products                     52,5%       58%         57,1%   70%

services      paid     by      foreign    17,5%       20%         28,6%   20%

       2.2: Financial and monetary policies for stimulating exports.

       Financial and monetary policies play a very important role in
encouraging exports. In fact, one of the major obstacles for exploiting
export potentials in the past years was inappropriate financial and
monetary policy, particularly the policy on investment into export
production sectors. The new policy of Vietnam are directed to the
following orientations:

       2.2.1: Stimulating investment into export production sectors,
particularly into manufactured industries.

       Favorable conditions for domestic enterprises of all economic
sectors to invest into production for export will be granted. These
favorable conditions will be, at least, equal to those granted to foreign
investors who are investing to Vietnam.

       Encouraging investment into production for export by tax and credit
incentives is applied. The recent tax incentives have initially encouraged
exports. Since the end of 1997, most of export products have been free
from export duties, except some products that are controlled by quota or
line management. There only 12 groups of products (including 20
products of natural resources and raw materials) are subject to export
duties. 12000 other products are free from export duties.

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       According to Law on Value Added Tax passed by National
Assembly in November 1996 and come into force by January 1, 1999, all
export products are free from value added tax and value added tax
imposed on previous stages of production of those export products will be

       With regard to income tax and turnover tax, the tax incentives are
granted to enterprises producing export goods.

       With regard to new enterprises established in non-key areas, income
tax exemption for two initial years and income tax reduction of 50% for 3-
4 following years will be granted. Turnover tax exemption will be granted
if products are produced for direct exports.

       With regard to new enterprises established in key areas, income tax
exemption for 3-4 initial years and income tax reduction of 50% for 3-7
following years will be granted. Turnover tax exemption will be granted if
products are produced for direct exports.

       With regard to enterprises expanding their scale, improving
production capacity or renovating technologies, income tax imposed on
added benefits earned by new investment for the following year shall be
exempted. Turnover tax exemption will be granted if products are
produced for direct exports.

       To encourage readjustment process to production of exported
goods, the above mentioned tax incentive measures are now under
consideration with the aim of exempting all turnover tax for turnover
deprived from export of manufactured products. Turnover tax rate will be
0,5% for turnover deprived from export of raw materials. Income tax
exemption periods will be applied on the basis of margin of investment
into renovation of technologies with the aim of improving qualification of
export products.

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       With regard to preference credits for exports, the preferences are
granted through loan rates, loan conditions and capital reimbursement. In
order to help export potential enterprises that have no conditions to access
to capital resources because of lacking mortgage assets, the Government
are now preparing to establish credit guarantee fund. This fund will
guarantee the loan of above-mentioned enterprises and it will share the
successions of enterprises and the risks of the banks.

       In the same time, the Government will set up the export insurance
fund, which will insure the producer and exporter against the deflation of
world prices. The Government also encourages Associations of goods to
establish their own insurance funds.

       2.2.2: Foreign exchange policy

       Export encouragement is affected by foreign exchange policy
through the exchange rates. Up to now, the foreign exchange policy of
Vietnam has given preferences to state-owned enterprises to import
equipment, machinery without linking with export obligations and
performances. A new measure being proposed is that all foreign currencies
earned by exports have to be sold to the authorized banks. After selling
their foreign currencies, the enterprises will received special invoices from
the authorized bank which identify the amount of foreign currencies have
been sold. When enterprises wish to buy foreign currencies to pay for their
imports, they must submit that invoices to the authorized bank to buy the
foreign currencies with preferential rate equally with the amount they sold.
If the enterprises do not have the need to imports, they can resell freely the

       By doing this policy, there will be 3 exchange rates: buying rate,
selling rate for enterprises having special invoices and selling rate for
other enterprises.

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       This measure not only encourages export but also has the effects of
limiting the imports by non-export originated foreign currencies and,
therefore, reducing trade deficits.

       2.2.3: Expanding foreign markets and encouraging exports.

       Expanding foreign markets is very important measure in the
strategy of export-oriented industrialization. In the conditions of free
trade, the competition in the world market is increasing fierceness.
Understanding changes in the world market to facilitate the accession of
Vietnamese enterprises is an imperative need.

       General direction for expanding export markets is focused
multilateralism. Since 1991, the exports of Vietnam are focused on Asia-
Pacific. It is expected that the ratio of exports to this market in total export
value will be reduced after the year 2000. Besides, the ratio of exports to
American markets will be increased, particularly exports to United States.

       Exports of Vietnam to APEC economies will expectedly occupy
more than 70% of total export value for next 20 years. Therefore, the
following measures have a very important significance in term of
expanding export markets of Vietnam:

       + Actively preparing and implementing AFTA schedules and
joining APEC, WTO.

       Even though the ratio of export to ASEAN in total export value will
be reduced from 18% in the period of 1991-1995 to 10% after the year
2000, this market is still very important because of the effects of AFTA.
Joining AFTA, Vietnam will have cheaper inputs for export production
and, in cooperate with ASEAN members, expanding its exports to the rest
of the world.

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       Because of the main trade partners of Vietnam are APEC members,
joining APEC is very important for Vietnam to expanding its export
markets. However, the most important and decisive matter for Vietnam is
to access to the WTO.

       + When Vietnam has not been the member of the WTO yet, signing
the bilateral trade agreement with the United State is significant step to
expanding exports. The Vietnamese Government is now actively
preparing for negotiating with the United States to sign the bilateral trade
agreement as soon as possible.

       Since the United States lifted the trade sanction imposed on
Vietnam, the value of trade between Vietnam and the United States has
been increased very fast by nearly 100% annual growth rate. The trade
value between two countries raised from US$222 millions in 1994 to US$
452 millions in 1995 and to more than US$ 1 billion in 1996. If the
bilateral trade agreement signed and United States agrees to grant MFN
status to Vietnam, the trade value may reach US$ 2-3 billions per year.
The United States is expected to be the biggest trade partner of Vietnam
after the year 2000.

       Exploiting trade relation with the United States is the prerequisite
condition for Vietnam to join WTO. Therefore, the Vietnamese
Government has to prioritize the task of signing bilateral trade agreement
with the United States as soon as possible.

       - Strengthening export marketing, specially researching and
studying foreign markets.

       Most of Vietnamese enterprises are now lacking with the
knowledge about foreign markets and consumer's taste. Expanding trade
representative offices in foreign countries, organizing trade exhibitions
and trade fairs, setting up trade relations with foreign export-import
organizations will help the exports of Vietnam to become more effective.

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The Government of Vietnam is now studying to set up a trade promotion
body with the role and responsibilities similar to JETRO of Japan or
KETRO of Republic of Korea.

3. Protection of domestic market and production.

       Trade policies of Vietnam are now facing with the problems in
going to trade liberalization when trade protection is still needed in some

       This matter is not the one for Vietnam only. In the past and
nowadays, every country in the world still needs to protect domestic
market and production. The differences are the magnitude and term of the

       ASEAN countries implemented protection by the policy of
encouraging production of import substituted products. Japan and Korea
implemented the protection policy in quite long period of time until their
domestic industries have the capacity to capture domestic market.

       3.1 Genaral view on domestic production protection

       The views described below are definitely existing ones and not
complete to deal with practical problems.

       3.1.1 Protection on the basis of trade liberalization

       This is the most fundamental one covering all short and long term

protection policies and measures. This means that all protection ways stem
from trade agreements which Vietnam has signed with other partners.

       In the course of establishing AFTA Vietnam has begun to
implement the Common Effective Preferantial Tariffs since 1996. In order

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to join APEC as well as WTO, Vietnam shall have to observe various
requirements concerning market access, tariffs and other trade
liberalization regulations which give only certain protection scope and
time for each specific sector and product.

       The protection on the basis of trade liberalization requires that
development of domestic industries should be put on international
standards such as quality, prices... meaning that protected industries shall
be future parts of the world economy. This kind of protection also means
that prohibition or minimum reduction of negative impacts arising from
the trade liberalization on domestic market and production. This is more
difficult task than compliance with trade liberalization regulations.

       3.1.2 Protection objectives for each good should be indentified

       Common protection measures are aimed at major objectives:
consumption regulation and protection of domestic manufacturing
industries. Protection with the objective of regulating consumption must
utilize both economic and non-economic measures; protection of domestic
industries is mainly using economic tools.

       For example, prohibition of importing debauched cultural products
does not mean encouraging domestic development of this sector, but
prohibition of consumption of these products in the country. So tariffs or
other judicial measures should be not applied. In the contrary, most of the
consumption goods which are now not allowed to be imported or
restricted by import quotas should be regulated by tariffs.

       3.1.3 The most fundamental and positive protection should create

favourable conditions for development of domestic industries.

       After identifying domestic industries which need support from the
State by giving preferences as to capital, land rental, revenue
help the enterprises cature the market more easily in both local and foreign

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       3.1.4 Protection with timeframe

       Protection periods and measures should be specified for each good

For example, as for items under CEPT they are fixed periods of tiem for
tariffs reduction in compliance with underlying agreements, but these
times may not be similar to other protection measures such as capital,
technology or market incentives...However all of these incentives shall be
restricted by timeframes and made public so that business enterprises can
make their plans to enhance competitiveness of their products.

       3.1.5 All protection measures should be equal to all economic


       As economic objectives should always be put on the front rank
when any protection measures are applied as to a certain industry. This
may limit the danger of potential protectionism against trade liberalization
of that industry and create a highly fair and competitive environment for
business enterprises.

3.2 Enforced Protection Measures

       These are various in fact. Based on the current system of policies
the following are some main ones:

       3.2.1. Import Prohibition and Quotas:

       Prohibited imports are goods or utensils that have bad impacts on
national sec urity, culture, environment such as weapons, poisons,
explosives, drugs, tobaccos, second-hand consumption goods. Autos and
motorbikes were allowed to be imported in small quantities but are
prohibited now in order to protect domestic auto and motorbike
production and assembly industry.

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       In addition to prohibited imports, the Government of Vietnam
annually presented a list of imports controlled by quotas. The list is
gradually shortened but is used as an effective tool to protect key
industries of the country. Annual import quotas are calculated on balance
between domestic production productivity and consumption demand in the
domestic market.

       The list of 1997 quota imports included petrol and oil, fertilizers,
steel, construction glass, autos, paper and sugar.

       Both prohibited measures and quotas are made adjustments on the
basis of the situation of domestic production and consumption. For
example, owing to increasing trade deficit and stagnation of some
domestic industries the Government of Vietnam issued a decision on
suspending the import of such several items as construction steel,
construction glass with 2mm to 7 mm in depth, cement, tourist cars with
under-12 wheels, motorbikes, and consumption goods as sugar, bicycles,
electronic fans, confectionery and biscuits, beer, drinks on 6 May 1997. At
the end of July 1997 the prohibition decision was lifted.

       3.2.2 Protection Tariffs

       Quantitative restrictions on imports are a traditional protection
measure of the Vietnamese trade policies. However this measure has been
replaced with tariffs or other taxes levied on consumption or business of
imported items. The highest tariff rate of 100% imposed on limited
imports was applied until 1996, for example, autos... the highest is now
reduced to 60% and the average rate on basic consumer items is also quite
high, nearly 35%.

       In spite of reduced tariffs actual protection level by various types of
tax is generally high. Imposition of revenue tax, value added tax... is
aimed at covering the shortage posed by tariffs reduction.

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3.3 Impacts posed by protection policies

       Assessment of the impacts of the protection policies is a very
difficult task, especially in the context of trade liberalization. The
following are two remarks on adverse impacts of the protection policies:

       3.3.1 Currently applied protection policies directing the economy
towards import substitution production rather than towards exportation.

       This is shown below:

       + Proportion of consumer goods of import composition has fallen to
the minimum level in recent years: in 1995 the ratio was 16.5%, in 1996 -
15.4% and in 1997-estimated 12%. Reduction in importing consumer
goods has contributed to limiting trade deficit and increased foreign
currency amounts for importation of production means.

       Further basic material inputs for domestic manufacturing such as
materials, fuels, components etc were favored to be imported. This
facilitated domestic production entities to develop. Especially those
producing exports. Some industries such as cement, sugar, paper ... were
import substitution ones regardless of economic efficiency.

       3.3.2 Preferences mentioned above that were granted mainly to the
State-owned enterprises and those of foreign-invested sector.

       The protection regime has awarded exclusive rights to the State-
owned enterprises and hindered the trade liberalization process. Quota
allocation and licensing regime really made both the State-owned and
foreign-invested enterprises earn gains exclusively. While the State-owned
enterprises suffered losses, these exclusive rights only contributed to
further hindrance to proper allocation of resources and to utilization of
competitive advantages of Vietnam in international labour division.

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       The present applied protection policies should be re-considered in
the course of internationally economic integration. Fundamental
adjustments to the economy should be made in order to achieve a
requirement that on the one hand foreign investment would be further
encouraged and efficiency of foreign investment projects would be
enhanced on the other hand. During this course many key industrial
sectors of Vietnam would be probably impacted.

4. Guidelines and Commitments of Agreement on some industrial

       Vietnamese industries are unable to compete in the international
markets. So the guidelines and commitments established in the Agreement
should be taken careful consideration of some following aspects:

       4.1 Establishment of business relations in new markets and
maintenance of traditional trading partners

       Although Vietnamese economy is not strong but Vietnam will have
many substantial potentials and favorable opportunities as its accession to
international markets. In this regard Vietnam has paid attention to:

       + Enhancement of trust with foreign business partners and
assurance of full, exact and immediate implementation of commitments of
the Agreement.

       + Vietnam is always willing to open its market and seek to access to
markets on account of both immediate and long-term benefits. General
direction of import-export market development of Vietnam is focused
multilateralism policy. In the context of trade liberalization, competition in
the international markets has become increasingly fierce it is very
necessary to take an advantage of directions of the world market to
facilitate Vietnamese industrial sectors‟ access into international markets.
For instance, conclusion of fully normal business relationship between

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Vietnam and the United States will be very helpful to Vietnam‟s accession
into WTO.

       + In addition, to seek new markets and maintain traditional business
relations are not beyond objectives that are to make favorable conditions
for domestic market development in the process of the country‟s
industrialization and modernization. However, proper protection of the
domestic market and production should be always preferred in any

       4.2 Establishment of clear and exact commitments should be

       At present almost Vietnamese business enterprises are short of
market information, particularly those on international markets. Therefore
establishment of trade representative agency abroad and business
promotion organizations will improve market information sources, set up
management principles and make right decisions.

       4.3 More practical measures should be strengthened and industrial
goods trade policies should be made adjustments in the following aspects:

       - Reduction in subsidies and protection level for key industrial
exports and imports to encourage domestic industrial enterprises. Such
reduction should be on equal terms with all economic sectors for the
benefit of the whole economy. This paragraph is also mentioned in the
paragraph 3 (market protection regime and domestic production).

       - To assure competitiveness of key exports in terms of maintaining
their stable material sources, increasing technology and management
improvement and raising funds for profit-yielding enterprises.

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       4.4 Opportunities and Challenges for key industrial products of

       - Vietnam is making its best efforts to participate into AFTA.
Vietnam will have cheaper inputs for its export branches and have access
to markets in other regions through ASEAN. Full normalization of trade
relations between Vietnam and the United States is one of the most
important conditions for Vietnam‟s accession to WTO.

       - Vietnam should strengthen marketing activities in international
markets, especially foreign market research, expansion of overseas trade
representatives, establishment of relations with trade promotion agencies
and of trade promotion department of Vietnam.

       - In the course of trade liberalization Vietnamese key exports face
big challenges in terms of competitiveness and markets.

       - Problems of capital for technology innovation, tax, credit, and
foreign currency are also barriers to development of production and
export-import activities.        Difficulties in employing workforce with
qualifications of science and technology or of organization and
management are not minor obstacles to Vietnamese key industries.

       Prices and growth of the economy are not only driving forces but
also challenges for position of Vietnamese key industrial products.

       If prices are stable (both input and output ones) the market will be

       Development of the economy in the proper direction of industry
structure will create a rhythmic and integrated driving force to achieve
strong and sustainable growth.

       If business community is quite aware of policy system in which
almost all of them are laws regulation and management of production
activities and goods flows will be ensured.

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5. Trade policies and some industries

5.1 Garment and Textiles

5.1.1 Capacity and Production Situation of the industry

       Outcome of changes in product composition of the industry,
policies to develop all economic sectors and right measures to re-arrange
the State-owned enterprises have resulted in new development steps of the

a) Production enterprises of the industry

       - The textiles industry had 74.9 thousand units until 1996, four
times in 1995 and 2.5 times in 1990. Number of production units
increased more rapidly than that of other industries in 1990-1996.

       - While number of State-owned units and cooperatives decreased
there were a boom in private business enterprises and households.

       - The garment industry were 35.2 thousand production units until
1996, increased 29% over 1985 and up 10% over 1990. While the number
of the State-owned and private enterprises of the industry (up 19.5% and
15 times respectively) collective production entities and households

       - As a result the total number of the textiles and garment were 110.1
thousand units until 1996, up 140.2% over 1995 and up 45.6% over 1990.

b) Output value of the garment and textiles industry

       Such value is shown in the table below (calculated in comparison
prices of 1994)

       The table shows that growth of output value of the garment and
textiles industry is slower than that of the whole industry. the garment and
textiles industry increased only 128.5% compared with 132.1 % of the

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whole industry. Ratio of the output value of the total value of the whole
industry was in a range of 9.9% to 10.2% for many years.

       In the same period the garment industry rose only 47.6% and the
textiles industry up 346.5%.

       Composition of the garment and textiles industry also changed. In
1990 the textiles industry accounted for 72.9% but the garment only
27.1%. In 1997 the textiles decreased to 47.1% but the garment up 52.9%
on account of changes from domestic and international markets.

       c) Locally-made main textiles and garment products

       Figures of 1997 over those in 1990 as follows: fibres increased 19.6
%, ready-made garments 70.4% up, towels 179.8% up, silk clothes 5.7%
down, canvas and cotton yard cloth down 15.1% and 24.2 % respectively,
woollen carpets 113% down, and knitted goods 13% down.

                The following table will show the figures specifically:

                                       1990            1995       1996         1997

Fibre-tones                            58100          59222       65300       69505

Cloth & Silk-million meters             318             263        285         300

Cotton yard cloth-thousand             33200          46116       30928       28000

Canvas          cloth-thousand         3303            2058       2269         2500

Handkerchief        and      face       109             276        278         305
towels-million units

Wool          carpets-thousand          213             307        94          100
square meters

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Knitted        goods-thousand          29300          30182       25255      25491

Ready-made            garments-       125140          171900      206959     213200
thousand units

5.1.2 Markets for and export value of the sector

        a. After 1990, garments were mainly exported to the former Soviet
Union, Germany, Szec Republic, Poland, Bulgaria, Japan in a value of
140,206,000 USD; 11,332,000 USD; 11,962,000 USD; 2,530,000 USD;
2,586,000 USD; 3,657,000 USD respectively and some other countries in
a small quantity. Garments have been exported to Japan, Taiwan, Korea,
Hongkong, Germany, Hungary, Szec, France, the USA, Netherlands,
Russia etc. since 1995.

        It can be said that the major importing countries of Vietnamese
garments are the EU, Japan, Russia, the USA, East European countries...

        There are two types of market where Vietnamese garments are
exported to, quota-imposed market and non-quota-imposed market.

        The EU has imposed quota on Vietnamese garments. The export
values of textiles and garments to the EU have increased gradually. The
average growth rate reaches 23% annually.

        In 1993, the EU quotas of 55 items and of 250 million USD in value
were allocated to 148 enterprises, of which 37 enterprises were non-state

        In 1994, the EU quotas of 66 items and 285 million USD in value
were allocated to 148 enterprises, including foreign invested enterprises.

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       In 1995, 292 enterprises were provided with export quota of textiles
and garments to the EU with a value of 350 million USD. In 1996, 325
enterprises were provided with export quota of 450 million USD. In the
first half of 1997, the export values to the EU was up by 42% compared to
the same period of the previous year.

       Among EU countries Germany, France and Netherlands are the
largest, second largest and third largest importing countries of Vietnamese
textiles and garments respectively.

       State owned enterprises under central authorities always account for
the largest share of the total export value of textiles and garments to the
EU. However, the share has been diminishing. The export values and the
shares were 125.6 million USD, 50.3% in 1993; 133.3 million USD,
48.5% in 1994; 151.9 million USD, 43.9% in 1995 respectively.

       State owned enterprises under local authorities have made up a
stable share of the total export value to the EU, about 37.7% to 38%.

       Non-state owned enterprises have exported textiles and garments at
a rapid pace. They accounted for 12% in 1993, 13.5% in 1994, 18.5% in
1995 and up to 20% of the total export value to the EU.

       Especially, enterprises located in the South have been leading
enterprises in terms of the export value as well as the growth rate of the
export value to the EU. They make up approximately 70%, of which
HoChiMinh City accounts for 60%.

       Non-quota markets of textiles and garments have been expanding at
a relatively rapid pace. The exports to these markets reached 650 million
USD in 1996 and increased by 80% compared to that in 1995. The
turnover of exports to Japan and the USA were 500 million USD and 25
million USD respectively and to some other countries.

       In short, the export values of textiles and garments have been
growing for recent years, but the growth rate was not as rapid as other

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industries. However, the textile industry has played important role in the
total value of industrial exports.

                b. Vietnam's textile and garment export values:

               Total export           Export values of            Percentage of textile
                turnover of              textiles and             and garment export
              Vietnam (USD)               garments                value in total export
                                                                     turnover (%)

1990               2,404.0                  214.7                         8.86

1991               2,087.1                  116.8                         5.60

1992               2,450.7                  190.2                         7.37

1993               2,985.2                  238.8                         8.00

1994               4,054.3                  496.0                        12.23

1995               5,448.8                  850.0                        15.61

1996               7,255.9                 1,150.0                       15.85

       The table indicates that the percentage of textile and garment export
value in the total export turnover diminished from 1990 and 1993 and has
been gradually increasing since 1994.

       If the base year is 1990, there was an increase of 435.6% in the
export value of textiles and garments 1996 while the total export turnover
of Vietnam was up by 199.4%. If the base year is 1995, there was an
increase of 35% and 33% in the export value of textiles and garments and
in the total export turnover respectively. These numbers show a changing

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partten in textile and garment industry, particularly ready-made clothes
which exports have increased considerably. However, these products
including jackets have been recently challenged with difficulties in the

       5.1.3 Growth of garment & textiles industry will help the
development of

The engineering industry to manufacture equipment and accessories for
textile and sewing machines, other engineering parts for garment and
textiles production line;

       The industry to produce parts and materials for the garment and
textiles sector, for example, shuttles, yard bobbins, packaging and
maintenance materials, brands ...

       Other sectors such as style design, flower printing, well
as fashion show to satisfy consumers‟ full tastes and easily integrate into
international markets.

       5.1.4 Foreign investment in Vietnamese garment and textiles

       There were 121 foreign-invested projects on fibre, fabric weaving
and garment with total registered capital of USD 1, 109.4 million.

       a- Foreign capital invested in fibre, weaving and dying sector:

       - Projects are almost all in the form of 100% foreign-invested
capital. In practice there are 29 100% foreign-invested projects with a total
of USD 885.1 million accounting for 91% of total registered capital. 15
projects with USD 51.3 million capital have been under way, 5 have been
cleared the ground and 10 have been put into operation to earn a revenue
of USD 59.2 million and create nearly 5 000 jobs. Notably Pang Rim

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textiles factory in Phu Tho province gains a monthly revenue of USD 2

       - There are 16 joint ventures with a total of USD 81.7 million
capital accounting for 8.3% of the total registered capital. Of which 13
projects have been under way with foreign-invested capital of USD 59.4
million making up for 75%. 9 joint ventures have been operative to
achieve USD 76.7 million in revenues and create 3 500 jobs.

       Foreign investors consisted of 13 countries and territories of which
Malaysia, South Korea and Taiwan took 69.6% of projects and 90.8% of
total invested capital. Malaysia had one USD 403.2 million project. South
Korea - 19 projects with an invested capital total of USD 347.7 million;
Hong Kong, Japan and France each country had 3 projects with a
respectively invested capital of USD 3.45 million, USD 6.95 million and
USD 9.21 million.

       The projects are mainly located in Dong Nai (8), in Ho Chi Minh
City (18), in Lam Dong (5) and in Phu Tho (3). From 1991 to 1995 17
projects were added a total of USD 194.97 million. In only 1995 eight
projects were approved to increase their invested capital by USD 173.73
million of which Hualong Textiles factory added USD 160.49 million.
Ratio of increase in invested capital of the garment and textiles industry
was quite high in comparison with those of others.

       As for efficiency of foreign-invested projects:

       + 29 projects were put into operation of which 19 ones gained
revenue of USD 231.6 million;

       + USD 263.54 million in profit tax and USD 132.8 million in
revenue tax were paid to the State budget;

       + More than 9 000 jobs were created.

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       b) Foreign-invested capital in the garment and textiles sector

       There are a total of 56 projects with a total registered capital of
USD 142.7 million.

       31 projects with USD 76.2 million are in the form of 100% foreign-
invested capital. 15 of the 100% foreign-invested projects earned revenue
of USD 41.8 million and remaining ones were being prepared for

       Foreign investors included 15 countries and territories, mainly from
Asia and Russia. Taiwan-18 projects with a total of USD 45.04 million;
Hong Kong - 11 ones with USD 14.69 million; Japan - 6 projects with a
total of USD 7.22 million and Federal Republic of Russia - 1 project with
USD 22 million.

       Almost all projects in the garment sector located in Ho Chi Minh
City and Dong Nai province.

       The garment sector had a high efficiency. 38 projects gained total
revenue of USD 95.73 million.

       USD 236 thousand in revenue tax and USD 356 thousand in profit
tax and land rent of 672 land hectares were contributed to the State
budget. 12.8 thousand jobs were created.

       In general size of foreign-invested capital in the garment and
textiles sector is small, except Hualong project in Dong Nai. Initially the
projects were established in the form of joint venture or partnership and
later they were converted into 100% foreign-invested ones.

       Most of garment and textiles enterprises were short of capital. Some
did business at a loss or were likely to go out of business.

       To increase output of exports and expand the market a substantial
the demand for invested capital and modern technology and equipment
were so huge.

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       A range of good and integrated policies of the State should be
issued to strengthen and develop the garment and textiles sector.

       5.1.5 Impacts of trade liberalization policies on the garment and
textiles sector

       a) Positive characteristics

       - Development policies of various economic sectors and lessened
trade regulations allow local business enterprises and organizations to
export and import directly and create a favorable business environment for
the sector.

       - Law on foreign investment in Vietnam was promulgated in
December 1987 and revised some times. This has helped the sector attract
a great amount of foreign-invested capital for development

       - Further some trade agreements and re-arrangement of State-owned
enterprises of the sector have had positive impacts on the sector,
especially after the government approved Charter of the Corporation under
which the garment and textiles industries were combined into one to stop
tattered production and increase its capacity.

       b) Negative characteristics

       However most of the policies have not been updated and revised
immediately so that development and efficiency of the sector has been
hampered. Below are some facts:

       - Capital policy: capital shortage (both working and investment
capital to innovate technology) of the sector was a usual problem.

       Current situation of investment capital for the sector as follows:

       The State issued regulations on loans without mortgages. But the
enterprises have to pay debts, high interest and taxes and their products
were not sold.

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       For example, in 1995 ratio of increase in sale prices was 12.7% but
interest rate increased by 20%. In 1996 these two ratios were 4.5% and
14% respectively. So the fact was that interest rate accounted for 50%
profits of the enterprises. In addition bank loans were almost short-term,
medium and long-term loans had a little.

       Since 1993 the investment capital to innovate technology of the
sector increased dramatically than ever before, particularly capital for
technology innovation of garment and textiles exporting enterprises.

       In developed countries investment level for garment and textiles
enterprises was USD 2000/person but in Vietnam only USD 1000/person.
Allocation of invested capital was not appropriate. Some areas were
invested so much but others got so little. Such situation resulted in wasting
capacity of machines and technology. For example, 200 embroidering
machines were installed in Ho Chi Minh city of which 100 units were not
used (wastage of USD 10 million).

       The enterprises preferred to buy machines and technology to
manufacture well-sold items such as shirts, jackets, pyjamas... but suits. 44
of 100-cat quota that were granted by EU to Vietnam were not registered
by the enterprises.

       The enterprises have invested so many modern technology and
equipment but lacking management expertise. Cost of their products has
been high and uncompetitive in international markets. Even the enterprises
did business at a loss and state-owned capital was lost so much, in
particular Nam Dinh Textiles Company and Minh Phung garment

       - Tax policy

       Imposition of revenue taxes has caused inequality between the
garment and textiles factories. For example, garment factories of the

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textile enterprises have not suffered revenue tax since they used their
cloths. But the other garment enterprises have not done so.

       There was also a difference between import taxes levied on
imported materials of the garment and of the textiles. Further fibre was
levied import rate of 30% and an additional difference of 8% between
commercial volume and actual volume. Re-export period of time applied
to processed garments was so short for processing activities of the garment

       - Market policy

       Owing to loose control of the domestic market with which garments
and textiles of China and Thailand were flooded the market. Foreign
markets for garment and textile products were curtailed because of
shortage of information and proper and immediate decisions. For instance,
our garment and textile sector has had a permanent office in Federal
Republic of Russia for many years but it has operated ineffectively to
promote trade transactions between Vietnam and Russia.

       Promotion trade activities of the sector in international markets
were so weak. EU and Japan are two important markets but Vietnam has
not integrated into these markets yet.

       - Organization and management policies of the sector

       There were only 44 enterprises under the management of the
Garment and Textile Corporation. Hundreds of others have not been
controlled uniformly and closely by the State.

       Enterprises of the sector were owned by many economic sectors.
Their production was tattered, uncooperative and inefficient. So their final
products were not sold and slightly competitive.

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       5.1.6 Difficulties and Challenges of the industry

       In addition to limitations mentioned above, the industry confronts
the following big difficulties and challenges:

       - Poor qualifications of the labor force, slow technology renovation,
and low productivity;

       - The industry has put a slight upon career training, enhancement of
cultural knowledge of labor force to gain technology and science.
Therefore, a Vietnamese worker can make only 16 shirts but a foreign
worker can make 27 ones for the same time.

       - Low productivity is partly because of outdated equipment and
technology 50% of them have been working for over 20 years and many
private textile enterprises have utilized handicraft equipment

       - Low productivity and outdated technology and equipment resulted
in high costs

       - Most of inputs for the industry were imported. For example,
quality of local fibre cannot meet requirements to produce exports.
Wastage proportion of local fibre is higher than imported fibre. Further
prices of imported fibre are unstable they have increased from 4,700 VND
per kilo to 4,800 – 5,300 VND per kilo for several years.

       - Clothes made of local fibre can be sold only in rural market or
served for the military force. But Chinese goods with various types and
low prices have captured the markets. Such situation has forced many
domestic enterprises to go into bankcruptcy.

       - Workforce costs of Vietnam is now quite high in the region. In the
course of integration the average monthly rent laborforce has rose from
USD 25-30 to USD 30-35. If we do not train and enrich the qualifications
of the workforce factor of workforce price in Vietnam will be no longer
attractive to foreign investors in the future

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       - Although garment and textile products of Vietnam have been on
sale in many countries but Vietnam has still done processing for others
and had poor qualification of style design. For instance, Processing price
of one jacket was USD 2.5-3 but its sale price in international markets was
more than USD 30. So export value was high but actual gains were low.
Processing activities for foreign partners has had not only low added value
but also remained unstable and depent much upon rent of workforce and
imported materials.

       - Sale prices of garment and textile products are often fluctuated
and existing capacity of the industry is much higher than export quotas
granted by EU where more than 50% of export value of the industry was
consumed. Non-quota markets such as Japan have been lessened
increasingly and the United States has not been exploited yet.

       - The sector is hampered by smuggled imports from China, Taiwan
and Thailand. Presently the sector captures only 30% of the market.

       - Financial activities and capital management show many
shortcomings and efficiency of capital use is low.

       - In 1996 capital circle of the sector was only 2.33 times. slowly
circulated materials n 1996 was VND 46 billion and VND 40 billion for
the first 6 months of 1997. VND 1 of fixed capital could produce only
VND 0.74 in revenue. Liabilities payable of business enterprises were
VND 1,061 billion except bank bad debts of VND 73 billion.

       5.1.7 Prospects and Solutions to develop the garment and textiles
sector of Vietnam

       The garment and textiles sector of Vietnam has large development
potential that has not been still exploited.

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       In the industrialization process this sector of many regional nations
such as Japan, South Korea, Taiwan... had an important role and had an
advantage of small invested capital but rapid capital circle and massive
workforce. The Vietnamese sector of garment and textile has seen these
advantages but done a little in fact.

       To utilize unexploited potential and take development opportunities,
the sector should draw up specific objectives and solutions to gain a
deserving position in the industrialization process of the country as some
East Asian countries did.

       a) Development objective of the industry

       The following are basic objectives:

       - The industry will produce 1 billion of cloth square meters and
export value of USD 2-2.5 billion, create some 1 million jobs until 2000.
Output of the industry will be 2 billion of cloth square meters, the export
value-USD 4-4.5 billion and jobs-1.8 million.

       - Composition of key products: cotton yard accounting for 40%,
P/C cloth-30%, and synthetic cloth-30%. Most of the products will have to
be finished ones but processed ones. Ratio of ready-made clothes will
have to be increased by an appropriate level.

       - Average growth rate of the industry will be 10% for this period.

       b) Solutions to achieve the objectives

       - It was estimated to produce 340 000 tones of natural cotton, 90
000 tones of PE fiber and more than 1 000 tones of PETEX fibre;

       - The whole sector will require USD 4.8 billion for new projects:
USD 3.8 billion for machines and equipment (of which USD 3.41 billion
for the textiles industry and USD 390 million for the garment), USD 1
billion for basic construction;

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       - Investment process will be divided into three stages:

           + From now until 2000: USD 668 million

           + From 2000 to 2005: USD 2 billion

           + From 2006 to 2010: USD 2.132 billion

       As for types of capital mobilization: the garment industry must
mobilize most of capital from domestic sources. Each of projects needs
some USD 1-5 million to produce high-quality products. The textiles
industry must raise 70% of the total needed capital from foreign sources
for more than 100 new proposed projects.

       In the near future Garment-Textiles Corporation of Vietnam must
study a possibility to spend USD 10 million foreign-invested capital in
cotton spinning lines at 10 enterprises in order to enhance quality of their
cloth. The Corporation will borrow money from Belgium government to
import 100 new textile machines for Nam Dinh Textiles Company.

       + Ho Chi Minh city and neighboring territories accounted for nearly
45-50% capacity of the whole sector;

       + Central areas took some 10-15% capacity of the whole sector;

       + North delta areas took some 35- 45% capacity of the whole

       - Development policies of the sector should be studied further and
revised such as policies on capital, tax, market, product...Regulations on
workforce appeared inappropriate. Such policies described in above
paragraphs (paragraph b, page 5.1.3)

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       5.1.8 Advantages and disadvantages of the sector when Vietnam
joins WTO

       a) Advantages

       The sector will have opportunities to boom. Its markets will
probably expand and become stable. There will be cheap labour source

       b) Disadvantages

       The sector will face fierce competition in the international markets.
The current value of the sector is only a half of Thailand and Singapore‟s
and of little account of China and South Korea.

       During Uruguay round of trade negotiations in 1994 an agreement
on garment and textiles was not signed the market problem will remain.

       Proper and immediate measures should be taken to deal with
difficulties of the sector (mentioned above) although these are not done
right now.

Final challenge is organization and management of the sector at macro-
economic level.

5.2 Auto-Motorbikes Industry

       5.2.1. Characteristics      and     situation    of    automobile   market
development in Vietnam :

       a) Characteristics

       Consumption market: The majority of Vietnamese people‟s living
condition remains low, the kind of automobile that they for the first time
purchase is not required too well decorated with a high price such as
leather made seats, amodern sound level, hifi... However, apart from

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those consumers, there are a small number of consumers who used to buy
vehicle with an expensive price

       The terrain of Vietnam os long and narrow, the sphere of operations
of a social economic region shall be communicated in 300 km

       For example: An enterprise owner in Hanoi enters into relations
with other enterprises in Hai phong which is 100 km of Hanoi (160Km Ha
Long, Quang Ninh - Ha Noi, 110Km Lang S¬n - Ha Noi, 300Km Vinh,
Nghe An - Ha Noi. In the case of going to further provinces such as Hue,
Da Nang, Ho Chi Minh, Vung Tau, Can Tho..... They have to meet many
high hills, bad weather caused flood, traffic jam. Accordingly they usually
take means of transport such as airplanes or train in stead of going by car.

       This above example is the same in the central area and the south of

       - In Vietnam and other countries, the State is a market consuming
the largest various kinds of automobiles. This characteristics is more
prominent in Vietnam because most of Vietnamese people can not be
affordable to buy cars for the taking shape of a mature owned automobile
market. Thus the State public automobile region is always an important
market in a long period.

       b) The situation of automobile market development in Vietnam:

       - The period from 1945 to 1954:

       French Automobile companies (namely Renault, Citroen, Peugeot)
had monopoly on the Vietnam automobile market. Besides there were
some kinds of English units model going on the roads but not so many.

       - The period after 1954:

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       French automobile gradually lost their market.             American
automobile transport companies started appearing in the South (namely
GM,Pontia, Ford Companies). The North was a market of automobile
transport companies of China, former Soviet Union, Hungary...

    Japanese automobile‟s the firstdebut in Vietnam was in 1960-1970
with poular brand names namely Mazda, Toyota, Corolla, Crown, Datsun,

    - After 1975:

    Various models of Western automobiles launched insufficiently in the
duration of nearly 10 years in the Vietnam automobile market. In stead of
that the debut of various kind of automobiles of the former Soviet - the
Eastern and China and the most popular one was models of Lada, Volga,
Moscovis, Voat...

    By the end of 1980s, with the Vietnam renewal process, various kinds
of Western and Japanese units further imported in Vietnam consumption
market (especially Japanese models).

       c) Consumers’ behavior:

       Nowadays who are consumers buying automobile and how is their
behavior ?

       Following are some suggestions of every automobile company

       - The State organs shall buy new automobile of motor joint venture
in Vietnam because such a kind of automobile is cheaper than the imorted
one, as limited by the financial authorities.

       - The private person prefers to buy used automobile because they
just spend the money of 20,000 USD for the purchase of automobile, most
of them intend to buy Japanese automobile in which a new Japanese unit

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in the Vietnam market costs 40,000 USD. Accordingly customers decide
to buy old units

       - But consumer behavior to automobile units is currently temporary,
when the trend of the developed economy average annual income per
capita reach higher (about 500 - 1000 USD), new automobile will be
further consumed.

       Following is the price list of various models of automobiles as
offered in Vietnam market:

                                     Model                          Unit Price

                    1       Kia Pride GPX Model                   13,700 USD/ unit

                    2       Daewoo Cielo GL Model                 17,400 USD/ unit

                    3       Daewoo Ciclo GLE                      18,600 USD/ unit

                    4       Fiat Tempra                           20,790 USD/ unit

                    5       Mazda 323 Standard                    20,800 USD/ unit

                    6       Mazda 323 Deluxe                      21,800 USD/ unit

                    7       Mazda 323 Deluxe upgrade              22,900 USD/ unit

                    8       Toyota Corolla G1                     24,000 USD/ unit

                    9       Toyota Zace Deluxe                    25,500 USD/ unit

                    10      Mekong (4 WD)                         26,800 USD/ unit

                    11      Mazda 626                             38,330 USD/ unit

                    12      Toyota Camry XL1                      48,500 USD/ unit

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                    13      BMW 3201                              49,000 USD/ unit

                    14      Jeep Wrangler                         55,000 USD/ unit

                    15      Mishubishi Pjeo (4 WD)                59,000 USD/ unit

                    16      Ford Taurus                           60,500 USD/ unit

                    17      Toyota Landoruise 80 Gx               67,000 USD/ unit

                    18      Nissan Cefiro 30                      73,000 USD/ unit

                    19      Marcedes E230                         74,500 USD/ unit

                    20      BMW 5281                              75,000 USD/ unit

                    21      Ford Expore (4 WD)                    83,000 USD/ unit

                    22      Toyota Crown Super Saloon             88,000 USD/ unit

                    23      Volvo 960                             11,500 USD/ unit

       d) The situation of imports of various kind of automobiles in

                                                  CAR                TRUCK

                         1990                      2,042                3,726

                         1991                        599                 808

                         1992                      3,201                 281

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                         1993                      6,869                 856

                         1994                      7,380               8,413

                         1995                      7.762              12,223

                         1996                      7,796              15,774

                         1997                      5,000              15,000

                    (according to

       Through the data table, Vietnam market is still a small market of
automobile consumption market, but yearly extension tendency has been
increased especially in the past years.           Together with the imports of
automobiles, in the past year Vietnam has established automobile
assembling industry.

       3,524 units were manufactured in 1995, 5,806 units in 1996, 6,000
units in 1997. The consumption level is estimated by the year 2000 to be
reached 70,000 units.

       e) The total variety of automobiles launched in the whole

       In 1991 there       were about 205,000 units; in 1995 there were
3,408,000 units, an average yearly increase of 34,000 units ( the period
from 1991-1995).

       It is estimated that the number of 600,000 to 750,000 units will be
launched by the year 2000.

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       5.2.2. .The situation of the development of motorbike consumption
       market in Vietnam:

       a) Market situation:

       In 1975 there were about 900,000 various kinds of motorbikes in
Vietnam and quatitiea of motorbikes were slowly increased up to the
decade 80s. Variety of motorbikes consumed in the vietnam market at
that time were mainly imported from the former Soviet Union, Eastern
Germany and Czech

       - From 1990 up to now the number of motorbikes consumed in the
Vietnam market has rapidly increased , majorly models of Japanese
companies and their joint venture inthe Southeast Asian countries.

       The average annual consumption level attained 500,000 units (the
priod from 1994-1996).

       The competition of motorbike consumption in the Vietnam market
has become fierce. Motorbike structure being used distributed according
to the origin of production companies that having changable trend.

       In 1996, HONDA model accounted for 80% of market, up to now
just reaching about 70%.         That means the reduction of an increasing
market structure due to various kinds of motorbikes such as: YAMAHA,
KAWASAKI, SUZUKI........... that occupying consumption market in
Vietnam with a further trend.

       b) Consumer taste and behavior between countryside and city
       in Vietnam with regard to motorbikes:

       In the countryside of Vietnam, favourate motorbikes are HONDA-
78-79-81... due to a low and reasonable price suited to narrow, sloppy and
banded roads in the countryside. Peasant behavior is difficult money

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earnings , as a result of which they don‟t feel regretful like when using
new motorbikes.

       Accordingly motorbike structure used in the countryside is mainly
old units belonging to out of date production system. Whereas Simson
model is favouritely used.

       In the city people‟s living condition has been improved particularly
in big cities such as Hanoi, Ho Chi Minh city...... people concentrate on
consume variety of new and highly qualified motorbikes.

       For example, motorbikes on the roads with a nice unit rate namely
Dream, Vespa, Piagio, Win...... accounts for a higher rate than others.

       Consumer behavior in the city when buy motorbikes, they usually
give three requirements:

       - Nice models.

       - Well-qualified..

       - Reasonable price

       If one of those three requirements is not sufficient, it will be
difficult to consume no matter how new motorbike are.

       c) The number of increasing motorbikes is mainly through
       imports (CBU and CKD imports):

                 The situation of the official imports of motorbikes:

                                             Thousand Units             %

                          1990                        36.4              100.0

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                          1991                        40.4             109.9

                          1992                        55.2             151.7

                          1993                       374.0            1027.5

                          1994                       283.6             779.1

                          1995                       458.5            1259.6

                          1996                       359.4             987.4

                   According to the                  350.5             961.5
                  estimation of 1997

        Considering 1990 as a starting point, in 1995 the highest increase
rate in this period was 11.6 in 1997 growth rate was slightly decreased 8.6
times. Vietnam motorbike assembling industry has put into operation in
the past year, as a result of which 283.6 units were reached in 1994 458.5
units in 1995; 358.4 units in 1996 and 450 units are estimated to gain in

        The quantity of Vietnam motorbikes marketing has been increasing:

               - 1975        :       900,000 units

               - 1994        :       an increase of 3,086,600 units

               - 1995        :       an increase of 3,578,200 units

               - 1996        :       amount to 4,209,000 units

        The motorbikes quantities launched is estimated to run to better
qualified units of 6.5 million units by the year 2000.

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       5.2.3 Trade policy toward automobile - motorbike assembling and
               manufacturing industry in Vietnam:

       Trade policy to automobile, motorbike units is concentrated on
import policy with 2 key factors: Import quota and Tax quantity

These 2 key factors are coordinated the imports of automobiles, 2-wheel
motorbikes as concretely stipulated by the Government depending on
market situation of each year.

The following is the specifications in 1997 :

       a) Import of 20,000 various kinds of automobiles including CKD
for assembling in Vietnam in which there are 5,000 12-seat units

       - With regard to less than 12-seat automobiles imported in
accordance with specifications to consumer goods as controlled by quality
and quantity

       - With regard to others, in the case enterprises grated business
license of means of transport articles with sufficient conditions,
enterprises may import articles over the above mentioned level

       b) With regard to 2-wheel motorbikes of about 350,000 units
including CKD for assembling in Vietnam, import mechanism is applied
along with it to consumer goods

       c) With regard to CKD of automobiles and 2-wheel motorbike:

       - The import quantity of imported CKD for exports is not limited

       - The number of imported to assemble automobiles and 2-wheel
motorbikes shall be consumed in the Vietnam domestic market. The
quantity of imported CKD shall be calculated in the total quota of the

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above mentioned imported units. Thus, various kinds of under 12-seat
automobiles and 2-wheel motorbikes are considered

         - Essential consumer goods as strictly controlled by quota of the
number of imported units are subjected to high import tax rate.              to
encourage the development of automobile-motorbike assembling and
manufacturing industry in Vietnam, Trade Ministry shall stipulate the
quantity of annually-imported units; in the case where necessary is made,
the Government shall make a decision to stop importing CBU units
temporarily.      Over this matter, many discussion happened aimed at
settling appropriate relations between the domestic production protection
and extension of the domestic consumption market.

         - On the basis of the encouragement of protection and domestically
produced articles, import tariff of CKD attached sub-motivated parts or
non-essential ones, 3-wheel automobiles is continuously re-amended and
in valid from Aug 1997. In this amendment, tax rate of imports of CKD
units still accounts for 60%; import tax of CKD1 and CKD2 decreased 5%
as a results of which import tax of CKD1 is 50% and 45% for CKD2.

         Specific consumption tax shall be prescribed to various kinds of

         - 5 or under 5-seat passenger cars shall be subjected to tax rate of

         - 6 to 15 seat passenger cars shall be subjected tax rate of 60%

         - 16 to 24 seat passenger cars and other various kinds of
         automobiles (including passenger and commodity automobiles)
         shall be subjected to tax rate of 30%.

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    5.2.4.     The situation of products consumption of automobile joint -
               venture enterprises in Vietnam:

       The total units marketed of automobile manufacturing enterprises
which put into operation in 1996 in Vietnam was 5,500 units, 6,000 units
in 1997 - an increase of 9% over the corresponding 1996. The automobile
consumption market in the first 6 months of 1997 was slowly operated as
compared with 1996, due to the reduction of a large amount of budget for
automobile purchase of the State Budget.

       In 1996, the number of customers sponsored by the State budget
accounted for over 50% in the total customers purchased automobiles at
enterprises whereas residential households which can afford to purchase
automobiles just accounted for 5%.

       Reviewing the situation of a number of automobile manufacturing
enterprises in Vietnam:

          Hoa Binh Motors Corporation (VMC) started its manufacture
operation in 1992. By mid of 1997, 8,340 various kinds of units were
assembled and 8,000 units were sold, turnover reached 1,611 billion
Vietnamese Dong, the crop paid 380 billion Vietnamese Dong to the State
Budget.      Under challenges market mechanism, the products of VMC
affirmed its position through good and ensured quality of units, diversified
model suited to Vietnam economic condition. VMC has not been satisfied
with initially attained results, continuously strives for the investment of
technologies to raise products quality and create new articles.

          Mercedes-Benz Vietnam Enterprise (MBV) after official 12
months of manufacture, 70 passenger cars with model E230 were
comsumed. MBV is now manufacturing 3 kinds of units: passenger
crs,trucks and buses. Last year, 114 passenger cars, 231 minibuses and 31
trucks were worked. Passenger car consumption market in this enterprise

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is limited because such a kind of car is rather best qualified, as a result of
which its selling price is higher than others.

          Vietnam Daewoo Motor Corp. (VIDAMCO): installation of
assembly line from Nov. 1995 to Apr. 1996.

       Truck and minibus assembly line with its capacity of 1000
units/year. 4 seats cars with the brand name CIELO used by newly set up
taxi companies.

       Various kinds of VIDAMCO units have 4 favourable conditions for
consumption of these products in the Vietnam market: the old price is
lowest compared with the respective models, payment condition is
equitable and prolonged, units are sustainable and best-qualified, after sale
guarantee service is carefully made use of.

        Toyota Motor Vietnam (TMC) - one of enterprises which do not
meet market demand - has not up to now put into full operation. By the
end of Sep 1997, TMC just manufactured 200 to 300 units/month. In the
future a factory with a maximum capacity of 10,000 units/year. TMC may
account for from 20 to 40 % of market share.

5.2.5. Conditions for the development of automobile-motorbike industry in

   a) Automobile:

       Many countries with developed automobile and motorbike industry
draw the following experiences:

       - Capital accumulation (1)

       - Technical technologies (2

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       - Accumulation of components and separated parts manufacturing
           industry (3)

       - Market (4)

       Vietnam has not completely satisfied with any condition in these 4
essential condition for the development of automobile-motorbike industry;
but Vietnam has many advantages and solutions to surmount weaknesses.

        Regarding to (1) and (2), Vietnam has already co-operated with
foreign countries by establishing enterprises due to insufficient strength.
Foreign partners can afford to choose business counterpart with financial
ability, advanced technologies, concrete process of domesticallization rate
demand, technological transfer and training of Vietnamese employees.

       To turn the 2 conditions into reality by the form of joint-venture,
Vietnam has granted business licences for 14 automobile manufacturing
and assembling enterprises, mostly co-operated with famous automobile
companies in the world.

       On Feb. 1996, there were 7 enterprises put in to operation and by
the end of 1998 the total of 14 enterprises will be put into operation.

       - Regarding (3), Vietnam has a sphere of rather mature mechanics
companies in which there are a number of automobile components
manufacturing companies for the tens of years with non-modern
equipment, low technology level but experienced professional and highly
skilful technicians forces.

       There are also a number of automobile components manufacturing
companies gained advanced-technological level.

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    - In view of market condition, the difficulty of Vietnam is a too low
people‟s earnings level, automobile consumption ability is not high caused
disadvantages for market. But these disadvantages are temporary;
Vietnamese developing economy will rapidly raise                    automobile
consumption demand with an average annual increase rate of 14% of used
units in the period from 1992-1995. By the year 2000, 1.4 million units
will be marketed and comsumption demand will reach 135,000 units in
equivalent with the total yearly assembly capacity of 14 existing

       Vietnam Automobile industry will be taken shape and developed
along with domesticallization process set by the State of Vietnam -
Broadly speaking, all companies pledge to gain higher domesticallization
rate than stipulated level, reaching 7,5% in 5 years and 35% in 10 years.
These pledges have efficiently been operated from the starting point of all
CKD import tax system according to variety of SKD, CKD and IKD
assembling. Vietnam may achieve a higher domesticallization rate if there
are more suitable encouraged tax levels.

       For the purpose of this, Industry Ministry is working out all
domestiallization policies based on tax imposing form in line with attained
domesticallization rate. The State will firstly promulgate essential
domestiallization rate to every kind of automobile in the certain time
frame. Import tax level to components and other separated parts shall be
applied respectively.

       Enterprises overgaining domesticallization rate and time frame will
be granted more preferential tax level.               Enterprises applying new
technologies with higher components and products exports rate will be
given priority in preferential tax level respectively. That is strong
economic motivation for promotion of domesticallization process of
enterprises (decrease of price and tax). Accordingly enterprises‟

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competitive abilities increase and create favorable conditions on products
consumption through decrease of selling prices.

   b) Motorbikes:

       Apart from a number of trading companies major in importing CBU
units, there are over 70 enterprises chiefly importing CKD units and

       From 1991 to 1996, domestic enterprises (excluding Joint-venture
enterprises and foreign companies) assembled motorbikes reaching at total
550 units, settling recruitment for over 3,000 employees.

       After the conclusion of CKD exports and assembling period is
estimated to be in 1998, domestic enterprises chart the following

       - To choose a number of main enterprises having potential of
production distribution with production cooperation to manufacture some
Vietnam model units.          This model is used a number of imported
components and parts from foreign countries but the price does not exceed
1,000 USD/unit. Domestic motorbike manufacturing enterprises should
concentrated on cheap price motorbike market in which major objective is
class of people having low earnings. They buy motorbikes for the purpose
of their own vehicle in business work.

       The remaining enterprises undertake to the participation in
producing small and unimportant parts and setting up guarantee and
maintenance companies for implementation of the after-sale duties.

       Joint venture enterprises and foreign companies assembled 62,000
units in 1995, 68,000 units in 1996 and 73,000 units are estimated to gain
in 1997.

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        Following is a number of motorbike assembling & manufacturing
enterprises in Vietnam:

   1.   MOTORBIKE MANUFACTURING ENTERPRISE:                        This is an
        enterprise set up by the HCM motorbike bicycle company and
        Mahadhom (Thailand).

        Head office              : 341 Cao Dat St. - Dist. 1 - Ho Chi Minh

        Investment License       : No 58/GP dated June 22, 1989

        Total investment capital : 4,800,00 USD

        Legal capital            : 4,800,00 USD

        Operation                : Manufacturing and assembling motorbikes.

        PROCESSING COMPANY LTD:                      An enterprise with 100%
        foreign capital- Chinfong Investment Co., Ltd. - Taiwan

        Head office              : 20 Chua BocSt., Hanoi

        Total investment capital : 55,556,000 USD

        Legal capital            : 55,560,000

        Operation                : Assembling and manufacturing motorbikes

        Up to now, the enterprise has assembled nearly 60,000 2- wheel
        units including various kinds namely Angle, Bonous, Passing,
        Enjoy, Husky with cylinder capacity of 50 150cc.

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        An enterprise with 100% foreign capital of Ying Fa Industrial Co.,
        Ltd ( Taiwan )

        Head office              : 30/4 Str, Chanh Nghia Commune, Thu Dau
        Mot, Song Be Province

        Total investment capital : 905,830 USD

        Legal capital            : 905,830 USD

        Operation                : Manufacturing motorbike components.

        Investment license       : No 1019/GP dated October 26, 1994.

   4.   AUTOMOBILE-                   MOTORBIKE                   COMPONENTS
        MANUFACTURING ENTERPRISES: An enterprise set up
        between General Import Export Co. and Thai Summit Autoparts
        Industry Co., Ltd. (TSA) (Thailand); SKR International Co., Ltd
        (Thailand) and New Chip Xeng Co., Ltd (Laos)

        Head office              : Nhu Quynh, My Ven Dist, Hung Yen

        Total investment capital : 39,000,000 USD

        Legal capital            : 15,000,000 USD

        Operation                : Manufacturing and assembling motorbikes.

        Investment license       : No 1420/GP dated on Oct 31,1995.

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   5.   VIETNAM HONDA ENTERPRISE: An enterprise set up by
        VEAM Corp and HONDA Motor Co., Ltd. Japan and Asia
        HONDA Motors Co., Ltd (Thailand)

        Head office              : Phuc Thang Commune, Me Linh Dist, Vinh
        Phu Province

        Total investment capital : 104,033,00 USD

        Legal capital            : 31,200,000 USD

        Operation                : Manufacturing and assembling motorbikes,
                                   Vietnam HONDA Factory is estimated to
                                   put into operation with its operation form of
                                   assembling IKD of various kinds of
                                   HONDA brand name 2- wheel units with
                                   the output of over 200,000 units/ year, and
                                   develop to gain 450,000 units/year.

        Major products           : 100cc units

        Motorbike consumption market in Vietnam becomes busy and
highly consumed value, requiring domestic motorbike manufacturing
enterprises to make effort, re-organize production, show initiative in
investment and survey in order to manufacture various kinds of
motorbikes suited to market requirement and competition to foreign units.

        5.2.6. Advantages and challenges of automobile-motorbike market
        in Vietnam when participating in WTO:

        a) Advantages:       Investors shall enhance Vietnam‟s advantages:

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    - Advantage of political and policy stabilities

    - Highly skilled employees, low labour cost

    - Favorable infrastructure

    - Vietnam is attracting foreign invested capital from famous
       automobile and motorbike companies in the world

    - Chances of the development of automobile - motorbike

   b) Challenges:

    - The first one is to be stressed by fierce competition on local and
       overseas consumption market .

    - To quickly organize, control and manage the production

    - Due to the coordination between some legal documents, it is
necessary to sensitively realize in the implementation of policies and
access to new partners

    - To improve ability/function as well as implementation responsibility
of organization during the shift to integrate into WTO.

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      5.2.7. Vehicle assembly and manufacture project under operation in Vietnam:

      These projects with such details as : Name of project, location, investment capital, foreign partner, JV period, design
output, production situation are briefed in the below table

 N     NAME OF          INVES       LEGAL             ADDRESS          FORE         VN        DURATI     DESIGNED       PRODUCTION
 O     PROJECT            TED        CAPIT                             IGN     PARTNE         ON OF                        SITUATION
                        CAPIT          AL                              PART         R         OPERA
                           AL       (Million                           NER                     TION
                                      USD)                                                    (Year)

 1          2               3           4                  5            6           7            8             9               10

 1                        35.9         20         HAN:         33B             Co       Loa               5,180 units/ 15 March ‟94: The
                                                Pham Ngu Lao St.               Mechanic                 year         innauguration of FIA
        Mekong                                                         Japan                    30
                                                       Tel: 8.250345           s                                     TEMPRA passenger
       Automobile                                                      Korea                            + 1,400
                                                                                               joint-                car    assembly   line

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                                                                                           ventures passenger cars with          the     desinged
     208/GP - 26                               HCMC: 120 Tran                   Industry
                                                                                                                        output      of       15,000
        Jun ‟97                                Hung Dao St.                     Ministry              +     700 buses
                                                                                                                        vehicles/ year
                                                      Dist. 1 - Tel:                                  + 3,080
                                               8322459                                                trucks

2      Hoa Binh          13.1         10         HAN:           Km 9   Philip   Hoa Binh     30        11,070           -       3,000    vehicles
     Motor Corp.                               Nguyen Trai St.         ines      Motor                units/year        estimated        to     be
                                                      Tel:8.543586     Japan    Factory                   including:    manufactured in ‘97
     228/GP - 18                                                                           ventures
                                                                                                                        of      which         2,000
       Aug „91                                                                                        + 2,500           motors                were
                                                                                                      passenger cars manufactured in the
                                               HCMC: 134
                                               Nguyen Bieu St.                                        + 7,000 light     first 6 month of that

                                                                                                      trucks            year.
                                               Dist. 5 - Tel:
                                               8326762                                                                  - There are 4 kinds of
                                                                                                      + 1.570
                                                                                                      buses,            cars marketing with
                                                                                                      minibuses         the brand names: KA,
                                                                                                                        MA/ DA, BMW and
                                                                                                                        SWBARU.               6,000

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                                                                                                                   units     have        been
                                                                                                                   assembled              and
                                                                                                                   consumed at present.

                                                                                                                   - Joint - venture put
                                                                                                                   into operation in

3     Viet nam-         32.23         10       HAN:           Tu hiep Korea Fac. 8798     30          9.500        -       Installation    of
       Daewoo                                  Commune                                            units/year       assembly line from
                                                                            Technical    Joint-
    (VIDAMCO)                                                                                                      Nov 1995 to April
                                                     Thanh Tri Dist          Science    ventures + 8,000
     744/CP Dec                                                               Dept.               passenger cars
                                                     Tel: 8.613310
        12,1993                                                                                                    - In the mid of May
                                                                             Defence              +    500 buses
                                                                                                                   ‟96.     30-     4     seat
                                                                                                  +    500 Jeep    passenger cars with
                                                                                                                   brand       name        of
                                                                                                                   CIELO          were    ex-

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                                                                                                                  - Aug „96 truck and
                                                                                                                  mini bus assembly
                                                                                                                  line put into operation
                                                                                                                  with     its    operation
                                                                                                                  capicity       of        1,000
                                                                                                                  units/ year.

     VINASTAR             50          16              Song Be         Japan Ex-Im            20        9,600      - 200 Proton Wira
                                                                           Co.                       minibuses/   were
    847/GP April                                                                           joint -
                                                                           Providing                    year          manufactured in
       23, 1995                                                                           ventures
                                                                           Materials                              1996
4                                                                                                                 -      360          vehicles
                                                                            Transport                             estimated           to     be
                                                                            Commu‟n                               increased       in       1997
                                                                               Ministry                           with the selling price
                                                                                                                  of 29,090 USD

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                                               HAN:                            SG                     11,000 units/
                                                                                               2 Fl 17 Ngo Quyen St.
                                                                              Motor                year
                                               Tel: 8241463 - Fax:                                                     According to planned
                                                                              Mache                  including:
                                               8.241462                                                                target   products      of
5     Mercerdes           70          13                              Germa    nics       30
                                                                                                   + 5,300 buses       3,600 vehicles to be
       Benz-VN                                 HCH: Quang Trung        ny     Com+
                                                                                        joint -                        manufactured
                                               St.                             1/5                 + 5,100 trucks
    1205/GP - 14                                                                       ventures                        consisting    of      400
        Apr „95                                      Commune11,                                    + 600               passenger cars.
                                               Go Vap Dis.                                         passenger cars
                                                     Tel: 8.458306

     VINDACO-                                                                                                          Output products to be
     VIETINDO                                                                                                          gained             8,000
6                         32          13       HAN: 27 Nguyen         Japan   Co.         30         6,700 units/
       (Dahatsu                                Thai Hoc St.                                               year         units/year    after    10
                                                                              Trasp     joint -                        years of operation

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    1206/GP - 14                                                              ort &     ventures
                                                 Tel: 8285880 -                                     (light trucks)
        Apr „95                                                               Comm
                                               Fax: 8285951

                                                                                                                     192-4 wheel cars with
                                                                                                                     the brand name of
                                               Binh Da Commune                                                       Super   Carystimated
      VIETNAM                                                                 Vikyo        30                        to be manufactured
                                               Dong Nai Dist -
       SUZUKI                                                                      no                                in 1997 icluding:1.5
7                       34.175       11.70     Bien Hoa City          Japan              joint -    12,400 units/
                                                                              Coma                                   tons-truck and 6- seat
     1212/CP - 22                              Tel     : (61)                           ventures         year
                                                                                   ny                                passengers cars. And
        Apr „95                                828319                                                                768 units planned to
                                                                                                                     be reached in 1998
                                               Fax     : (61)


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      VIETNAM                                   Hai Hung Province                          40      + 2,280
        FORD                                    Tel: 8265627 - Fax:                                passenger cars
8                       102.7         72                              Americ    Co.      joint -
     1,365/GP - 5                                                       a               ventures   + 1,280
        Sep „95                                                                                    millitary trucks
                                                                               Minist              + 3,940
                                                                                 ry                Minibuses

                                                                                                   + 9,490 trucks

                                                                                                   vehicles/year :
       Vietnam                                                                 Vinap       40
       Chryster                                                                ro Co.              + 10,800 light
9                       191.5       28.920           Dong Nai         Americ             joint -
     1,366/GP - 5                                                       a      Indust   ventures
       Sept „95                                                                  ry                + 3,400 Jeep
                                                                               Minist              model
                                                                                                   + 2,800
                                                                                                   passenger cars

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                                                                                                 20,000 units/    - Breaking ground for
                                                                                                 year             the building of the
                                                                                                                  factory on March
                                                                                                   (2nd period)
                                                                                                 + 6,300
                                                       Vinh Phu                                                   - It‟s estimated to put
                         164.8                                                                   passenger cars
                                                                                                                  into operation        in
10     VIETNAM           for 1st     49.140     HITC Bld. 7 Fl, Cau    Japan   VEA       40
                                                                                                 + 3,000          the 3rd term of „97
       TOYOTA            period                        Giay St.                 M
                                                                                       joint -   minibuses        frm Oct „96.
                        of 89.6                                                Corp
      1,367/GP - 5                                 Tu Liem, Hanoi                     ventures
                                                                                                 +10,700 multi    - Jun „97: Main
         Sep „95
                                                 Tel: 8342791- Fax:                              used trucks      workshop put into
                                                       8342800                                   +10,100 units/   operation, in the first
                                                                                                 year             six month of
                                                                                                                  „97, over 400
                                                                                                 1 period,        vehicles ex- worked
                                                                                                 CKD2              1000 units is
                                                                                                 assemblling(Hia planned to be
                                                                                                 ce and Corolla)  marketed in 1997

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                                                                                (SG                   6,750 units/
                                                                               Motor              year:
      VIETNAM -                                                                           40
         ISUZU                                                                                    + 1,300 buses
11                         50          15         Ho Chi Minh City     Japan   Co.)     joint -
      Oct 19,1995                                                               and    ventures   + 3,050 light
                                                                               Govi               trucks
                                                                                                  + 1,200
                                                                               Ex-Im              + 1,050 ......
                                                                                                  +     150 heavy

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                                                                       Singap Traci
                                                                        ore     mex
                                                                                                      1,200 units/
                                                                                Ex-Im               year:
12     VIET-SIN           16.4         4.9             Song be                              30
         AUTO                                                                                       + 1000 trucks
                                                                                          joint -
     1,500/GP - 10                                                              Tranp    ventures   + 200 buses
         Feb „94                                                                ort &


                                                                                                    + Output at the
                                                                                                    1st period of
                                                                                                                      Construction of D1
                                                                                                                      Factory of 16 ha
                                                                                                                      located at Hoa Khanh
                                                                                                    with various
13      NISSAN-           110          38              Da Nang         Malays               40                        IZ at the North of Da
                                                                                                    brand names:
                                                                                                                      Nang from the end of

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       VIETNAM                                                          ia                         Nissan,            1994. Ex-work to be
                                                                                         joint -
                                                                                                   Sunny/Senta        done by the
        Auto TV                                                                         ventures
                                                                                                   and Nissan         beginning of 1998

                                                                                                   + 2nd

                                                                                                                      The Joint Venture is
                                                                                                                      estimated to put into
                                                  29 Trang Tien St.,           Repair              1,760 units/year
                                                                                                                      operation by mid of
                                                         Hanoi                 ing
14     Hinomotor           17          8.1                             Japan             Joint -   (trucks and big    1997.
                                                 Tel: 8254937 - Fax:                    Venture         buses)
                                                                               y1                                     The period from
                                                                                                                      1998-2000, 1,760
                                                                                                                      various kinds of
                                                                               pot &
                                                                                                                      vehicles to be

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                                                                  Comm     manufactured.

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      At present : 11 automobile and manufacturing enterprises.

                      Total investment capital 939,86 million USD. Total legal
                    capital of 310,76 million USD.

      Source        : Ministry of Planning and Investment

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5.3   Electronic and informatic industry:

The Vietnam electronic and informatics industry starts developing in
integration into countries in the region and in the world. Building a trade and
investment environment the electronic and informatic industry in Vietnam is a
difficult question in the local market excluding foreign market. To perceive
practical reforms and the development of the Vietnam electronic and informatic
industry in the future, we shall step by step consider the following aspects:

5.3.1. The establishment and the development of the Vietnam electronic and
         informatic industry:

         Most of enterprises belonging to the Vietnam electronic and informatic
industry have newly set up by the end of 80s and 90s. Therefore, it is an young
industry which comes into being when Vietnam economy has been changed
into open market economy.

Economic growth has made impact on social economic fields of production and
life and created a remarkable domestic market for the electronic and informatic
industry and it becomes attractive for foreign investors in Vietnam.

Only in the past ten years, the electronic and informatics industry has unfold
many tense changes.

      a) Regarding a new, animated and rapid developing electronic and
         informatics market:

         Quantity and qualify of electronic and informatics units in the market
have quickly been increased. Diversification of electronic and informatics units

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includes household electronic, industrial electronic and national defence

        The price of various kinds of electronic and informatics units is
development result of the international technology and a factor for extention of
the domestic market as well.

        The electronic and informatics market in recently under the circumstance
of “saturation” (excess supply). But the slow consumption of electronic and
informatic units is due to really reduced purchase power. Vietnamese market
now keeps a large possibility, that is two third out of the total 14 residential
household having no radio, refrigeration, cassette.               And average computer
index per capita in Vietnam is just about 0.7 unit per 1000 people. Whereas in
ASEAN countries, an average level per capita is too high: 3 units/1000 people
in Indonesia; 11 units/ 1000 people in Malaysia; 80 units/ 1000 people in
Singapore. The new electronic and informatic industry accounting for about
0.3 % of GDP is too low.

b)      The animated market changing the competition from buyers to

        In the years of 90s, together with the economic growth, people‟s
purchase power was increased and they don not like using old electronic units
and out of date equipment. On the other hand supply source of goods in the
domestic market is not sufficient because assemble ability and imports of local
enterprises were poor, some enterprises did not put into operation. Accordingly,
excess demand made electronic and informatic market vigorously operate.

From that situation, there were a few producers misunderstanding and
importing SKD, IKD massively for assemble to the market. Besides the
number of enterprises in the electronic industry rapidly increased (on Feb ‟96,
18 projects were put into operation).

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        Therefore, supply exceeded demand of the market in a too far distance.
Concretely T.V assembling and manufacturing enterprises are capable of
manufacturing 3 million units per year, while consumption demand in domestic
market just accounts for about 700 to 800 units every year. That does not
include a large affect of smuggled units with famous brand names in the world,
in which the price is cheap accounting for 49% to 70% of the price of the same
goods being sold in the domestic market. Various kind of informatic units also
share the destiny of a massive imports and no guarantee assemble that of
making the price of this unit quickly decline.

        The price of computer units in the international market decreases, a
decrease of 30% in Southeast Asian countries and 15% in America. From
1995, an average monthly computer price decreased 4%.

Facing such a situation, electronic and informatic manufacturers in Vietnam
have made use of reducing their price, withdrawing capital. The market
becomes fierce under the competition of the seller. Nowadays, the electronic
and informatic industry has not still been seen optimistic signs

        c) The “domesticallization” of electronic and informatic units expresses
its idea for setting up of “ Vietnam trade mark “ changing SKD imports to IKD
imports, but Vietnam electronic and informatic units remain badly- qualified
because production technology level of the Vietnam electronic and informatic
industry under any form just stands at “ debut”, showing small and weak as
compared with requirement of the electronic and informatic industry both
domestically and internationally.

        d) Extention of foreign relations but variety of electronic and
informatic units assembled in Vietnam have not seen development.

        When enforcing the open economic policy, Vietnamese market certainly
becomes a part of the international market.

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        Electronic and informatic units spreading into Vietnamese market under
many forms (officially and illegally).

        Enterprises with 100% Vietnam currency capital in the manufacture of
electronic and informatic units are, in fact, tools “ in connecting operation “ to
foreign enterprises, occupying Vietnamese market. Finally these products are
appreciated to be attached foreign brand names.

        e) The electronic and informatic market is not well co-ordinated
between business units:

        Electronic household units seems to be saturated, industrial electronic
units are less developed.

        Regarding informatic units, attention is especially paid to hardware,
while software is not concentrated in.

        Up to now, investment structure to software informatic field accounts for
40% of project expense that is quite different from a number of countries in the
region and in the world.

        It is true by saying that there is not a software market in Vietnam.
Buyers buy computers with the purpose of using as electronic typewriter and
sellers do not know how they have to do with customers after selling their

        Most of software products in Vietnamese market are through imports.
Among over 200 Vietnamese companies making business in the informatic
field, there are only 13 software producing and supplying companies with the
total investment capital of 1.5 million USD. This imbalance show the habit of
over- reliance and dependence on foreign countries and the weakness of the
Vietnam informatic industry in its development orientation and technical
technologies as well.

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        Nowadays, businessmen who are responsible for this industry are finding
their right way, though a little of prospect has recently been appeared, they
have to wait for an experiment time to gain an initial hope.

        The market now is on the rapid rise with a spontaneous, imbalance
developing scale and structure. Foreign units are rich, domestic units remain
poor and spare, particularly sellers‟ market is not concretely defined. It is not
easy for the Vietnam electronic and informatic industry to find foreign export

        5.3.2. Issues should be considered in the trade and investment policy
        toward the electronic and informatic industry:

        General orientation of the electronic and informatic industry toward
import substitution products or development of the key industry along with
exports has not clearly been defined.               Accordingly, concrete trade and
investment policies toward the electronic and informatic industry are not
concentrated on tax category applied to electronic and informatic products:
domestic production, at certain time, has been encouraged and at certain place,
imports is encouraged (including CBU imports). That state is concretely
contrast to general view point of Vietnam industrialisation that is foreign way,
not only keeping Vietnam domestic market but also setting up certain market in
the region and in the world.

        Now we deeply study issues that are lack of agreement in the following

        a) Policy on technological equipment imports:

        This policy has made a positive effect on the development of the
electronic and informatic industry. Concretely mode of major SKD assemble
has been changed to CKD and IKD, by doing that it has its stand at the

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domestic market (in which a number of electronic units exported at the
domestic market are offered in some neighbouring countries).

        Though policy on technology imports is oriented to advanced
technologies, much technological equipment imported in this industry is out of
date.     The Vietnam electronic and informatic industry is not invested
immoderately to the imports of deals of measure equipment - an important part
in the electronic and informatic assembling technology.

        But the value of amounts of equipment is too expensive accounting for
50% of the total investment value; therefore, to avoid from loosing in the
investment of technological equipment for the electronic and informatic
industry, we should be completely and harmoniously careful for production of
international standard products.

        b)     Tax policies:

        The situation of the electronic and informatic industry is majority
specialised in assemble work. But current tax level applied to the electronic and
informatic industry according to point 6, part 1 in the turnover tariff (Decree No
55/CP dated on August 28,1993 of the Government as attached) shows many

        Tax category in this above table do not clearly express the production
encouragement in the country but aiming encouragement of imports:

                         IMPORT DUTY             TURNOVER         CORPORATE
                                                      TAX         INCOME TAX

         CBU                     5%                     4%            45%

     Components                  6%                     8%            35%

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  CKD component                 15%                     8%             35%
   for colour T.V

        While CBU imports for consumption is subjected to the turnover tax of
4%, domestic producers excluding investment of capital, technological
production line, they have to implement a range of productive process relating
to labour management, assemble processing, asset depreciation, packing
preservation, registration of products quality... have to be liable to pay turnover
tax of 8%.

        Under this state, unmarketable market applied turnover tax rate of 8% for
household electronic producers is unreasonable and carefulness stipulation.
Moreover, import tax of CBU units is lower than that of CKD.

        These tax categories are reason decreasing investment intention of
domestic assemble.

        Because of a changeable tax policy in Vietnam, medium and small
enterprises (chiefly electronic and informatic industry) have to lend investment

        The change of import tax every 2 times a year, even a term is not
appropriate with production circulation of producers belonging to the electronic
and informatic industry.

        Apart from tat, tax application at the minimum price id just a measure
against loosing of tax authorities, having an irrational administration method
in the market mechanism, hindering seriously operating enterprises.

        In Vietnam, tax researchers define that computers and attached
components are consumer goods but not labour tools, so corporate income tax

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applied is subjected to 45% as the same with consumer goods (25% is not
imposed); turnover tax of 4% (1% is not imposed). This tax category is not
really appropriate because the quantity of over 90% computers are bought at the
service of work process by the State organs and producing enterprises.

        Finance Ministry stipulates an yearly depreciation rate for computers of
10 units but does not take notice of a rapid change in communication
technology with in about 2 or 3 years. In fact, from 1990 up to now computer
import tax has increased from 2% to 5%.

        c. Policy on intellectual-right protection and man power

        Great attention and importance should be attached to the protection of
“Vietnamese trade marks” (“Made in Vietnam” trade marks) with intellectual
right protection. Although in Vietnam a copyright law has already been
available in the Civil Code, the law implementation is not completely strict.
Haphazard joint and paste of brand names lessen the prestige of “Vietnamese
trade marks” to the so-far-lowest level at local consumption market.

        Especially the protection of intellectual rights for software producer
seems to sink into oblivion with almost no attention. Newly-born software
products were freely copied. While capital from local source is too little to risk
in investment, this situation makes Vietnamese software technology very
difficult in foreign investment and co-operations. Therefore, right and effective
consideration should be put on the policy on intellectual right protection.

        As far as the policy on man power development is concerned, the
electronic and informatic industry is one of new technology industries, which
requires high-technique workers... especially in informatic software production.

        According to the prediction of informatic researchers, the required
numbers of informatic experts in Vietnam in the year 2000 must be at least ten
times higher (about 20,000 people) than that at present. While the labour

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demand is so high, investment in training human resources with high technique
is so little.

        Regarding the labour policy, salaries and wages among state-owned
enterprises in informatic fields are unsatisfactory. Vietnam encourages
producing made-in-Vietnam software. However, it may take years of hard
working to create an invaluable intellectual software product in return for only
a little amount of subsided salary every month. This pushes many young talents
to work for foreign enterprises.

        The decline in Vietnamese electronic and informatic industry at present
is partially due to immoderate attention of the State management to training and
fostering human resources for the industry.

        If there is no prompt policy on this issue, Vietnam will be left behind in
regional and international labour delegation in electronic and informatic

        d) State management policy on electronic and informatic industry:

        The electronic and informatic industry is under ragged and dispersed
management.        New enterprises are under the management of at least 3
ministries (Ministry of Industry, Ministry of Environment, Science and
Technology, General Post-telecommunication Department) and spread out in
many provinces and cities.

        On the other hand, due to loosen import management mechanism,
smuggled and tax-evaded goods are available everywhere, which creates big
chaos in the market. It has considerable impacts on domestic producers and
pushes them to a very difficult and vulnerable situation.

        According to the electronic and informatic management policy, tax will
be refunded in case of import re-export activity. This policy encourages export.
However, if there is not a strict examining mechanism, there are likely many

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small gaps for some exporter to make unreal export and get all the tax refunded
to be used as “dangerous measure” to cut down the price for occupying the
domestic market.

        In order to create a healthy and equal competition environment and a
necessary support to the operation of domestic enterprises, the State
management authorities should be well-informed, sensitive in discovering,
adjusting and strictly implementing regulations on tax and taxable price.

        e) Policy on investment for the development of electronic-informatic

        The assemble technology of Vietnam electronic-informatic industry is
now equivalent to developed electronic-informatic industries such as Korea,
Singapore, and Taiwan.

        Un-synchronous and not-in-time investment with current advances of
science and technology leads to the current situation of Vietnamese electronic-
informatic industry. Technological assembly lines in almost electronic-
informatic equipment manufacturing enterprises were partially equipped; only a
few brand-new lines were synchronously imported and the other great numbers
of lines are unsynchronous, unequal, modern technology is mixed with
backward technology; new designs are intermixed with old designs from many
firms with various series.

        There is still a short of major equipments of the assembly lines in
Vietnamese electronic-informatic industry, such as: automatic component-
plugging machines, surface assembling machinery system, automatic
programmed control system, ISO9000 production control equipments....
Without these equipment, Vietnamese electronic-informatic industry shall not
be able to produce, assemble highly-qualified electronic and informatic
products for export.

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        Besides, equity of enterprises in electronic-informatic industry is too low
with poor material base, dispersed organizations in many fields, many regions;
investment is scattered and local.

        Those remaining problems prove that there is no clear orientation in the
investment policy in Vietnamese electronic-informatic industry. Although
products from electronic-informatic enterprises such as Vietronics Tan Binh,
Vietronics DongDa, Hanel, Genpacific, FPT... are qualified, they are not much
accepted in domestic market compared to import items. Reduced comsumtion
volume makes the production stagnated, creates no jobs for the workers and
gradually tranfers the market to foreign invested enterprises.

        In this regards, there may be still a long way to the strategic target of
Vietnamese electronic-informatics industry in order to set up “Vietnamese trade
marks” and direct toward exporting electronic-informatics products.

        5.3.3. Strategy for the development of electronic and informatic industry:

        According to master plan of electronic and informatics industry, from
now to the year 2000 we have to build it for the becoming of an industry toward
exports. Vietnam electronic and informatic industry will have a complete
infrastructure, a rational structure for integration into local and international

        The electronic and informatics industry has made an effort to step up
yearly development speed reaching 20 to 25%, becoming an important
economic industry in Vietnam and making a key contribution to the national

        Regarding assemble technologies; software production; product design;
organization of various kinds of electronic and informatic services, from now to
the year 2010, we have to strive for the target achieving an equivalent level to

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other countries in the region. That is an arduous and difficult phase toward
Vietnam electronic and informatic industry.

     a) Scope of Planning draft set the development process of the
        electronic and informatic industry in three following period:

        - The period from now to the year 2000:

        The key target       in this period is the development of components,
electronic spare parts and initial establishment of informatic software;
promotion of man power sources development and training; strong attraction of
direct foreign investment.

        It‟s estimated that the total investment capital to these fields in this
period will run to 900 million USD, attracting about 15,000 employees in
which high educational level employees will account for from 30% to 40%.

        After targets of the electronic and informatic industry in this period are
fruitfully implemented, they will make a favourable impact on related
electronic and informatic industries attracting over 20,000 employees.

     - The period from 2001 - 2005:

        The electronic and informatic industry will improve infrastructure, invest
newly selected technologies (advanced and efficient) and vigorously develop
designed products as attached by Vietnam brand name marketing to the local
and international market.

        The total investment capital to the above developed fields in this period
is estimated to reach 1,150 million USD, attracting about 60,000 employees in
which high educational level employees will account for from 40% to 50%.

     - The period from 2006 to 2010:

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        In this period, the electronic and informatic industry will consolidate,
broaden the development of gained achievements at previous periods, as a
result of that by the year 2010, Vietnam electronic - informatic industry will
really become an industry with a high technical science level standing at a
remarkable position in the national economy like other advanced countries in
the region.

        The important task in this periods: VN‟s electronic-informatic industry
should accelerate the promotion of local research potential in order to find new
technologies of its own.

        The total investment capital in this period is estimated to amount to 1,500
million USD.

     b) The reality of planning draft of Vietnam electronic - informatic
          industry development is affirmed on the following aspects:

     - Demand and development base of the electronic - informatic industry
have further been heightened, based on credibility of economic growth rate
every year of the national economy.

     - According to the researchers‟ prediction, by the year 2000 demand of
electronic - informatic equipment and services will reach about 1 billion USD
in which electronic equipment for industry will account for 10%; 30% for
electronic household; 10% for electronic served for national defence; 10% for
informatic equipment; 10% for telecommunication equipment and 10% for

     - Vietnam electronic - informatic industry from production of electronic
household equipment up to now Vietnam electronic producing organizations
are capable of producing amounts of particularly-used equipment, Vietnam
informatic technologies are broadly applied in the State management, business
production, economic projects examination, national defence, communication
and other fields.

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        Informatic generalization has been brought up at the secondary schools,
professional colleges, universities and it is a ground to create important man
power sources for the development of informatic technologies in the coming

        Investment projects to the electronic - informatic industry are step by
step operated toward right orientation (technological transfer must be advanced

        The attraction of foreign investment projects to electronic-informatic
technology is implemented along with the modernization of the local
technologies and mainly exported products. Broadly speaking, project on
electronic - informatic technology development by the year 2000 - the first
period, besides exploitation from direct foreign invested capital sources, the
state of Vietnam will supply investment capital sources to key programs and

        For the next periods, further mobilization of other capital sources under
many forms will be implemented regardless of where capital sources come
from, after-capital technologies are certainly advanced technologies and
products produced by these technologies are absolutely accepted by the
international market.

        According to the experience of countries namely NICS, Eastern Asia,
ASEAN, that is obligated requirement in the control and investment licence
grant to electronic - informatic projects in Vietnam and this experience is
applied in Vietnam.

        Vietnamese market has become a part of the ASEAN and international
market. This is advantage and challenge in changing structure of the Vietnam
electronic - informatic industry.

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        Improving products and setting up opportunities for promotion of a real
competition for enterprises with 100% Vietnam currency capital, striving for
exports abroad is a developing path of the Vietnam electronic - informatic
industry at present and in the future.

        5.3.4. A number of solutions against the danger of our further falling
aimed at keeping pace with and exceeding other advanced electronic -
informatic industry countries in the region:

        With the view to bring up the trade ration, attracting foreign investment,
improving competition position in the entire regional market, the Vietnam
electronic - informatic industry should pay special attention to settlement of the
following aspects:

        a) Regarding the selection of model and development steps:

        In this field, we have to make a survey and advantage of experience of
advanced technical technologies in the region and in the world, based on
cooperation with developed countries, simultaneously step by step produce a
part of components and spare parts with Vietnamese brand name.

        b) Regarding the definition of development steps in line with the way
from assemble to production, on the basis of scale promotion, technological
level, diversification of variety of goods and when we have favourable
conditions for export implementation we bshould concentrate on the exports to
developed countries with a large consumption volume.

        c) Setting up competitive ability of the electronic industry:

        Nowadays, the electronic - informatic market is an acute competitive

     - Between assembled units in Vietnam and foreign imported units.

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     - Between newly produced units and old units.

     - Between officially imported units and illegally imported units.

        But this competition has been taken place between local enterprises, but
not having competitive strategy between countries. But when Vietnam takes
part in AFTA and joins APEC, WTO, Vietnam market will become an
unattachable part with many changes of regional and international market,
accordingly, nature and level of the competition will become fiercer.

        Therefore, there are two issues suggested for consideration:

        First, we should protect market share for the Vietnam electronic
informatic enterprises right in the domestic market.

        Second, with the view to promoting exports, attention is paid to
consumption market that is a traditional customer in Vietnam and
simultaneously through joint-venture enterprises, we step by step enter into
developed markets in European and American countries.

        d) A number of concrete solutions in the State management toward
the electronic - informatic industry:

        - To unify rational standards with a new situation of IKD, CKD and
SKD. If there is no unification between enterprises when importing component
sets for other goods in which there are not form of IKD assemble according to
the State‟s tax stipulation we will meet more difficulties.

        - To temporarily import CBU units against smuggled units in order to
protect domestically produced and assembled electronic units. To get rid of
further falling of the Vietnam electronic - informatic industry.

        - To build policy on protection of domestic electronic - informatic
production such as: preferential policy toward domestic producers on electronic
components, components semiconductor, spare parts, external equipment.......
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         - On the other hand, tax should be completely considered, especially
readjustment of component import tax and turnover tax along with the real
encouragement of domestic production. To build a preferential financial policy
toward local and oversea enterprises when investing to the Vietnam electronic -
informatic industry.

       - To build mechanism to more efficiently create capital source to the
electronic and informatic industry including: supplemented investment capital
of the State, self supplemented investment capital, private person owned
capital, foreign capital. Certainly when this matter is considered there will be
relations to many promulgated laws.

       - Finally, we should set up a feasible plans on the training of corps of
experts who are good at electronic - informatic field in general and practical net
software in particular.

         The   electronic-informatic      industry    is   a      key   industry   in   the
industrialization and modernization of the country. Preferential policies on all
aspects of the state have early overcome difficulties, and will be key factor to
ensure the development and rapid integration of the Vietnam electronic -
informatic industry into general development process of the region and the

III Trade and Telecommunications sectors

1. Trade

1.1.     Types of commercial acts in Vietnam

         1.1.1 Purchase and sale of goods

         The purchase and sale of goods is a commercial act whereby the seller
shall have the obligation to deliver the goods and transfer the ownership thereof
to the buyer and receive payment in return; the buyer shall have the obligation

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to receive the goods and make payment to the seller in conformity with the
agreement reached upon by the two parties.

        1.1.2. Representation of a business person

        A representative of a business person shall itself be a business person
which accepts the authorisation from another business person (the “represented
person”) to act as the latter‟s representative for the purpose of carrying out
commercial activities in the name of and under instructions from the
represented person and which is entitled to remuneration for so doing.

        1.1.3.Commercial broking

        Commercial broker means a business person who acts as intermediary
for parties (the “hirers”) that may be sellers or buyers of goods or providers of
commercial services in negotiating and executing contracts for a purchase/sale
of goods and in providing commercial services and who shall be entitled to
remuneration under the broking agreement.

        1.1.4. Purchase/sale of goods on consignment

        Purchase/sale of goods on consignment means a commercial act by
which the consignee carries out a sale or purchase of goods in its own name in
accordance with the terms and conditions agreed upon with the consignor and
receives consignment commission therefor.

        1.1.5 Purchase and sale agency

        Purchase and sale agency is a commercial act whereby a principal and an
agent agree that the agent shall purchase and/or sell goods in its own name for
the principal and shall receive remuneration therefor.

        1.1.6. Commercial processing

        Commercial processing means a commercial act whereby the processor
performs the processing of goods at the request of ad with the materials

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provided by the processee for remuneration; the processee accepts for
commercial business and pays remuneration to the processor.

        The scope of commercial processing includes producing, processing,
refining, repair, reprocessing, assembly, categorising and/or packaging of goods
at the request of and with the material provided by the processee.

        1.1.7. Tender for goods

        Tender for goods means the supply of goods through the selection by the
invitor of the business person among the tenderers which meets the conditions
of prices and economic-technical conditions set by the invitor.

        1.1.8. Freight forwarding services

        A freight forwarding service means a commercial act whereby the freight
forwarder receives cargo from consignor, arranges the transportation, storage,
and warehousing of cargo, clears relevant formalities and provides other related
services in order to deliver the cargo to the consignee under the consignment of
the cargo owner, carrier or other freight forwarder (referred to as client)

        1.1.9. Goods inspection services

        Inspection of goods is a commercial act carried out by an independent
inspection organisation to determine the actual condition of goods at the request
of individuals, state bodies or organisations.

        1.1.10. Commercial advertising

        Commercial advertising is a commercial act undertaken by a business
person to introduce its own goods or services for commercial promotion

        1.1.11.Display and introduction of goods

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        The display and introduction of goods is a commercial act carried our by
a business person to introduce and advertise its own products and goods to
customers for sales promotion purposes.

        1.1.12. Trade fairs and exhibitions

        A trade and exhibition is a commercial promotional activity to be carried
out in its entirety in a given period of time and specific location in which
production and business organisations and individuals display their goods for
the purposes of marketing and signing sales/purchase contracts.

1.2. The trading network in Vietnam

        The Development of the trading network in Vietnam has undergone 3

        1.2.1. Before 1954: Trading entities were mainly hold by French, Indian
and Chinese capitalist groups as well as some small Vietnamese capitalists.

        Foreigners, especially French, had a trading monopoly in the main
domestic and international markets.

        Vietnamese traders in towns and districts were small businesses or acted
as sale agents for grosses in big cities of the country.

        1.2.2 After 1954: Vietnam was split in two parts. Trading industry in
each part was organised in a different form:

        - In the Northern part: state trading enjoyed the priority of development
in most of the localities (in the fields of domestic trade, foreign trade ad hotel
business). In the rural areas, the network of co-operatives were expanded. The
market for private businesses was very small. Foreign Trade was in the State
monopoly. Catering, hotel and tourism businesses were not subject to the State
monopoly but due to another mechanism, other economic sectors almost could
not do businesses in those sectors.

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        - In the Southern part: Trading businesses were mostly in the hand of
foreign and Vietnamese capitalists. They established commercial centres in
main cities and harbours in order to dominate all the trading activities in the
southern part of Vietnam.

        1.2.3 After 1975: Trading industry is uniform throughout the country.

        Before 1980, domestic trade was clearly segmented, namely organised
markets (goods were sold at the subsidised prices and bought at the prices
instructive by the Government); liberal market (prices were determined by
market force). Foreign trade was still under the state monopoly. Business form
in catering, hotel and tourism sectors remained unchanged in comparison with
the previous period.

        By 1981, there was changes in the structure of the markets. The trading
network has witnessed the participation of different economic sectors. The
price system of domestic markets moved gradually to an uniform price. The
structure of organised and liberal markets changed in the direction that the
organised market was shrunk and liberal market was expended.

        Foreign trade was extended. The State gave up the monopoly in
importation and exportation.

        The network of hotels and restaurants was blooming with an extended
participation of economic sectors under more flexible and various forms of

        Up to early 1997, the number of businesses involved in restaurant,
tourism and services of domestic trade sector increased up to 14,871 of which
1778 State owned enterprises, 268 co-operatives, 4532 limited companies, 8123
private enterprises, 40 corporations and 130 foreign capital invested enterprises.

        Regarding foreign trade, overseas markets have been enlarged with more
than 104 trading countries and territories. Besides State owned foreign trade

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companies, there are also more than 500 enterprises taking in the foreign trade

1.3. The situation of Vietnam trading business.

        Carrying out the policy of multiplication and diversification of economic
relations, Vietnam trading business has enjoyed a high growth rate.

        1.3.1. Domestic trade: The total of goods retailed has increased rapidly
(despite the fact of inflation):

                                Total goods retailed          Growth index (base
                                                                   line 1990=100)
                                     (billion VND)

1980                          2.4                            0.0

1985                          65.1                           0.0

1990                          19031.2                        100.0

1991                          33403.6                        175.5

1992                          51214.5                        269.1

1993                          67273.3                        353.5

1994                          93490.0                        491.3

1995                          12160.0                        636.7

1996                          145874.0                       766.5

1997 (estimated)              158000.0                       830.2

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        So the total of goods retailed in 1995 and 1997 increased by 6.4 and 8.3
times respectively in comparison with that in 1990.

        Inflation occurred mostly before 1992. Since 1993, the prices have only
slightly changed.

        Comparing the prices index in December of each year with the previous
year, it results that:

        In 1990, prices increased by 70.1%

        In 1991, prices increased by 67.5%

        In 1992, prices increased by 17.5%

        In 1993, prices increased by 5.2%

        In 1994, prices increased by 14.4%

        In 1995, prices increased by 12.7%

        In 1996, prices increased by 4.5%

        In 1997, prices increased by 3.6%

        Along with the high growth rate, the structure of economic sectors in
domestic trade has been changed. The share of state owned enterprises (SOEs)
reduced from 33% in 1994 to 12% in 1997.

        In domestic retail, market share of SOEs was 30.4% in 1990, 22.6% in
1995 and 22.0% in 1997 respectively. Adversely, the market share of non-SOEs
was 69.6% in 1990, 77.4% in 1995 and up to 78% in 1997 respectively.

        1.3.2. Foreign trade

        The total export value in 1988 was 3795.0 million USD and up to 5156.4
million in 1990. Due to the turbulence in its traditional western and former-

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Soviet Union markets, Vietnam exportation was facing many difficulties in
1991 and 1992. However, thanks to the right reform and open policies of
Vietnam Government, foreign trade business of Vietnam has not only
overcome those challenges but also enjoyed growth. The total export value
remained at 4425.2 million USD in 1991 but started to mount up to 5121.4
million USD in 1992 and 13604.3 in 1995 (so increased by 137.7% versus that
of 1994 and 263.9% versus that of 1990). In 1997, the export value continue to
extend to 20171 million USD (increased by 9.6% versus that of 1996 and
391.2% versus that of 1990).

        In 1990, foreign trade business in Vietnam had to deal with 2 kinds of
market system: System of convertible currencies where payment was made by
the Rub and system of non-convertible currencies where payment was made by
the USD. In 1993, there has been only one market system where payment is
made by the USD.

        Vietnam is still facing trade deficit, there is not an appropriate way to
balance imports and exports as yet.

                     Import                  Export               Trade deficit

1993                 3924.0                  2958.2               -938.8

1994                 5825.8                  4054.3               -1771.5

1995                 8155.4                  5448.9               -2706.5

1996                 11143.6                 7255.9               -3887.7

1997                 11271.0                 8900.0               -2371.0

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        The direction of exports' scope reveals a lot of difficulties, probably
because sources of goods for export are not various and merchandises are not
competitive enough in the world and regional markets. Foreign trade business
has made enormous effort but those difficulties are still in place.

        The export price index in 1995 reduced by 113.1% in comparison with
that of the previous year, in 1997, it was only 100.4%. For import price index, it
was 107.3% in 1995 and 103.5% in 1997.

        Regarding exports structure, the share of manufactures has been
increasing. This share was 47.4% in 1991, 53.7% in 1995 and 57.7% in 1997
respectively of the total export values.

        Adversely, the share of forestry, agriculture and fisheries products has
been reducing. This share was 52.6% in 1991, 46.3% in 1995 and 42.3% in

        Regarding imports structure, since 1994, import of capital goods has
been increasing and that of consumer goods has been decreasing. The
proportion of consumer goods imported in 1994 was 17.8%, 16.5% in 1995 and
13.3% in 1996.

        1.3.3. Tourism business.

        The tourism business of Vietnam has been positively changed in terms of
travel tour services.

        The number of clients of the tourism business was 9582.7 thousand
persons in 1995, 9970.2 thousand in 1996 and 8879.5 thousand in 1997,
generating a turnover of 5653.2 billions VND in 1995, 5954.2 billions in 1996
and 5917.5 billions in 1997. The turnover generated from services supplied to
foreign clients was 3205.6 billions VND in 1996 and 3559.8 billions in 1997,
equivalent to 53.8% and 60.2% of the total turnover respectively. In the recent
years, the numbers of foreign tourists to Vietnam has continuously increased.

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        The number of hotels has expanded considerably, not only from the part
of the SOEs but also from other private sectors. It results in an exceeded supply
in the hotel business.

1.4. The market of trade business of Vietnam.

        Vietnam economy is really lying on an open-market oriented one.
Trading businesses become therefore crucial for the development of national

        The market of trade business of Vietnam is the bridge between
consumers and producers. It represents, on one hand, producers who supply
their products on the distribution network and on the other hand, consumers
whose demands may be satisfied in the most advantage way.

        The current market of Vietnam trade business are mostly domestic
market and foreign market.

        1.4.1. Domestic market is a large, dynamic and busy market in terms of
offers and demands and diverse varieties which responds to the needs of both
production sector and household consumption (morally and materially)

        The target of this market is very various in terms of consumption level
and consumers' taste and depends on the level of incomes as well as aesthetic
knowledge and custom in each localities. Therefore, there is a distinction of
urban market and rural market in domestic trade:

        - Urban market is very demanding in terms of the elegance of shops, the
cultural levels of sellers, the attraction of packaging and the quality of goods.

        The urban market does not have a large number of consumers (there is
only about 20-22% of the total population) but occupies a high proportion in
the consumption value because consumers power is high and goods consumed
in this market are of high value. They are also very demanding consumers.

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        - Rural market is not demanding in terms of the appearance of goods but
has strict requirement on the longevity and utility of goods as well as good
prices which may suitable to their low income.

        This market is huge with a large variety of consumers. It occupies up to
80% of the population. At present, rural markets in low land areas have a higher
consumption level but still do not go beyond the figures mentioned above.
Rural markets in high land areas still have a low consumption level of which
their demand is only limited in basic necessary goods which are mainly used
for their very simple daily meals. Demand for goods used in transportation and
entertainment is very small.

        The above mentioned figures of domestic markets should be duly taken
into account in planning future direction for trade activities and should deserve
a long term approach of domestic trade business.

        1.4.2. Foreign market.

        The foreign market is a bridge between domestic producers, consumers
and foreign producers and consumers. This market is very dynamic and various
in terms of consumers identities. It is very demanding in terms of the
appearance and quality of goods.

        It is difficult to maintain a stable volume of exports and imports in
foreign markets because of the continuos and hardship competition of
advantages between countries.

        At present, it is important to Vietnam to maintain her traditional foreign
markets but it does not mean that Vietnam should neglect the research for new
more advantage markets.

        The foreign trade business of Vietnam must defeat all challenges and
look for all kinds solutions to expand the its activities and to take an advantage
position in the world market in order to help Vietnam economy develop.

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1.5. Vietnam trade policies.

        Open-oriented trade policies will be the starting point for a sustainable
integration of the outward-looking economy of Vietnam into the regional and
global economies on the basis of her increasing economic potentials.

        The Commercial Law of Vietnam (adopted in May 1997 by Vietnam
National Assembly and the Government) indicated clearly Vietnam positions
on some trade policies as follows:

        1.5.1. Policy towards State Trading Enterprises (STEs):

        Even though the proportion of domestic trading enterprises in trading
activities have been reduced but those enterprises still keep a dominant role in
markets of many goods essential for living and national economy. Therefore the
policy on STEs will be a momentum for STE to assume their responsibilities
and benefits their interests on the basis of a solid legal foundation.

        The main content of this policy is that the Government will invest in
infrastructures and human resources of STEs to enable them do business in
essential goods and undertake an important role in trading activities. This is one
the instruments of the Government of Vietnam in accommodating supplies,
stabilising prices in the pursuit of national economic and social targets.

        The Government has policies to develop welfare enterprises acting in
non-profitable sectors or low profit earning where other economic sectors are
not interested in. This policy reflects the pre-eminent nature of the populism
regime of the Socialist Republic of Vietnam.

        1.5.2. Policy towards co-operatives and other forms of economic co-
        operation in trade business.

        This policy indicates that the Government of Vietnam will protect the
ownership, rights and other legitimate benefits of co-operatives and other forms
of economic Cupertino in the field of trade, support and facilitate those entities

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in order to enable them reform and expand activities through preferential
policies such as tax, loans, credits and domestic mobilisation...).

        As the activities of this economic sector have been considerably shrunk,
especially in the rural areas, its positive support to STE in the large domestic
market has reduced.

        1.5.3. Policy towards business people in house-hold enterprises and
        private capitalists.

        This policy reflect the position of the Vietnam Government in
encouraging the participation of every economic sectors in the outward-looking
and trade-oriented economy.

        The content of the policy is that the Government protect the ownership,
rights and other legitimate benefits of business people in household enterprises
and private capitalists in trade field. The Government encourages and facilitates
business people in those sectors to co-operate and enter into joint-ventures with
SOEs in the forms of agents or State capital invested enterprises and other mix
forms in other to tap out potential of those sectors and generate internal
resources for the development Vietnam trading enterprises in both goods and
services trade.

        Those economic sectors are very dynamic in doing business and have a
great capacity of adaptation inn rural and high land markets of Vietnam. They
are able to go to anywhere and always ready for domicile delivery.

        Most of them have small business size, they use simple transportation
means or even their shoulders to transport goods. The drawback of those
sectors (mostly mobile household enterprises) is that they have no registration
licenses, do not pay taxes and present everywhere so they are causing traffic
jam, pollution and non-hygiene , especially in dense population centres,
districts and towns. The Government has issued a band on this mobile business
and established a police task force to control regularly main areas but that
drawback still remains.

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        1.5.4. Trade policy towards rural, high land, island and remote areas:

        For rural areas:

        The Government has a policy to develop trade in rural markets. This
policy aims at developing and extending rural market places.

        STEs play a dominant role and organise in partnership with other
economic sectors involved in trade business to sell agriculture capital goods,
manufacturing goods and to buy agriculture products with a view to enhancing
the purchase power of rural inhabitants and facilitating the structural adjustment
and commercial production in the course of industrialisation and modernisation
rural areas.

        For high land, island and remote areas:

        The Government has a policy of distribution and tax, credit preferences
for business people involved in trading essential goods as well as price and
transportation subsidies to enterprises designated to supply goods related to the
realisation of social targets in such areas.

        The Government plans to invest in infrastructure (especially in road
construction) in order to extend economic interaction in those areas.

        1.5.5 Distribution and trade in services policy.

        This policy shows that the Government removes restrictions on the
distribution and circulation of goods which are not subject to national

        The main content is that the Government encourages and facilitates the
expansion of goods distribution and the development of trade in services which
are not restricted or banded by laws.

        In case necessary, the Government may use economic and administrative
intervention to ensure the balance of supply and demand or the realisation of
economic and social objectives.

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        The policy also points out that it is prohibited to distribute and supply
goods and services which are harmful to the national security, defence, social
order and safety, historic and cultural traditions, moral, customs, biological
environment, production and people health.

        All activities aim at preventing the distribution and provision of legal
goods and services are contradictory with this policy.

        The Government also issues a list of goods and services which are
prohibited or restricted or subject to conditional trading status.

        1.5.6. Foreign trade policy

        The Government uniformly regulates foreign trade and has policies to
expand commercial exchanges with foreign countries on the basis of
independence, sovereignty, equity and mutual benefit in the pursuit of
multiplication and diversification relations and of encouraging all economic
sectors to participate in the export-oriented production and exportation. In the
mean time, the Government also carries out incentives to production of
competitive goods and exportation of trade services, and discourage the
importation of goods which can be made domestically. Domestic production is
protected in an appropriate way. Importation of capital goods, equipment, high
technology for production and industrialisation is prioritised.

        For each period of time, the Government will issue specific regulations
on foreign trade and the participation of Vietnamese overseas in the foreign
trade business.

        In reality, the foreign trade of Vietnam has many drawbacks reflecting in
each specific production sector which have been touched upon in the previous

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1.6. Regulation on activities of Vietnamese business people and foreigners
doing business in Vietnam

    1.6.1 Regarding Vietnamese business people:

    - Conditions to do business:

    - Individuals from 18 years old having sufficient capacity and civil conduct
and legal entities, co-operatives, and households having sufficient conditions to
do business in accordance of the laws of Vietnam shall be, upon request,
granted business registration license and then become business people by
Government authorised bodies.

    - Business activities registration:

    The registration shall be done at Government competent administrative
bodies designated by laws.

    Subjects to be registered:

    Name of the business person (name of the authorised representative); name
of the business entity, official address, business sectors, charter capital or initial
investment capital, duration of the business, branches, shops and representative
offices (if any)

        - Tax registration: Tax declaration and contribution is compulsory for
           all registered business people.

        - Business management:

        - Business people can directly manage and execute their business. In
           case of employing an executive manager, there must be a written
           contract of employment.

        - Business people must be responsible of the business activities done by
           their employees in accordance with the letters in the employment

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        - Employed executive managers must assume their responsibilities
            towards their employers in accordance of the employment contract.

        - Ending business activities:

        Business activities may be ended in the following cases:

        + Voluntary close by the business person,

        + Expiration of business licenses,

        + Bankruptcy or business dissolution,

        + Decision of authorised Government bodies.

        + Dead of business person without inheritor or the inheritor does not
        continue business activities.

        Rights and duties of business people in case of ceasing trading business
is based on existing laws.

        1.6.2. Regarding foreigners doing business in Vietnam:

        Foreign business people satisfying requirements set by Vietnamese laws
can establish representative offices and branches in Vietnam.

        The activities of foreign representative offices and branches must be in
conformity with Vietnamese laws and the scope of activities of foreigner

        Rights and duties of foreign representative offices and branches are
based on the commercial law of Vietnam.

1.7. Benefits and challenges of Vietnam in joining the WTO

        WTO accession is a multiple staged process which demand of time for
each stage. Therefore the shortest time that a country may accede to the WTO

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since its application submission is about 3-4 years, in some cases, it may last to
more than 10 years.

        By the end of December 1994, the Minister of Trade of the Socialist
Republic of Vietnam sent application letter to the Director-General of the
WTO. Since then, relevant agencies of Vietnam drafted and completed the
Memorandum on Trade regime of Vietnam and have done preparatory works
for the accession negotiation with WTO members so that Vietnam may become
WTO member in the near future. With the objective of trade liberalisation,
WTO obliges acceding country to forward commitments and concrete actions
to reduce tariffs, non tariff barriers first regarding manufactured goods then
agriculture, services and textile products.

        WTO has preferential principles for exports of developing countries.
Developed countries accept to not require developing countries to exercise fully
reciprocal principles in international trade. However, all developing countries
accede to the WTO must be committed to lower their tariff and non tariff
barriers as well as to implement Agreements of trade in goods, services and

        For small and less developed countries such as Vietnam, accession
conditions may be simpler. Developing members of WTO, particularly least
developed ones, have longer transition period in implementing WTO
Agreements comparing to developed members.

        Vietnam trade has taken appropriate steps towards the accession to the
WTO. At present, Vietnam has received technical assistance from bilateral
programmes and from international organisations in the accession course.

        So far, there are 121 WTO members occupying more than 91% the world
trade. It is foreseen that in the next few year, there will be up to 150 WTO
members who will take nearly 100% the world trade. WTO has laid down
common play rules for international trade that abided by all member countries.

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If Vietnam continues to stand aside, she will be in a disadvantage position of

        WTO urges the linkage between countries and regions and thus speeds
up the process of economic globalisation. WTO members use this organisation
as an important instrument to get access and to expand markets for their goods
and services exported.

        Once being member of WTO, Vietnam can use WTO rules and its
supports (to the position of a developing country ) in trade relations with
developed countries.

        Furthermore, Vietnam will be automatically granted MNF from all other
members. In addition, as a developing country, Vietnam will benefit from
preferential treatments stipulated in WTO agreements to developing countries.

        However, Vietnam shall have to cope with a lot of challenges and
difficulties in the course of her accession to WTO. First of all, that is the
routine thinking and psychology pressures of the needs to protect for ever
industrial sectors and thus restrict trade liberalisation while wishing other
countries lowering their tariff and non tariffs barriers to Vietnam exports.
Secondly, Vietnam economy is still immature where goods are produced with
low quality, poorly packed and monotone. The competitiveness of many
products is less than imported products. But good things arise from the devil.
When domestic made goods have to face with hard competition of imported
goods, they have to improve themselves in terms of quality, packing, variety
and prices in the interest of consumers. Thirdly, the policy system of Vietnam
in the fields of production, trade, banking, finance, customs etc. is still not
stable and exposed to many inconsistencies with the WTO rules.

        There are many concerns that the implementation of tariff reduction
when Vietnam becomes WTO member will have considerable impacts on the
Government revenue as import tariff collection takes the main part in taxes and
duties source of Vietnam (in developed countries such as the USA, the part of

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import tariff is only 1% to 2% of the total tax and duties collection). However,
the import tariff of Vietnam composes of several duties. When Vietnam
reforms her tax regime, those duties will be singled out and thus import tariff
rates of Vietnam will not necessary be high but still ensure the Government
revenue. Furthermore, appropriate tariff rates will help limit smuggles,
encourage exports and imports and therefore increase the value and the volume
of duties collection.

2. Telecommunication.

        Telecommunication service is one infrastructure sectors which serve the
production and social lives. Before 1945, all the communication system was in
the hand of the French colony which provided services mostly to the
administrative machine. It was a small and backward industry.

        During the resistant revolution against the French colony, despite a lot of
difficulties, the communication by cable was maintained and greatly help
uniform proceedings of the revolution.

        After the liberalisation of the north of Vietnam (1954-1975), the
Government of the Democratic Republic of Vietnam has attached due attention
to the development of telecommunication services which then enjoyed great
growth and contributed to the process of economic restoration and
development. The Government monopolises telecommunication business.

        Since 1975, the reunification of the country helped expanding locally and
international the telecommunication network. The infrastructure of this sector
has increasingly been improved.

2.1. The telecommunication network of Vietnam

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        The telecommunication network of Vietnam had 40 centres in 1985, 44
in 1990 and up to 59 in 1996 respectively. The telecommunication network has
rapidly reached towns, communes, districts, villages and all localities of the

                              1985                  1990          1996

district level                475                   495           610

Area level                    1228                  1112          2113

Commune level                 -                     2900          8500

        2.2. Wire and non-wire transmission and telecommunication equipment
has continuously been modernised and developed. In 1990, there was mostly
connecting transmission while at present, both modern transmission and
transistor prevail. Provinces and districts throughout the country have been
equipped with automatic operators and microwave channels have been
multiplied comparing to that of 1985 and 1990. All international
communication is done through satellite with high credibility. So far Vietnam
has about 500 satellite channels, including Intelsat and Inter Putnik. The quality
of those satellite channels is always satisfied, i.e. 100% for Intelsat and 97% for
Inter Punik.

        Facsimile services have developed.

        Telephone sets have been increasingly modernised. There are not only
linked telephones but also mobile, portable ones in many advanced varieties.

        Telephone is becoming more and more popular in all economic sectors
and population classes. There was only 126400 sets in 1991, 746500 in 1995
but in 1996 and 1997, this number was up to 1 164 500 and 1 240 000

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        The telecommunication sector has launched an intensive campaign but
the number of telephones is only reached 1 set/100 inhabitants. Most of
services such as postal matters and parcels, money transfer orders, journal
distribution, telephone line and long distance calls charges collection in 1997
have considerably increased versus those of 1990.

2.3. Telecommunication services of Vietnam have reached enormous expansion
in order to better provide services to production lines and people livings.

        The turnover of telecommunication services has been increasingly. It
reached 219.7 billion VND in 1990, 4207.4 billion in 1995, 5930.2 in 1996 and
about 6500 billions in 1997.

        However, the share of telecommunication sector in the GDP is still too
small, less than 2% of 1995-1997 GDP despite of some augmentation so far.

2.4. Services charges.

        Before 1986, the telecommunication charges were not determined by
market forces due to its objectives of production and social facilities. The
market of telecommunication services was mostly concentrated in the public
sector, other sectors took only a very small part.

        After 1986, Vietnam started to carry out an open economy, all economic
sectors have animatedly participate d in production lines, trade and services in a
large spread. The telecommunication was also strongly kicked off and its
service charges have been adjusted in accordance with the new circumstance of
market mechanism- based economy. The charges of postal matters and parcels,
telegrams, telephone (line subscription, long distance call), stamps …increased.
As the telecommunication sector is monopolised by the Government and absent
from vigorous competition, the augmentation of service fees was rarely

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        The service which is rapidly expanded is telephone service because of
the increased demand of the production and trade sectors. At present, the
installation of line telephones and mobil phones is not considered as luxurious
as it was in the old economy. Government bodies compete in purchasing luxury
phones, business people pay attention to convenient facilities for long distance
calls, management, competition and smuggle which help to reduce travelling
costs and increase business efficiencies.

        The telecommunication sector intended to give bonus to consumers
desiring to install telephone lines but this compliment seems insignificant as the
living level of the population, particularly urban population has been
considerably increased.

        Currently,     consumers      view     monthly      phone   line   subscription
inappropriate. There exists an average mix up, distance calls' fees
discrimination between users. If it is reduced fees for out- peak time calls, it
should be high fees for peak time calls in order to properly regulate
communication network.

2.5. Construction investment in telecommunication sector.

        The Government of Vietnam has ever paid attention to the
telecommunication sector with a view of strengthening and expanding this
sector as well as facilitating its regional and global integration. The
Government has planned the number of projects in telecommunication. In 1998,
there will be 700 millions USD invested in the sector, increased by 9% in
comparison with 1997.

        The telecommunication sector of Vietnam has carrying out 4 joint-
venture contracts with telecoms of Australia, Japan, France and England to
develop further local telecommunication network, build up a domestic satellite
network, upgrade and extend existing line network, establish and uniformly
regulate the Internet and to take part in the construction intercontinental optic

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cable line between 6 countries in the region, i.e. China, Vietnam, Laos,
Thailand, Malaysia and Singapore). The attraction of foreign investment
projects in telecommunication sector is for the purpose of modernising
telecommunication technologies, establishing and exploring optic cable lines
branched from the national 500 kV net.

2.6. Outlines of trade policy in telecommunication services

2.6.1. Tax policy

        The domestic productive development of the telecommunication sector
has not been significant. There is not an interesting development strategy with a
coherent and uniform plan throughout the country. It is partly due to the impact
of tax policy which is very much unstable and therefore made the immature
telecommunication sector suffer the same wake as other sectors, particularly in
the fields of loans and import tariffs… Some duties rates have refrained the
expansion of the telecommunication sector which has great contribution to the
industrialisation of the national economy.

2.6.2 Policy on the importation of telecommunication equipment

        This policy has had positive effects on the development of the sector for
the past few years. The importation of out-of-date equipment has been reduced.
However, Vietnam still lacks a comprehensive and timely investment plan in
telecommunication sector in order to provide better services to production and
national security and defences.

2.6.3. Policy on intellectual property rights (IPR)

        Characterised     as   a    high    scientific and        technique sector,   the
telecommunication business in Vietnam considers the protection of IPR as an
important phase to tap out potential creativeness and enthusiasm. Vietnam has

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adopted the Law on copyrights but the enforcement of this law is not strong and
severe enough. The intellectual property rights are still neglected and
sometimes violated. This fact, to some extent, has impacts on the co-operation
of Vietnam telecommunication with foreign partners.

2.6.4. Human resource development policy

        As the telecommunication is a new and high tech industry, it has urgent
needs of high skilled technical workforce.                   Otherwise, the Vietnam
telecommunication industry can not keep abreast with the rapid evolution of
telecommunication industry in the region and in the world.

        The training of high qualified experts and university graduates for
telecommunication sector can not be done overnight. It is therefore needed to
have a long term plan of skilled technical workforce training to prepare for the
sector enter into the 21 century.

2.6.5 Regulatory policy relating to the telecommunication sector of Vietnam.

        If the telecommunication sector is considered as a branch of the
electronic and information industry, the regulatory policy on this sector should
be reviewed in order to have an unique regulatory body. At present, the
regulation of this sector is still spread out.

        Import regulation is loose. Smuggle of equipment, particularly telephone
sets has caused turbulence on the market, the monopoly of the Government is
not as strict as before. This fact has negative effects to both the Government
and consumers.

        The sensibility of Government regulatory bodies in adjusting and
seriously implementing tax regulations and tax valuation for an equal sake of
businesses is necessary to boost the development of telecommunication
industry of Vietnam.

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2.7. Create the competitiveness of telecommunication industry of Vietnam.

        Once Vietnam becomes member of APEC and WTO, the Vietnamese
market will be in no way but integrated with the regional and world markets
and     the      competition    will    therefore     much        more   vigorous.   The
telecommunication industry of Vietnam is a part of this integration. The
opening up domestic market with the reduction of tariff and non tariff barriers
for APEC and WTO while the telecommunication industry is still infant put the
Government in a need of protecting the sector in order to maintain jobs for the
work force.

        Therefore the following issues are put forward to the telecommunication

2.7.1. Maintaining and stabilising domestic telecommunication markets,

2.7.2. Enhancing        international      co-operation      to    approach    advanced
        technologies and renovate the industry,

2.7.3. Paying due attention to the training of a high skilled technical work

2.7.4. Further attaching to traditional markets of the telecommunication sector
        of Vietnam and in the mean time embarking on new markets such as
        European and American markets through joint-venture mechanism.

2.8.    Advantages and difficulties of Vietnam telecommunication industry when
        Vietnam joints the WTO

        WTO enhances the economic linkage, including telecommunication
services, among countries and regions and thus accelerates the economic

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        WTO members use the organisation as an important instrument to
stabilise and enlarge their markets of goods and services.

2.8.1. Regarding advantages:

        Vietnam is a less developed country, her weak economic position can not
apply retaliating measures to developed countries in case of unfair trading or
discriminatory treatments. Once becoming WTO member, Vietnam can use the
WTO legal framework of preferential treatments for developing countries to
reduce such discrimination, unfair practices and other unilateral actions of
developed countries. In addition, Vietnam will automatically enjoy the MNF
treatment of all WTO members. Besides, as a less developed country, Vietnam
will also benefits from some preferences stipulate in agreements reserved to
developing countries.

2.8.2. Regarding difficulties:

        Apart from those advantages, Vietnam will have to face many difficulties
and challenges. The telecommunication industry, like other sectors, falls in the
routine thinking that the Government should continue to protect indefinitely the
domestic market and export market abroad.

        The telecommunication industry of Vietnam can not be set aside of the
context of a weak Vietnam economy whose the competitiveness is too low in
the world market.

        Regulatory mechanism and policy in telecommunication sector is not
open as yet. There are a lot of restrictions and lack of decisiveness in the
direction of the sector.

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        In the course of shifting from the monopoly mechanism to the open
market oriented one, there are already a lot of changes but still at fault. Bold
introduction of advantages to the sector is still inhibited.

        Above is some main outlines of the telecommunication industry of
Vietnam. It deserves further reflection on the right development direction of
this sector in Vietnam.

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Chapter III

                     Vietnam in the WTO: recommendations

I.      Formulating principles for joining WTO

1. Outlines of the Uruguay Round

        Before considering the formulation of principles for the participation of
Vietnam in the WTO, it is necessary to overview principles embodying the
results of Uruguay Round of Multilateral Trade Negotiation.

        Without prejudice to preferential treatments granted to developing
countries, WTO agreements require that Governments of developing members
have to make their trade policies transparent through the notification
mechanism of the WTO and through reports of the WTO secretariat on trade
policies of members.

        The results of the Uruguay Round of Multilateral Trade negotiations
embody legal texts of more than 60 agreements, annexes, decisions and
understandings. In reality, those agreements are simply structured.

        The most important agreements centre on trade in goods and trade in
services. In general, there are 3 main parts, but details in each part may be very

        The general content of 3 parts is as follows:

        - at the beginning: Main principles of GATT (for trade in goods) and
GATS (for trade in services).

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        - The core of agreement: containing the agreement itself or annexes
addressing requirements in each sector or entering into specific issues.

        - at the end: detailed and long list of countries' specific commitments on
the market access for goods and services.

        For the GATT, those commitments are made under the form of bound
tariffs for goods in general.

        For services, commitments contain the level of market access for specific
service sectors and the list of services which are subject or not subject to
discriminatory treatments.

        The Uruguay Round dealt with the 2 first parts on general principles and
specific issues. It also tacked the negotiation of market access for manufactured

        Once general principles have been set up, negotiations go into specific
commitments for each sector.

        The Uruguay Round concentrated on issues such as market access,
financial services, basic telecommunication, maritime transport and information

        Agreements on trade in goods (in the context of GATT) deal with issues
in the field of agriculture, SPS, textile and clothing, standards, TRIMS, Anti-
dumping, custom valuations, preshipment inspection, rules of origin, import
licensing, subsidies and countervailing measures and safeguards.

        Agreement on trade in services (annexes of GATT) deals with issues
such as movement of natural people, air transport, financial services, maritime
transport and telecommunication.

        Tariff bindings were the most highlighted in the Uruguay Round (the
round issued 22500 text pages listing countries' commitments on goods and
services). They include commitments on tariff reduction and binding vis-à-vis

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imports. In many cases, tariffs were bound at 0% (e.g. information technology

        For instance, in agriculture, commitments on tariffs, tariff quotas,
domestic supports, export subsidies have been forwarded in countries'
schedules which attached as an annex of the agreement. In addition,
considerations have been taken in the fields of SPS, negative impacts of
agriculture reforms to least developed countries and net food importing
countries (at Ministerial level).

2. Directions for the formulation of commitments and negotiation
    requirements for Vietnam.

        WTO is an international organisation which is large in size and deep in
technical specialisation. Furthermore, it is characterised by complex and
specific legal features.

        Therefore, there are many challenges and complex accession formalities
for a country to joint the WTO. In this regard, Vietnam has taken appropriate
steps and followed favourable directions but the accession process can not be
done overnight. Vietnam started this process in December 1994 by submitting
an applicant letter of the Minister of Trade Vietnam to the Director General of
the WTO. Since that time, Vietnam established organisation and agencies to
examine and monitor the process positively and carefully.

        It is also noted that the objective of WTO is to liberalise the global
trading system. WTO therefore encourages, urges and obliges member
countries as well as acceding countries to forward specific commitments and
concrete actions to reduce tariff and non-tariff barriers, firstly to manufactured
products then agriculture products, services and textiles. The above is
considered as a prerequisite accession conditions.

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        Next, it is required that Vietnam has a coherent and long term policy to
integrate into the world economy.

        Based on the above requirement, the formulation of commitments of
Vietnam in the WTO must not neglect the following principles:

        Firstly, Vietnam must observe and abide by WTO rules of which the
most important are related to tariff and non-tariff barriers.

        Secondly, Vietnam must show up the credibility of her coherent and long
term open-oriented policy towards the integration into the world economy.

        Thirdly, Vietnam should use advantages of a developing country in terms
of MFN, transition periods in the course of formulating her commitments.

        Fourthly, it is needed to know how to combine WTO obligations and the
rights of sovereignty and independence of the country which has been
constitutionalized through different laws of Vietnam.

        Fifthly, Vietnam should use up preferences in the WTO rules and take
into account the reality of Vietnam economy to formulate flexible but legal-
based commitments in order to gain supports from WTO members.

        Sixthly, commitments should be made in the principal spirit of
facilitating the industrialisation process of Vietnam. Therefore, it is needed to
consider thoughtfully undertakings in each sector in accordance with the
capacity and potential of Vietnam.

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II.     Lobby supports and relations paving ways for multilateral and
        bilateral negotiations.

1. The determination of the Government of Vietnam in external policies.

        Since 1986, Vietnam Government has repeatedly confirmed the pursuit
of multilateral and diversified external relations in her economic development
policy. The driving guideline is as follow: " Vietnam wish to make friend with
all nations for the purpose of peace, independence and development".

        In the political report heard at the Communist Party Congress in June
1996, it is reiterated that " Vietnam will continue her independent, multilateral
and diversified external relations in the spirit of making friends with all nations
for the purpose of the purpose of peace, independence and development".

        The report on the directions and duties of the External Economic
Relation Development Program submitted at the VIII Party congress also
specifies the policy of Vietnam towards multilateral economic organisation as
"following the adherence to ASEAN and the preparation for AFTA, Vietnam
will advance the process of joining Asia-Pacific Economic Forum (APEC) and
the World Trade Organisation (WTO)".

        This determination has a great echo and builds up the confidence about
Vietnam in the world and thus laid grounds for realising her objectives.

2. Appropriate steps towards the accession to WTO

        Since early 1980s, Vietnam has sent representatives to plenary sessions
of GATT as unofficial observer in order to keep in touch and understand this

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        Early 1994, the Minister of Trade of Vietnam sent a letter to the
Director-general of GATT (H.E Peter Sutherland) in which Vietnam officially
ask GATT for a full observer status in order to have an in depth understanding
on organisation which may lead then to the accession decision.

        On 20th July 1994, the General Council of GATT adopted the decision to
grant Vietnam full observer status. Since then, Vietnam can send
representatives to GATT meetings and be informed of all GATT activities but
has not voting right.

        By the end of 1994, the Vietnam Government decided to establish an
interministerial working group on GATT/WTO under the direction of the
Minister of trade.

        In January 1995, the inter-ministerial working group started its works on
accession of Vietnam to WTO.

        As GATT/WTO is an international organisation having undergone
several rounds of negotiations and containing increasingly a huge load of
economic, trade, legal issues and procedures to regulate trade relations among
members, its legal texts are not only overloaded but also very complicated.
WTO members always allocate a great volume of human and material
resources to those issues for the sake of their national interests.

        Vietnam certainly has to follow that path. However, due to its transitional
period, Vietnam is not only lacking knowledge and experiences on international
issues but also an able work force knowledgeable on WTO.

3.Good will and supports that GATT/WTO and its members has reserved
to Vietnam:

        - GATT/WTO and several countries have granted appropriate technical
assistance to Vietnam in the course of in-depth study on the WTO;

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        - Since late 1980s, GATT/WTO has annually allocated a scholarship for
Vietnam to follow a GATT/WTO 4 month course on trade policy held in
Geneva. It shows up a priority that the GATT/WTO secretariat has given to

        - In January 1994, Mr. Ake Linden, legal adviser of GATT Director-
General undertaken a mission in Vietnam to exchange views and information
with relevant Vietnam government agencies on GATT and its formalities
regarding full observer status.

        - In December 1995, a WTO mission led by Mr. Seung HO, president of
the Working Party on Vietnam accession was sent to Vietnam to work with the
interministerial working group on legal and technical issues of accession

        - Some countries and international organisations also set up technical
assistance programmes to Vietnam in the course of her WTO accession. For

        + the Ministry of Foreign Affairs and Trade of Australia held a 2 week
        trade policy course in Hanoi, of which WTO issues were among the main

        + Canadian International Development Agency organised a 3 days
        seminar in Hanoi in late Mars 1998 within the project “Vietnam and

        + UNDP is implementing a project on “ Enhancing the capacity on
        efficient and sustainable integration of Vietnam into the world trade
        system and improving trade efficiency” (project VIE/95/024/N01. The
        main objective of the project is to help Vietnam train her staff and
        officials involved in WTO works.

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4. The importance of consensus from senior members of the WTO on the
accession of Vietnam

        It is important to note that the acceding country has to complete its tariff
and non tariff negotiations with WTO members. Based on agreed arrangements,
the Working Party on accession will submit a draft decision and accession
protocol to the General Council. The general Council will examine those paper
and vote for the accession of the country in question.

        The accession protocol will be effective in 30 days after the acceptance
written by the Government of acceding country.

        By the charter of the WTO, 2/3 of for votes are sufficient to accept a
country as member. But in fact, the admission of a country as member is
usually done by major consensus. If any giant developed countries such as the
United States, EU, Japan do not agree, the admission can not take place. For
example, China accession to the WTO is hung on once there are               the still
outstanding issues in the relations between China and US. China has applied to
the WTO for already 10 years but is not yet admitted. Therefore, it is very
important to create multilateral and bilateral supports in the course of
negotiation accession. In this regards, Vietnam has many steps forward but
efforts are still needed, especially in the relations with the United States.

III.    Conveniences and difficulties of Vietnam accession.

        There is no doubt about the necessity of joining WTO. It is proved by the
participation of 132 member countries which occupies more than 90% of the
world trade. It is foreseen that by the end of 20 th and early 21st century, the
number of WTO members will be up to 150, accounting about 100% of world
trade. Furthermore, WTO is a common game‟s rule for international trade that
all member have to abide by. If Vietnam is an outsider of this play, she will be
disadvantageously isolated.

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1. Conveniences

        WTO boosts economic linkages between countries, regions and
accelerates the process of economic globalisation. WTO members are using this
organisation as an important instrument to stabilise and enlarge their markets
for goods and services. For Vietnam economy, this functioning use is extremely

        Vietnam economy is weak and infant (Vietnam is a developing country),
therefore she is usually in a weak position in bilateral trade negotiations with
developed countries. It is also because of being a weak economy that Vietnam
is not able to use retaliating measures when she is subject to trade
discrimination from other stronger economies. If Vietnam is member of the
WTO, Vietnam can use WTO legal framework to reduce such discriminatory
treatments as well as other unilateral actions in trading with developed
countries. At the mean time, Vietnam can also use WTO rules and supports to
accelerate trading relations with developed countries.

        The other convenience of Vietnam membership in the WTO is that
Vietnam can automatically enjoy MFN of all WTO members and some
preferential treatments specialised to developing countries in different WTO

2. Difficulties

        Besides those conveniences, Vietnam is facing also a lot of difficulties in
her accession to the WTO.

        Firstly, there is a routine thinking and psychology that Vietnam should
protect indefinitely industries and refrain the process of trade liberalisation.
Conversely, Vietnam wishes other countries lower their tariff and non tariff
barriers so that Vietnam can promote her exports.

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        Secondly, Vietnam economy is a weak and infant one where the quality
of goods is low, designing and packaging techniques are not varied and
attracting. The competitiveness of many products is lower that imported
products. However, that is where opportunities occur. When domestic produced
goods have to compete with imports, they have to find all possibilities to
improve their quality, designs and packaging and to lower prices for the sake of
consumers. Experiences show that many domestic made products have
successfully competed with imported ones and therefore changed consumers‟
mind from favouring imported goods to domestic goods. In addition, it is
evident that if domestic goods can not compete in their home markets, how can
they conquest foreign markets?

        That is competition and free market be essential elements to mobilise
Vietnam economy and lead it to greater growth.

        Thirdly, mechanism and policies of the Government in regulating
production, trade, banking, finance, customs….are not stabilised and contain
many inconsistencies with the WTO. Vietnam economic mechanism is still
characterised by incoherence and situational measures.

        When Vietnam joins WTO, she has to observe WTO rules by lowering
tariffs, reducing non tariff barriers and simplifying import formalities. Many
administrative agencies are         worried that tariff cuts will affect negatively
budget revenues as tariff collection take a significant part in the total taxes and
duties‟ revenues. In many developed countries, the US, for instance, import
tariff collection occupies only 1-2% of the total taxes and duties‟ revenues.
However, it should be noticed that Vietnam import tariffs contain some other
taxes. When Vietnam implement her tax reforms, other import related taxes
will be excluded then import tariff of Vietnam may be kept at a low level while
preserving a stable budget contribution. On the other hand, when import tariffs
are appropriate, they will help reduce smuggle, increase exports and imports
and therefore, improve tariff collection and budget contribution. They also
create stabilisation in the market and society as well as national security and
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        Once admitted into the WTO, Vietnam will have to comply with all
bindings of this organization i.e. cutting tariff, reducing non-tariff barriers and
deregulation of import procedures. Some authorities show concerns that cutting
of import tax might heavily affect the state budget revenue as the import tax of
Vietnam accounts for a large portion in the total revenue from taxes and fees
which is different to those of developed countries as America with import tax
making up for 1-2% of the total tax and fee revenue. However it should
carefully study the tariff sheet of Vietnam to see that the import tax of Vietnam
also including some other taxes. As the tax policies of Vietnam reformed and
other taxes calculated, the import tax will then appear to be not high and
ensuring its revenue for the state. In addition, reasonable tariff rate will reduce
smuggling, encourage import and export hence increase sources and volume of
import tax revenue. It will create the market and social stability in term of
national security.

IV-     Main issues asking for high attention in the negotiation schedule for
        the accession of Vietnam into the WTO.

        If making comparison with its preceding GATT , WTO sets out quite a
few stricter economic and trade conditions to countries applying for its

        Therefore Vietnam should pay attention in schedule of negotiation
meeting fundamental requirements of WTO on the basic of equality,
independence and self control of Vietnam.

        Followings are some fundamental requirements of WTO that Vietnam
should pay attention to:

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1. A market economy is the primary and embracing condition for the WTO

Up till now, Vietnam has formed a relatively adequate and stable market
economy. Vietnam has shifted from the central planning, red-tape and
subsidizing economy to an open-market economy with macro regulation of the
state and reached some significant initial results in the course of the country‟s

        However, the economy of Vietnam is still now in the transformation
period, not quite stable and inadequate, at some points, with the market
mechanism that is undertaken by the WTO.

        Reality has proved that some economies at higher stages of development
such as China, Russia still face so many difficulties in the accession into the
WTO due to the facts that they have not established a relatively adequate and
stable market economy.

2-      Appropriate policies and mechanism in foreign trade administration:

        The general trend of WTO is terrifying non-tariff measures, deregulating
import and export procedures. Companies, big or small, domestic or foreign, of
various economic sectors are equal in exportation and importation activities.

        During the transition from the state-monopoly to market-oriented foreign
trade, Vietnam has made many changes and improvements in policies and
mechanism in foreign trade administration. Therefore, the foreign trade of
Vietnam has recorded outstanding achievements over the last few years.

        However, the exchange of state monopoly of the foreign trade with its
development with different sectors and the distinct clarification between state
administration and business management remains clumsy and sluggish.

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        It is noticeable for some following policies and mechanism of the
administration of the foreign trade of Vietnam which are inconsistent with
WTO‟s norms:

        Firstly, Vietnam has only one tariff rate applicable to every countries.
Recently as joining into AFTA, Vietnam has started to establish a tariff sheet
favorable to all AFTA members. At the same time, other countries applies 3
tariff sheets: a general tariffs – which are in fact applicable to goods of a few
countries at high rates; a MFN tariffs – which are applicable to WTO members
and favorable tariffs applicable to countries joining tariff union or free trade

        Secondly, Vietnam has not enacted anti-dumping law. Hence, Vietnam
may find difficulties in dealing with big foreign companies dumping make loss
to domestic production and services.

        Countries all have anti-dumping law which allows government
authorities examine and apply necessary countervailing measures to foreign
companies to ensure sound competition between domestic and foreign

        Thirdly, trade policies and mechanism of Vietnam are featuring of the
state monopoly in foreign trade such as appointing export, import focus and
export, import under orientation...

        In any WTO member country, enterprises are equal in the import and
export of goods and services. For items require protection, these countries
apply the quota measures.

        Fourthly, although export license per shipment has been canceled,
import-export procedures remain complicated and discriminative between
companies in different economic sectors as well as companies within a same
sector, between center and local companies... represent ill implications.

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        One of the principles of WTO is not to discriminate companies‟ size.
Every economic sectors have the rights to register, pay tax and freely to operate
its importation and exportation as stipulated by the laws.

3-      No discrimination between domestic and imported goods:

        WTO stipulates that members are not allowed to discriminate imported
goods and services with the like domestic goods and services.

       Import goods and services, after fulfil their duties, should be treated as
the like domestic goods and services. Vietnam has not clearly stated the matter.
In addition, stipulations and regulations are different from region to region.

4-      Custom procedures and its appropriate custom valuation:

        Regarding the custom procedures, criterions for goods valuation for
custom‟s purposes are complicated and technical issues. The Custom of
Vietnam has made some big paces, deregulation in custom procedures, and
ensured the transparency and improvements in valuations for custom‟s

        However, WTO set out specific requirements for those who wish access
to comply with. Therefore, the Custom of Vietnam has to make adjustments
and amendment to meet the WTO‟s requirements.

5-      Intellectual Properties Rights (TRIPS):

        The developed and industrialized countries pay much attention to the
protection of intellectual properties rights and require WTO accessing countries
to commit to strictly comply with and implement regulations in TRIPS

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        For Vietnam, the 1992 Constitution, 1995 Civil Laws (enforced as of 1
July 1996), 1995 Criminal Law, 1995 State laws on the treatment of
administrative violations stipulated the protection of intellectual property rights.
In addition, the 1989 State laws on the protection of industrial property rights,
1994 copyrights protection law and series of instructions and circulars
particularly stipulated areas, law enforcement measures and procedures for the
protection of intellectual property rights. However, some state laws and decrees
were expired on 1 July 1996 (when the Civil Code came into effect) and
replaced with new legal documents that were in line with the Civil Code in the
end of 1996.

        For the international relationship, Vietnam is a party to the 1882 Paris
Convention on the industrial property rights; 1881 Madrid Treaty on the trade
label; 1970-PCT Washington Convention on Joint Inventions; 1967 Stockholm
Convention of the Establishment of World Intellectual Property Organization.
Vietnam has, however, not joined in the Bera Convention of the Copyrights.

        Vietnam is a developing country and still in lack of laws and regulations
particularly stipulating the protection of intellectual property rights. Ways of
thinking, habits of disregarding the intellectual property rights are relatively
common. In the other hand, forcing measures and institutions for
implementation of laws on the protection of intellectual property rights are

V-      Main recommendations for some above-mentioned industries that
        require high attention in the schedules for negotiation:

        The above-mentioned Vietnamese economic sectors have been
specifically approached to over their status and development trend as well as
advantages and disadvantages in schedules for Vietnamese accession
negotiation into the WTO.

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        Item IV referred to main issues that required higher attention to the
schedule for negotiation in agreements for all sectors.

        Now some recommendations could be raised up for some sectors:

1-      Agricultural and food processing goods: (including rice, coffee and cane

        1.1    Regarding the rice: For the last few years, Vietnam has reached
to a rather high position in the regional and international markets. Frankly
speaking, the Vietnamese export rice is high in quantity, not in quality and
international standards.

        Therefore in the negotiation schedule we should make the full use of:

        - MFN favorable treatments extended to Vietnam as a infant agricultural

        - Domestic protection at a reasonable level.

        - Creating attracting power in the trade and investment policies in
consistence with WTO‟s regulations under the socialist direction of Vietnam in
the time of trade opening with a view to create a momentum for stable boost of
cereal production (mainly rice) ensuring the food security.

        - Looking forward to a new market in a active manner to encourage
Vietnamese rice to reach higher quality and value. If that market is a fastidious
one, it should be seen as a accelerating factor to upgrade the Vietnam rice to a
level not inferior than that of advanced countries in the future.

        - Paying more attention to the renovation of science-technologies.

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        1.2    Regarding the coffee:        For the last few years, the coffee markets
of Vietnam have been widened but not in a quite stable situation and affected to
domestic production as it is mainly for export.

        Therefore in the negotiation schedule we should make the full use of:

        - MFN favorable treatments of the WTO extended to developing
countries in tariff, domestic production protection and extension of favorable

        - Attracting investment to raw material areas and advanced coffee
processing technologies more actively which might facilitates improving the
Vietnamese coffee to a higher grade in both quality and quantity in world

        - Retaining traditional markets and, at the same time, expanding to new
markets, creating the stability in exportation of developed countries. High
attention should be paid to markets of France, Germany, UK and USA to
develop the high quality coffee processing technology to increase exports to
these outlets.

-       Introducing consistent market and investment policies particularly for the
coffee sector.

-       Being cautious in the organization, administration and management of
Vietnam in this sector which used to be backward.

        1.3    Regarding the sugar sector:          It is the sector with its domestic
production usually failed to meet the domestic consumption demand. Annually
Vietnam had to import sugar at big quantity.

        In order to raise domestic production to meet the demand for domestic
consumption and to export partially, it should be noted:

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        - There should be protection policies for domestic production to establish
secured raw material areas for the sugar production. Making full use of
advantages WTO offered to have proper protection regulations for raw material

        - Attracting joint-ventures to collect loans for the renovation and
establishment of sugar processing industry at a appropriate scale to specific
domains of Vietnam with advanced technology. It is of key importance to the
sugar industry of Vietnam.

        - In addition to developing the sugar industry, attention should be paid to
substitute industries to promote that development.

        - The sugar market of Vietnam is mainly for importation. That weakness
is likely to be under pressure in price hence needed to make full use of
advantage brought about by WTO‟s regulations.

        - Revising trade and investment policies to overcome difficulties of
WTO‟s regulations.

2-      Fishery:

        The future direction for the fishery of Vietnam is to develop to be a sharp
edge of the economy of Vietnam. We should make full use of advantages and
constrain disadvantages when Vietnam enjoins full membership of WTO. Sea
products exportation is the economic sharp edge of the industry, creating outlets
for attracting and expanding inputs for a stable market at home and abroad.

        In that direction, the schedule for negotiation should be focussed to:

        - Making full use of advantages to technological renovation in aquatic
products catching and growing, processing and other technologies relating to
the fishery with a view to promote the production and exportation of high
quality products.

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        - Aiming at new and fastidious markets such as UK and USA, creating
competitiveness to induce the production and exportation.

        - Taking more responsibility in the organization, administration and
management reflected in agreements‟ terms and conditions in a clear and
concise manner.

        - Making full use of favorable treatments WTO might likely extend to

        - Giving sound expression to trade and investment-attracted policies.

        - Making full use of technical cooperation on all aspects, directly and
indirectly, of the fishery industry.

3-      Some industries of Vietnam enjoining certain position in its accession
        into the WTO:

3.1     The textiles and garment industry:

        We may all be aware that incomes from the product structural transition
of the textile and garment industry, with scientific policies for development of
economic sectors, sound measures in organization, restructuring state
enterprises have made a new step in the development of the industry of
Vietnam. It nurtures bright future for the textiles and garments of Vietnam in an
open stage, increasing production and seizing world market in conformity with
its position.

        Reality has proven the correct way Vietnam chose is to orient to world
market by studying consumption habit of different markets.

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        However the industry still face with remaining difficulties especially its
raw materials. The industry of Vietnam could hardly develop without making
proper consideration to the raw materials issue:

-       Raw fiber for textile

-       Raw material for garment

        The industry is mainly escaping from current situation by conducting
processing for foreign partners.

        The industry therefore should pay attention to:

-       Seeking for markets in favor of definite purchase and sale

-       Promoting      traditional    commodities       that      Vietnam   has   relative
        competitiveness in the world market, not bogging down to diversification
        of goods.

-       Seizing markets through competition in goods quality and raising
        consumer‟s prestige and making full use of favorable treatment in tariff
        commitments of WTO.

-       Quickly renovating technologies – especially in the textile industry to all
        economic sectors in possible conditions.

-       Further opening cooperation to attract foreign investment capital.

-       Joint-ventures should be expanded to different regions not focussing only
        in some urban areas with a view to balance the labor allocation and
        urbanization of the country.

-       Strengthening the introduction of high quality traditional commodities
        that fit the favorite of regional and international markets; and studying
        characters of goods in each favorite market.

        Quickly grasping market demand to make textile and garment contracts
fruitful for Vietnam.

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-       Creating firm position for some Vietnamese textile and garment products
        in some new markets in developed countries.

-       Getting alert in organization, administration and management in the
        implementation of bilateral or multilateral agreements.

3.2     Motor-automobile industry:

        The motor-automobile of Vietnam came into being in a circumstance
quite deficient in accumulation of capital, technology and markets.

        In addition, the motor-automobile of Vietnam will develop in line with
the localization launched by the state of Vietnam.

        Therefore, in the schedule of accession into the WTO, the motor-
automobile should:

-       be more actively in approaching the domestic market in consumer‟s
        favorite and psychology, in the Vietnamese topography and the living
        standard of the population„s majority in decades to come.

-       summarize the achieved and unachieved in operation of joint-ventures
        with foreign partners in the motor-automobile over the last few years.

        Making full use of the advantage is to occupy the domestic market.

-       The development of this industry in Vietnam should make firm steps in
        combination with short-term and long-term markets as the industry
        growths and population‟s living standard rises.

-       Approaching advanced technology from developed countries especially
        those who occupied Vietnamese outlets.

-       There should be protection policies for domestic production by making
        full use of favorable WTO‟s regulations extended to Vietnam as a
        developing country.

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        Providing ripe conditions for the stable growth of the motor-automobile
        industry of Vietnam.

-       Ensuring complete intellectual property rights and protection of
        copyrights in market competition.

-       Production scale should be appropriate with the domestic market over
        periods, not breaking the supply-demand balance for any reason.

        Endeavor to develop spare parts production for motor-automobile so that
        it will be able to bear Vietnamese trade mark.

-       Wiping out the consumption mechanism by the state; accelerating the
        equitization of state enterprises to create dynamism in competition;
        treating equally in trade and production policies to all economic sectors.

3.3     Information technology industry (IT):

        In the current global information booming age, the IT industry of
Vietnam is so fresh in comparison with other countries in the region as well as
in the world. Providing an environment for stable consumption through internal
growth is therefore a headache not to mention reaching to the world market.
The IT of Vietnam is almost not strong enough to compete with imported IT
products. More considerations should be taken during the accession into the

       - Promptly approaching to most advanced technology to bridge the gap
between Vietnam and other countries in the region and in the world in both
labor force and technology.

       Making full use of assistance from goodwill countries and those in need
of supporting the IT industry of Vietnam.

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       - It should identify outlet for the IT industry is local market. To create
competitiveness, we should facilitate the production products of good quality,
nice appearance, durable and reasonably cheaper than imported goods

       - Seeking for solutions for the IT to shift from assembling to producing.
Paying attention to establishment of synchronous production of spare parts and
components for the IT.

       The IT of Vietnam should pay attention to software development. The
localization of IT products reflects the idea of building up the “Vietnamese
trade mark”.

       - In short term period, there should be proper protection policies to
provide the IT industry of Vietnam a chance to develop. Beside the foreign
investment attracting policies, trade policies should be open and suitable to
attract new scient achievements.

       - Ensuring legally sufficient intellectual property rights for every objects
without any discrimination in nationality, economic sector throughout the
Vietnamese teritory.

       - The administration and management of the IT industry should also be
renovated in comformity with the world to provide convenient conditions for

4-      Trade and telecommunication:

4.1.    Telecommunication:

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        Up till now, the telecommunication of Vietnam is still under the state
monopoly. It came into being and operated long time ago and along with the up
and down of the country.

        The telecommunication of Vietnam has enjoyed remarkable favors by the
state in both network organization and telecommunication technology. It is an
infrastructure serving effectively production and social living at a large scale at
home and abroad.

        It approaches with advanced technology by a fairly convenient way in an
open economy. However upon the requirement of the industrialization of the
country, the telecommunication cound not help quickly approaching the
world‟s technology for faster development.

        The state of Vietnam has made big installation for the industry and
highly respected foreign investments and received active response from quite a
few countries such as Australia, Japan, UK, France ...

        In its accession schedule of Vietnam into the WTO, Vietnam can not
help taking care to:

-       Attracting more foreign investment capital to more completely develop
        its local telecommunication network, setting up local satellite network,
        upgrading and expanding ground telecommunication network, unitedly
        establishing, administrating and managing the Internet.

-       Integrating regional in the construction of transcontinental optical cables
        system as well as building and exploiting branches and sub-branches of
        optical cable system from the 500 KV line.

-       The attraction of foreign investment capital under projects should be
        conducted under direction of modernization of technology, training a
        high skill technical workforce adequate to acknowledge the scientific
        advance of this sector in the world.

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-       Extending relation in services with various countries in the region and
        the world on the basic of equality and liberalization of civil
        telecommunication services not to affect to national security. The
        industry should accept competition to create motive force for

-       Making full use of MFN favorable treatment in tariff extended to
        Vietnam as a developing country.

-       Strengthening cooperation in science research in telecommunication

-       Cooperating with foreign countries in production of telecommunication
        products (such as telephone set) and coordinating in international
        telecommunication transactions.

        There    should     be   satisfactory     policies   in   the   importation    of
telecommunication equipment and technology.

        - Ensuring intellectual property rights, copyrights of all and every
member without discrimination of nationality and economic sector.

        - Clearly expressing policies in telecommunication services charges in
conformity with WTO‟s regulations. Establishing a system of service charges
and applying a consistent charge mechanism in everywhere to every object.

4.2     Trade:

        The trade of Vietnam has been growing over variable periods. These
changes depend on economic mechanism.

        10 years ago, the operation of the internal trade was set up separated
from the foreign trade under the subsidization mechanism with strict control

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over the purchasing and selling sections in the domestic market. The foreign
trade had also its specific network cooperating with countries under the
direction of central planning mechanism which stayed inadequate between
supply and demand.

        Recently these two systems were integrated and operated in an open
economy with trade liberalization.

        Therefore, quite a few lessons from the loss and the win have been
summarized by the state for the trade in the current economic situation of

        For the accession of Vietnam into the WTO, the trade of Vietnam is the
organization working on behalf of the government of Vietnam to “cam can nay
muc - to hold the scale even/ to hold the balance” and “dung mui chiu sao -
stand in the breach” in conducting the negotiation schedule with WTO.

        Hence every results recorded at any degree in negotiable schedule in
WTO‟s agreements mainly thank to careful preparation and implementation of
the trade.

-       Firstly, the trade should sufficiently express all indications required by
WTO‟s rules (as mentioned in item 4) in which the most significant issues are
tariff and non-tariff.

-       Trying to make full use of assistance and enthusiasm by WTO members
and those who had strong voices to WTO (possibly America and Japan).

-       Elaborating trade policies reflected through the trade law of Vietnam,
representing adequately the course of trade liberalization.

        Ensuring traders‟ operation equally in interest and responsibility without
discrimination of nationality and economic sector.

        - Considering and making use of advantages of Vietnam, and at the same
time limiting difficulties through bilateral and multilateral agreements.

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        - Properly applying measures of elaboration to make mostly full use of
favorable treatment in tariff, non-tariff, and MFN to Vietnam as an developing

        - Establishing a adequate team in preparing and approaching WTO
delegations. Instructing different industries to prepare necessary contents to be
elaborated for WTO which not only comply with WTO‟s principle of law but
also in favor of the social-economic situation of Vietnam.

        The accession into the WTO is the course of studying and negotiating to
find out accession conditions acceptable by all parties.

        The reality has proven that the period from application submission to
enjoying full WTO membership takes at least 3-4 years.

        At present, 30 countries including China, Russia and Vietnam has
submitted application for membership; This organization has established
various working groups to examine applications, to conduct procedures of
consideration and negotiation with accessing countries.

        The application of Vietnam into the WTO, in the circumstance that the
economic renovation of Vietnam has gained some remarkable achievements,
receives high assessment and encouragement by international community. The
fact that Vietnam joined ASEAN and AFTA and applied for APEC
membership has shown its determination in opening its economy for integration
with the world and the region. The trade normalization with the U.S.; signing
joint agreement with EU also facilitate the accession of Vietnam into the WTO.

        However, there are so many things to do which require endeavors from
the GATT/WTO inter-ministerial working group to fulfil its duty getting ready
for the negotiation schedule of Vietnam into the WTO in the near future.

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1. The trade law of Vietnam            The National Politics publishing house,
                                       Hanoi - 1997

2. Law on Amendments and               The National Politics publishing house,
     Supplements of some               Hanoi - 1998
     items in the law on the
     import and export of

3. Law on foreign                      The National Politics publishing house,
     investment in Vietnam             Hanoi - 1996

4. Law on encouragement of The National Politics publishing house,
     domestic investment               Hanoi - 1998

5. Instructions and                    The National Politics publishing house,
     guidances for the                 Hanoi - 1997
     implementation of the law
     on encouragement of
     domestic investment

6. Law on state enterprise             The National Politics publishing house,
                                       Hanoi - 1995

7. Law on special                      The National Politics publishing house,
     consumption                       Hanoi - 1998

8. Law on value added tax              The National Politics publishing house,
                                       Hanoi - 1998

9. Trade and investment                The Science and Society publishing house,

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     policy and the                    Hanoi - 1998
     development of some key
     industries of Vietnam

10. The trade policies system          Ministry of Trade, Hanoi - 1997
     of the Socialist Republic
     of Vietnam (I, II)

11. The trade of Vietnam in            Statistics publishing house, Hanoi - 1996
     open age

12. Non-state trading                  Statistics publishing house, Hanoi - 1996

13. The agriculture of                 Statistics publishing house, Hanoi - 1996

14. About the state macro-             Ministry of Agriculture and Rural
     administration to the food Development
     processing industry of

15. 1995 Statistics                    Statistics publishing house, Hanoi - 1996

16. 1997 Statistics                    Statistics publishing house, Hanoi - 1998

17. Figures and Events 1 + 2           General Statistics Magazine 1996

18. Vietnam on the path to             Asia-Pacific General Department

19. Instructions for                   The Multilateral Trade Policy Department
     Commitment                        - Ministry of Trade
     Establishment of Vietnam
     into WTO

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