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SPECIAL ECONOMIC BULLETIN 2009

MINISTRY OF FOREIGN AFFAIRS OF VIETNAM Department of Economic Affairs

January, 2009

January, 2009

Special Economic Bulletin 2009

Inside this issue: Page

Vietnam economic review in 2008 and outlook in 2009 4

Vietnam’s response to the global financial crisis 10

Vietnam’s international economic integration update in 2008 14

Vietnam’s investment environment update in 2008 18

ODA mobilization and utilization in Vietnam 24

Communication between the Government and business circles 29

What the world says about Vietnam 33

Annex

Vietnam’s export directions in 2009

Solutions to promote tourism in Vietnam in 2009

Vietnam’s energy development strategy towards 2020 and 2050

Vietnam’s highway network development plan by 2020 and vi-sion after 2020

National program on response to climate change

36

- Special Economic Bulletin 2009

VIETNAM ECONOMIC REVIEW IN 2008 AND OUTLOOK IN 2009

After 2 years of WTO membership, Vietnam has been opened to various develop-

ment opportunities but also faced with different challenges. In 2008, the world economic

slump caused by the global financial crisis, volatility in prices of crude oil, food and com-

modities as well as inherent weaknesses produced a lot of difficulties for Vietnam’s econ-

omy, particularly high inflation and large trade deficit. Given the resolute implementation

of the 8-point- policy package of inflation curbing, macroeconomic stabilization and social

welfare measures since early 2008, Vietnam’s economy has witnessed significantly posi-

tive moves. Economic growth was sustained, monetary and financial markets remained sta-

ble, inflation and trade deficit gradually declined and FDI inflows increased rapidly.

1. Vietnam economic review in 2008

1.1. Economic growth

The country’s gross domestic

product (GDP) grew by 6.23%, of

which agriculture, forestry and aqua-

culture sectors increased by 3.79%;

industrial and construction sectors

increased by 6.33%; and services in-

creased by 7.2%. The economic

growth in 2008 slowed down and was

lower than the average of the past 5

years.

Despite negative impacts of

climate change, natural disasters and

floods, agriculture production

achieved positive results. The total

agriculture output in 2008 increased

by 5.6%. Rice output increased sig-

nificantly, thus ensuring the national

food security and export.

Industrial production and construction faced with many difficulties due to the world

economic downturn caused by the global financial turbulence and surge in prices of fuel

and basic commodities. Nevertheless, industrial production output increased by 14.6%, of

which the State, non-state and FDI sectors grew by 4%, 18.8% and 18.6% respectively.

Production output of extractive industries declined by 3.5%, manufacture and processing

industries increased by 16%; and water, gas and electricity industries went up by 13.4%.

Total retail sales and services revenue in 2008 were estimated to grow by 31%.

Many tourism attractions were upgraded and improved. By the end of 2008, the number of

international arrivals in Vietnam increased by 0.6% compared with 2007.

VIETNAM ECONOMIC REVIEW IN 2008

8.4 8.178.48

6.23

0

1

2

3

4

5

6

7

8

9

2005 2006 2007 2008

GDP growth in recent years (%)

Source: General Statistics Office

1.2. Foreign trade

Despite unfavorable economy conditions and keen competition, export turnover has

sustained rapid growth. Total export turnover in 2008 reached 62.9 billion USD, up by

29.5% on year-on-year basis. Some main export products continue to maintain a high

growth rate such as crude oil 23.1% (10.5 billion USD); textile 17.5% (9.1 billion USD);

aquatic product 21.2% (4.6 billion USD); shoes 17.6% (4.7 billion USD); rice 89.1% (2.7

billion USD); electronic products and computer 29.5% (2.7 billion USD) and coal 50.5%

(1.4 billion USD).

Vietnam’s export has suffered from losses caused by sharp drop in prices of its

major exports (crude oil, rice, rubber, etc...). Demand in key export markets such as the

U.S., Japan and EU, which occupied nearly 50% of the export volume of Vietnam, has

contracted. Since September when the financial crisis intensified, Vietnam’s monthly

export has slowed down significantly. Export value in November was just 4.8 billion USD,

lower than previous months, namely October with 5.1 billion USD, September with 5.3

billion and August with 6.1 billion USD.

Import turnover in 2008 reached 80.4 billion USD, up by 28.3% compared with

2007. The volume of most imports grew rapidly due to climbing import prices (fertilizer

prices up by 94.2%, fuel up by 53.5%, steel up by 45.8%). Monthly trade deficit has

reduced rapidly since the middle of the year, however the total trade deficit still reached

around 17.5 billion USD in 2008, equal to 27.8% of the export turnover and equivalent to

the deficit level of last year. Major reasons for the large trade deficit are: (i) The climb-up

of most imports, particularly fuel, materials and equipments, which could not be produced

domestically; (ii) The share of processed exports remain modest, whereas most imports are

processed goods, machinery and equipments; (ii) Tariff reduction and regulation

streamline in compliance with the WTO commitments have facilitated operations of

trading companies, including importers.

1.3. Investment

Total investment capital for development in 2008 reached 637.3 trillion VND (about

1300

800900

500700

500400

0

500

1000

1500

Jun Jul Aug Sep Oct Nov Dec


Special Economic Bulletin 2009 -

Trade deficit (million USD)



38.8 billion USD), accounting for 43.1% GDP, up by 22.2% compared with 2007, of

which public investment was 184.4 trillion VND (around 11.3 billion USD), investment

by non-State sectors was 263 trillion VND (about 16 billion USD) and disbursed foreign

direct investment (FDI) was 11.5 billion USD, etc...

Registered FDI

capital climbed up to a

record level of over 64

billion USD, tripling the

volume of last year. Several

projects has a registered

capital as high as 3.5 - 7.8

billion USD. Despite that

fact, FDI inflows into

Vietnam are forecasted to

slowdown in the upcoming

time due to downward trend

of international investment

caused by credit crunch and

tougher terms in the

international financial markets. However, in the global uncertain environment, capital

flows tend to flight into safe destinations. As a result, provided that stable-macroeconomic

conditions are sustained, problems in infrastructure, institutions and human resources are

settled, Vietnam would continue to be an attractive investment destination in the region.

1.4. Given the resolute implementation of the 8-point- policy package for inflation

control and macroeconomic stabilization, monthly consumer price index (CPI) has

declined rapidly since mid-year. In fourth quarter, CPI plunged to negative figures with -

0,19% in October, -0,76%

in Novermber and -0,68%

in December. However, the

inflation rate for the whole

year remained at a high

level of 22,97%, though

still lower than previously

forecasted figures. Other

macroeconomic indices

were kept such as

government’s revenue and

spending, credit growth,

international payment

balance, foreign exchange

reserve, etc... Foreign debt

was controlled within a safe

range.

Financial and banking systems have not been exposed to direct impacts by the


Foreign Direct Investment (billion USD)

2.38

3.562.99

2.2

3.91

2.14

1.131.56

0.18-0.19

-0.76-0.68-1

0

1

2

3

4

5

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Monthly CPI (%)

5.729.9

20.3

64

0

10

20

30

40

50

60

70

2005 2006 2007 2008



global financial stresses because the level of Vietnam’s financial integration with the world

finance remains modest. However, deposits in foreign banks may get more risks. As

businesses have been facing difficulties and "frozen" property markets have prolonged,

some borrowers may have failed to pay debt. And as a result, non- performing loan may

increase. In the context of global financial uncertainty, since foreign investors may

restructure their portfolio or rechannel investment to safer assets for hedging, the

Vietnam’s stock markets are experiencing a sharp downward trend. The VN Index dropped

from over 1.000 points in early 2008 to around 300 points in late 2008.

2. Economic outlook in 2009

The donor community and

numerous international scholars shared

a view that the medium- term outlook

of Vietnam remained favorable despite

the current economic troubles because

of its strengthened fundamental factors:

(i) Socio- political stability; (ii) The

Government’s consistent and strong

commitment to reform and international

integration acceleration; (iii) The

implementation of WTO commitments

facilitates a more favorable business

environment; (iv) Young labor abundance. According to Professor Michael Porter

(Harvard Business School), in the medium term, with “appropriate economic strategy“

Vietnam could be well qualified for a “manufacturing base”, a “node in Asian value chain”

and a services hub in Indochina. With those advantages and fundamental factors, the

expectation of international investors transformed into huge capital inflows into Vietnam

in 2008 despite its short-term economic challenges.

In the short term, economic growth in 2008 slowed down due to adverse impacts by

the outside environment. Given the worse condition of the world economy, 2009 continues

to be a challenging year for Vietnam’s economy. The objectives were set for 2009 as keep-

ing inflation under control, ensuring macroeconomic stability, sustaining appropriate eco-

nomic growth, proactively preventing economic slowdown, ensuring social welfare and

effectively strengthening international economic integration and cooperation.

- Economic growth is targeted to increase by 6.5%, and total investment would

account for 39.5% GDP in 2009. The World Bank (WB) also forecasted that Vietnam’s

economy would grow by 6.5% in the next year. Given downward risks of the global

economy, some international institutions (IMF, ADB, etc...) forecasted that Vietnam would

slowdown further with a growth rate of 5%.

- With lower prices of commodities, inflation rate in Vietnam would decline faster to

15% or lower. According to IMF’s forecast, inflation is even likely to reduce to one-digit

figure by the end of 2009.

- Export volume is targeted to increase by 13% in 2009. The trade deificit is



“Despite the economic turbulence this year

and a difficult year ahead, the medium- term out-

look for Vietnam remains favorable, provided

that the government sustains the momentum of

economic reforms that have brought so much

success this decade”

Statement by World Bank at the Consultative

Group Meeting for Vietnam, Hanoi, 4-5 Decem-

ber 2008


forecasted to continue downward trend because of declined import prices, particularly

prices of oil and basic commodities. After Dung Quat oil refinery complex with the 6.5

million-ton-oil capacity being put into full operation in March 2009, a significant portion

of existing imported fuel and petrolium-based materials (like petrol, gasoline, oil

derivatives, fertilizer, plastic, etc...) shall be supplied in Vietnam, and trade deficit may, as

a result, decrease.

In an effort to mitigate the adverse impacts by the global financial crisis, Vietnam is

resolutely expediting 5-point-stimulus policy measures to contain economic slowdown,

sustain economic growth with a financial stimulus package worth of around 6 billion USD

in 2009, in which focuses are: (i) To promote production and export; (ii) Investment and

consumption demand leverage; (iii) To introduce flexible and effective monetary and fiscal

policies; (iv) To accelerate the implementation of poverty reduction programs and ensure

social welfare. The shift of priority from inflation control to growth stimulation in

Vietnam is viewed by international community to be indispensable, flexible and

appropriate in the context of global economic recession and deflation. However, unlike

other regional countries, remnants of high inflation and trade deficit in Vietnam might

linger over the year of 2009. And it must, therefore, be prudent in economic stimulus in

order to secure both macroeconomic stability and growth.

To unleash growth

potentials, particularly

taking advantage of rapid

economic growth recovery

after the global financial

crisis, beside the above

short-term measures,

Vietnam is trying its best

to strengthen the

foundation for sustainable

growth in the upcoming

years, with the following

measures:

(i) To consistently

gear up and enhance

international economic

integration, making full

use of post-WTO accession opportunities;

(ii) To accelerate the improvement of the legal system and market economic

institutions;

(iii) To speed up the development of key socio- economic infrastructure, notably

important transport infrastructures in order to solve ”bottle-necks” and enhance the

competitiveness of businesses and the whole economy;

(iv) To attach more importance to human resource development, particularly skilled


Monthly meeting of the Cabinet in December, 2008 to discuss measures to pre-

vent economic slowdown and stimulate the economy.

workforce with a view to attracting high- tech and high- value added investment, and to

accelerate the shift in the economic and export structures;

(v) To facilitate the development of businesses of different economic sectors; to

speed up SOEs reform, which focuses on equitization;

(vi) To effectively implement the National Program on reponse to global climate

change in an effort to mitigate its adverse impacts on agriculture production and rural

living;

(vii) To expand social welfare networks in order to support vulnerable people; to

enhance sustainable poverty reduction and make sure the poor could enjoy the fruits that

economic growth would bring about.




VIETNAM’S RESPONSE TO THE GLOBAL FINANCIAL CRISIS

In early 2008, the Vietnam’s economy faced with numerous difficulties, particularly

accelerating inflation and widening trade deficit, due to negative impacts of the global

economic downturn as well as hikes in prices of crude oil, food, and commodities. From

March 2008, Vietnam had resolutely implemented a policy package of macroeconomic

stabilization and inflation control, comprising of 8 measures that focused on monetary

tightening and pulic investment cut-down. Basic interest rate had increaded to 12% (from

8%) and then to 14%. Inefficient or unnecessary projects had been cancelled or

postponed... As a result, since mid 2008, there were positive moves in macroeconomic

condition with sharp drop in inflation and trade deficit, as well as stable monetary and

financial markets. FDI inflows into Vietnam continued to increase roburstly, demonstrating

the expectation and confidence of foreign investors towards a good long-term development

prospect of Vietnam’s economy.

Since September 2008 when the finan-

cial crisis in the U.S. intensified and evolved

into a global financial crisis, the global econ-

omy has been experiencing a sharp down-

turn. Many developed economies have slid

into recession while developing countries

have faced with a lot of difficulties. Many

countries have aggressively carried out

strong economic stimulus packages such as

the U.S. (168 billion USD), China (586 bil-

lion USD), etc … As its financial and mone-

tary linkages with developed countries re-

main modest, Vietnam has not been directly

affected by the global financial shock and

therefore no collapse or severe financial tur-

moil has been witnessed in Vietnam. How-

ever, as a small economy with increasingly

deep integration into the world economy, Vietnam seems to be vulnerable to indirect im-

pacts by unfavorable changes in the external economic environment through trade, invest-

ment and financial- monetary channels.

After the economy just cooled down, under the adverse impacts of the global

financial crisis, the threat of economic slump loomed large in Vietnam. Given significantly

declined inflation pressure and trade deficit, Vietnam has shifted the priority from inflation

control to economic stimulus. The Government has instructed the close monitoring of the

outside financial and economic movements for pro-active response to the adverse impacts

of the global financial crisis; safeguarding the banking system; strengthening close

surveillance of stock exchanges and real estate markets. To mitigate the impacts of

worsening external economic environment, Vietnam is concretely implementing 5 point-

policy package to prevent economic downturn, sustain economic growth and ensure social

welfare.

VIETNAM AND THE GLOBAL FINANCIAL CRISIS

Five-point policy package to stimulate economic growth

and ensure social welfare

1. To promote production and export

Agriculture: To tackle bottle-necks

and support agriculture development to

create more jobs and income for farmers.

To provide support for development of

seed production, materials, fertilizer, epi-

demic prevention, post- harvest technol-

ogy. To accelerate capital disbursement of

agricultural and rural infrastructure devel-

opment projects (e.g. irritation system,

fishing ports, aqua- production areas,

etc…). To support development of agricul-

tural promotion and service centers.

Industry: To give priority to devel-

opment of labor and domestic materials

intensive industries such as production of

consumption goods, construction materi-

als, mechanics and manufacture, ship building, fertilizer, supportive industries, oil chemis-

try, etc… with a view to make full use of domestic resources, materials and technology,

therefore to reduce the dependence on outside supply of equipments, materials and fuels.

Trade: To strengthen trade promotion and expand export markets in regions/ coun-

tries less vulnerable to the global financial crisis. To make best use of benefits from free

trade arrangements for increasing exports and reducing trade deficit such as Vietnam- Ja-

pan Economic Partnership Agreement, FTA between ASEAN and its dialogue partners

(China, Japan, South Korea, Australia, India), etc…

Infrastructure: To accelerate progress of major projects in energy, highways, air-

ports, seaports, rural transport networks, etc… To develop the national technology innova-

tion program with a view to increase hi- tech application and development for competitive-

ness improvement.

2. To encourage investment and domestic consumption

Investment: To accelerate capital allocation and implementation of important infra-

structure projects such as seaports, electricity, highways, irritation, schools, health-care,

etc… To make up-front allocation of nearly 100 million USD from the government bond



In monetary field, in the fourth quarter of 2008, the basic interest rate was cut down

5 times from 14% to 8.5% in an effort to enhance liquidity in money markets, mitigating

adverse impacts of global economic turmoil on banking system and domestic enterprises.

Exchange rate band was expanded from ± 2% to ± 3%.

Prime Minister Nguyen Tan Dung: “ Mobilizing

collective efforts to prevent an economic downturn,

maintain growth and ensure social welfare”


for development and improvement of irrigation, dykes and natural disaster mitigation fa-

cilities. To speed up the disbursement of FDI and ODA projects, particularly those in in-

frastructure development, hi- tech product production, export and labor intensive projects.

To facilitate land procedures, capital access, site clearance, interest rates, etc… for enter-

prises of different economic sectors.

Domestic consumption: To introduce market prices of electricity, coal, clean water,

etc… according to the roadmap approved by the Government . To accelerate the expansion

of distribution networks of essential goods (e.g. food, gasoline, steel, cement, medicine,

etc…). To strengthen the quality and safety control of goods and services.

3. To implement flexible fiscal and monetary policies

Fiscal policy: For SMEs, to deduct 30% corporate income tax from the fourth quar-

ter of 2008 to the end of 2009 and for the remaining (70%) of this tax, the paying time

shall be extended up to 9 months. To expand the grace period for some industries such as

ship building, mechanics, etc…. To refund 90% VAT tax on input materials used for ex-

port production in case proper documents have not been presented. The remaining 10%

VAT shall be refunded if proper documents were presented. To reduce import tax on some

materials that could not be produced domestically. To increase import tax on luxury goods

in conformity with WTO commitments in order to reduce trade deficit.

Monetary policy: To exercise a flexible and effective monetary policy; to apply ex-

change rates in line with market mechanism with a view to encourage export, sustain mac-

roeconomic condition and balance of payment. To reduce required reserve and basic inter-

est rates in order to increase capital access for businesses, particularly SMEs and export

businesses.

4. To ensure social welfare: To accelerate the expedition of support for provinces

suffering natural disasters in terms of foods, housing development, epidemic prevention,

clean water, cultivation, etc… To increase investment in housing development for poor

people, workers in industrial parks, pupils and students. To support low- income employ-

ees, people suffering natural disaster losses and social support enjoyers. To early introduce

unemployment insurance. To increase the national food reserve for emergency support of

areas suffering natural disasters.

To fine-tune the implementation of poverty reduction programs, credit for poor peo-

ple, pupils and students. To increase investment and poverty reduction support for 61 poor

districts and step up the development of vocational training for rural labor in order to ac-

celerate production, job creation and income improvement.

5. To strengthen capacity for monitoring and forecasting of global economy and do-

mestic economy with a view to timely revise and adjust economic policies in line with the

reality. The Government instructed the relevant Ministries and local authorities to pro-

actively expedite market stabilization measures and to strengthen communication and dia-

logue with business circles and provide accurate and transparent socio- economic informa-

tion with a view to bolster public consensus and confidence in implementation of eco-

nomic stimulus measures.


In fiscal field, Vietnam is planning an economic stimulus package worth of around 6

billion USD (110,000 billion VND), equivalent to 6 -7% its GDP, which is to be mobilized

from different sources (tax exemption and reduction; budget reserve, etc.). The stimulus

package demonstrates great effort and resolution of the Government of Vietnam to contain

economic slowdown. The stimulus package focuses on consumption and investment

leverage; infrastructure and hi- tech industries for strengthening long- term growth

foundation; promotion of labour and local materials intensive industries to creat jobs,

sustain economic growth and solve social problems.

Given the global economic recession, the shifting policy priority from inflation

control to maintain momentum of economic growth in Vietnam is essential and timely,

demonstrating a flexible and appropriate move in response to changes in the external

economic environment. Unlike other regional countries, vigilant for remnants of inflation

threat and trade deficit, Vietnam is implementing monetary loosing and fiscal expansion

flexibly and prudently with a view to harmonize economic growth and stability.

A part from the above measures, Vietnam supports and is in position to cooperate

with other countries to prevent the diffusion of the global financial crisis. Vietnam has

been actively strengthening the close coordination with regional countries under the

Chiang Mai Initiative within the ASEAN+3 framework to enhance regional monetary and

financial cooperation in order assist member countries in macroeconomic stabilization.

Vietnam has also been augmenting trade, investment cooperation with ASEAN,

ASEAN+1, ASEAN+3 and other countries in an effort to minimize the adverse impacts by

the global financial crisis and economic recession.




VIETNAM ’S INTERNATIONAL ECONOMIC

INTEGRATION UPDATE IN 2008

Vietnam’s 2 year-old WTO’s

membership brings various opportunies.

Despite unfavorable global economic

condition, FDI inflows continued to increase

vigorously with a new high record of 64

billion USD in terms of registered capital in

2008, tripling the figure of last year. The

remarkable high ODA pledge of 5 billion

USD manifested the confidence and strong

support by the donor community for the

development of Vietnam. Export markets

have expanded to 150 countries with export

turnover of 62.9 billion USD, up by 29.5% on year-on-year basis. The implementation of

WTO’s commitments to market access, non-discrimination, subsidy abandon, policy

transparency and publicity, etc... has fostered a more sound competitive environment for

enterprises striving for excellence in term of quality, efficiency and productivity.

In 2008, Vietnam still maintained certain control on the following commodities:

tobacco, cigar, gasoline, petroleum, newspaper and magazine, aero-plane and spare parts,

video compact disk.

Vietnam complied all commitments to cut down import tariffs, among which some

tariff lines had been reduced earlier than the committed schedule such as: passenger buses,

milk... Import taxes on textile products were also reduced (averagely from 37.3% to

13.7%).

Up to now, 5 foreign banks

have been licensed to set up 100%

foreign invested banks in Vietnam,

including Standard Chartered, HSBC,

ANZ, Shinhan and Hong Leong Bank

Berhad.

As of 11th January 2007,

trading rights were granted to

distributors with foreign ownership of

less than 49%; from January 2009,

the foreign ownership cap shall be

removed. From January 1st 2009,

100% foreign invested educational

organizations are allowed to be

established and operate in Vietnam.

INTERNATIONAL ECONOMIC INTEGRATION

WTO

Vietnam actively participated in 7th ASEM

Summit in China, 24-25th October 2008 with several

initiatives, which were warmly welcomed by ASEM

members, including the initiative on cultural

coordination with a view to promote ASEM image, or

initiative on strenthening the exchange of experience

in preparedness for climate change and epidemic

disease.

Vietnam is closely coordinating with ASEF

Fund to prepare activities to be held on the sideline of

the 9th ASEAM Foreign Ministers’ Meeting in May

2009 in Hanoi.

Vietnam is also an active member in

APEC. In the 16th APEC Summit in Peru, 22-

23 November 2008, according to Vietnam

initiatives, the Summit agreed to reaffirm the

international commitments to increasing ODA

and assistance for developing countries in

response to global economic downturn.

An important landmark of ASEAN is to complete and adopt ASEAN Chapter which

will help the association co-operate more effectively and operate more dynamically. Viet-

nam actively took part in and significantly con-

tributed to drafting the ASEAN Charter, particu-

larly proposing goals, principles and key guide-

lines for the Chapter. Vietnam was one of the

first 5 members to ratify the Charter on 6th March

2008.

On 1st April 2008, on behalf of the Viet-

nam’s Government, Minister of Trade and Indus-

try, H.E. Mr. Vu Huy Hoang signed the ASEAN

– Japan Comprehensive Economic Partnership



ASEM

APEC

ASEAN


(AJCEP), which is an important agreement to strengthen close and comprehensive eco-

nomic cooperation between ASEAN and Japan, marking a significant milestone in the

ASEAN- Japan cooperation.

Joined with other ASEAN member, Vietnam has actively participated in negotiation

of the ASEAN – India Free Trade Area (FTA), which was scheduled to be signed in early

2009. Vietnam is also key member in FTA negotiations between ASEAN and Australia

and New Zealand.

Vietnam successfully hosted the

3rd ACMECS (Ayeyawadi – Chao

Phraya – Mekong Economic Cooperation

Strategy) Summit and the 4th CLMV

(Cambodia, Laos, Myanmar and

Vietnam) Summit from 3-7th November

2008 in Hanoi. The two Summits adopted

many important cooperation documents,

including the ACMECS Summit

Declaration; the ACMECS Leaders’

Declaration on Facilitation of Trade,

Investment and Tourism; signing the

CLMV Summit Joint Statement, etc...

and created a new impetus for further enhancing ACMECS and CLMV cooperation

frameworks more effectively and substantively.

Vietnam actively participated and contributed to the success of the 3rd GMS

(Greater Mekong Sub-region) Summit in March 2008, in Vientiane, Lao PDR, and the 5th

Cambodia – Laos – Vietnam (CLV) Summit in November 2008 in Vientiane, Lao PDR

with a view to strengthen the good neighborliness effective cooperation with sub-regional

countries for the sake of developing the Mekong sub-region into a region of connected

infrastructure, dynamic economic development, social harmony and environmental

sustainability.

After 2 years of negotiation, Vietnam and Japan signed

the Economic Partnership Agreement (EPA) in 25th December

2008. The signing of EPA is a political and economic event of

major significance to bilateral relations, marking the 35th anni-

versary of the two countries’ diplomatic ties. The EPA is also a

concrete step towards strategic partnership relationship between

Vietnam and Japan. This is the first economic partnership agree-


MEKONG SUB-REGION

SIGNIFICANT AGREEMENTS

ment that Vietnam signs with its major partners, marking a new milestone not only in the

Vietnam – Japan cooperation, but also in the international economic integration progress of

Vietnam. The EPA is a comprehensive agreement built in accordance with the World

Trade Organization’s (WTO) standards and rules, aiming to facilitate the trading of com-

modities, capital, technologies and skillful labour between the two countries.

Vietnam and EU kicked off the negotiation of Vietnam – EU Partnership Coopera-

tion Agreement (PCA) which is agreed to cover a wide range of areas and will outline a

common vision for the future. PCA is a comprehensive agreement on bilateral and multi-

lateral cooperation ranging from politics, economics, trade, investment, justice, culture,

education, science-technology, healthcare, agriculture, tourism, energy and traffic to envi-

ronment. It reaffirmed the traditional friendship and the historical, political and economic

relationship which attaches Vietnam and the EU. The negotiations of the PCA to replace

the 1995 framework agreement reflect Vietnam and the EU’s desire and determination to

build a stable and long-term cooperation framework, which permits both sides to bring

their relationship to a new height. The third round of the PCA talks will take place in Brus-

sels, Belgium in 2009.




VIETNAM’S INVESTMENT ENVIRONMENT UPDATE IN 2008

In 2008, FDI inflows into Vietnam reached a new record which is a practical evi-

dence for international investors' confidence in the long and medium term development

prospect of Vietnam. Beside the Government’s strong determination to sustain macroeco-

nomic stability, efforts to improve business environment also play an important role in in-

creasing FDI attraction.

In 2008, many businesses and donors expressed their positive view of the mid-term

development prospects of Vietnam and still positioned Vietnam as a lucrative FDI destina-

tion. More than 75% surveyed enterprises planned to expand their business in Vietnam in

next 3 years. However, businesses also cited inflation- triggered salary increase, lack of

skilled workforce, infrastructure bottlenecks, cumbersome administrative procedures and

regulations of labor strike are major obstacles and have yet to be improved in Vietnam’s

business environment.

In response to investors' demand and concern, Vietnam is trying its best to improve

business environment with a view to offer a more favorable one. In 2008, the efforts fo-

cused on: (i) sustaining macroeconomic stability; (ii) continuing to deal with bottlenecks in

-infrastructure, improving human resources and streamlining administrative procedures.

1. Sustain macroeconomic stability

In the context of the global economic downturn, macroeconomic stabilization is a

pre-requisite in investment environment in Vietnam. Given the priority focused on infla-

tion control, the Government has resolutely implemented a series of measures in an effort

to curb inflation, stabilize macroeconomic conditions, particularly the 8-point policy pack-

age focusing on monetary and fiscal tightening. Thanks to sound implementation of these

INVESTMENT ENVIRONMENT UPDATE

Factors for doing business in Vietnam (%)

Source: The Global Competitiveness Report 2008-2009 (WEF)

measures, inflation rate has been declining since June. Total credit growth in 2008 was be-

low 30%, the payment balance had surplus of 2.7 billions USD, FDI inflows into Vietnam

achieved a new high record in terms of both registered and disbursed capital, etc...

In effort to maintain the macroeconomic stability, the Government strengthened dia-

logue with business communities to share with their concern and timely and transparently

provide accurate information related to the socio-

economic situation, policies and measures of the Govern-

ment. The Government's efforts to stabilize the economy

have been actively supported by domestic and foreign

business communities. The public-private partnership,

therefore, have been strengthened closely to consolidate

the mutual confidence and consensus between the Gov-

ernment and business sectors to navigate through short

term challenges.

2. Improve the legal framework

In 2005, the National Assembly promulgated the Law on Investment which took

valid from July 2006, providing a single framework for both foreign and domestic invest-

ment. In addition, the Government issued a

series of guideline documents like Degree

No. 108/2006/ND-CP concretizing the

Law of Investment, Degree No.

78/2006ND-CP regulating outward invest-

ment, Degree No. 101/2006/ND-CP regu-

lating re-registration and transformation of

foreign invested companies, Degree No.

88/2006/ND-CP on business registration.

Besides, many legal documents related to

business environment have been already

issued such as, inter alia, Law on Land,

Commerce Law, Procurement Law, Law

on e-Transaction, Law on Intellectual Prop-



We commend the Government

of Vietnam for managing the

economy so well during this

challenging year.

Asian Development Bank

Nhon Trach Industrial Zone – Ho Chi Minh City

The Vietnam - Japan Joint Initiative to Improve Business Environment with a

view to strengthening Vietnam's competitiveness

The Vietnam – Japan Joint Initiative was started in April 2003 by the two Govern-

ments and has proved its effect. The Phase I was implemented from December 2003 to

November 2005 with 44 major items and 125 sub-items. Phase II was implemented from

July 2006 to December 2007 with 46 major items and 80 sub-items. In November 2008,

Vietnam and Japan agreed to start Phase III with the Action Plan including 7 major items

and 37 sub-items to continue improve the legal system and policies related to investment

environment in Vietnam. Focuses are:

(i) To improve regulations on decision-making process of Directors’ Boards of en-


terprises established before the Enterprise Law taking effective;

(ii) To enhance the capacity focal points governing foreign investment activities;

(iii) To develop public infrastructure for improving living of workers in industrial

zones;

(iv) To clarify and specify cost items in calculation of corporate income tax;

(v) To introduce transparent and fair application of VAT invoices;

(vi) To draft a master-plan to develop supporting industries;

(vii) To accelerate the development of electricity infrastructure, etc…

The Phase III Action Plan with less items and sub-items showed positive progress

in business environment since the number of components in business climate to be im-

proved has gradually reduced. This Action Plan is scheduled to be implemented within 2

years from November 2008 to November 2010.

As emphasized by Mr. Mitsuo Sakaba, Ambassador of Japan at Vietnam Consulta-

tive Group Meeting (Hanoi, 4-5 December 2008): “In view of the current international fi-

nancial and economic crisis, improving business environment of Vietnam is even more

critical to keep attracting foreign direct investments. In September 2008, Japan and Viet-

nam agreed in principle on the bilateral Economic Partnership Agreement, of which we

are working for early signing. Last month, our two countries also launched Phase Three of

the Vietnam – Japan Joint Initiative to improve Vietnam’s business environment…. The

outcome of this initiative is equally beneficial to other countries, and I hope that Vietnam

would be able to strengthen its international competitiveness through this exercise and be-

come the most favourable FDI destination in the world.”


3. Efforts to remove “bottlenecks” to the economic growth

In addition to resolute implementa-

tion of macroeconomic stabilization policy

package, Vietnam continued its efforts to

remove obstacles in investment and busi-

ness environment, particularly in infra-

structure, human resources and admini-

stration procedures.

Electricity: Given rapidly eco-

nomic development, energy demand in

Vietnam is on rise correspondingly. Elec-

tricity production by October 2008 was

estimated 62.125 billion kWh, up by

12.2% compared with the same period of

Construction site of Son La Hydroelectric plant

last year.

Road infrastructure: By the end of 2008, national road No.1 and other the major

highways to seaports and international border checkpoints, road links in the Southeast re-

gion and Mekong delta, etc… have been significantly improved. Phase I upgrade of major

seaports (Cai Lan, Hai Phong, Tien Sa, Quy Nhon, Nha Trang, Sai Gon, Can Tho, etc…)

has been completed. According to the International Telecommunication Union (ITU), Viet-

nam is one of the most rapid growth telecommunication markets in the world. By the end

of 2008, telephone line density reached 88.7 sets per 100 people; nearly 20 million internet

subscribers, accounting for 24,1% total population.

Workforce: In recent

years, labor demand in labor

intensive industries like tex-

tile, manufacture, assembly

and food processing has rap-

idly increased. This fact dem-

onstrated that Vietnam has

the potential to become a

manufacture and processing

base in the region and is ac-

tively integrating into the

“Asian value chain”. In addi-

tion, the increase in labor de-

mand in insurance and bank-

ing sectors is also a practical

evidence not only for rapid

development of financial sectors, but also for Vietnam’s great efforts to undertake WTO’s

commitments on market access in financial services.

However, the fact also shows that there is a lack of well- skilled workforce and high

- level managers in Vietnam. According to WB, the quality of human resource in Vietnam

just records 3.79 point on the scale of 10. From such a reality, human resource develop-

ment must be given with top priority. In 2008, Vietnam implemented a series of measures

to improve its labor forces: (i) Strengthening partnership between educational and training

institutions and businesses; (ii) Developing high-quality workforce training schemes in in-

formation technology, banking and finance, tourism and ship building; (iii) To set up inter-

national training centers invested by private sectors for training middle - level workers in

response to demand of foreign investors.

4. Accelerate public administration reform and anti-corruption

In 2008, the reform of administrative institutions continued to be reinforced in re-

sponse to requirements in exercising grass-root democracy, streamlining administrative

procedures and information publicity. Introduction of one - stop business registration is a

significant step in administration procedure reform. Business registration application is just

filed to provincial Department of Planning and Investment and business license will be



Job trends created in FDI enterprises (unit: job quantity)

Source: Vietnam business annual report 2007

Food

Tourism

Textile

Banking

Construction

Insurance


granted after 5 working days. Information technology has been applied in public admini-

stration such as Government’s online meetings, information ports for exploration of admin-

istrative procedures, etc… Those efforts helped improve responsibility and accountability

of administrative agencies for better public services.

In 2008, a series of legal docu-

ments on anti- corruption were promul-

gated1. The “Integrating anti- corruption

into educational programs” Scheme and

the National Strategy for Anti- corrup-

tion towards 2020 have been estab-

lished. Besides, various anti- corruption

have been enforced over the last years

such as: (i) To make activities of the

governmental agencies transparent; (ii)

To develop and introduce norms and

standards in management and utilization

of public assets, public land and finance;

(iii) To make properties and income

transparent; (v) To remit salary of civil

servants through bank accounts; (vi) To

apply rules and norms on professional

morality in some sectors.

To further improve business in upcoming

years, the following measures will be imple-

mented:

- Accelerate the progress in planning and

revise out-of-date plans; improve the legal frame-

work for planning in order to facilitate site clear-

ance for investment projects.

- Revise or remove investment incentives,

which are not conformity with WTO’s commit-

ments, but legitimate interests of relevant investors must be ensured. Issue legal documents

to provide guidelines for the implementation of laws related to business and investment

activities.

- Make overall review and revision of infrastructure planning towards 2020 in order

to facilitate FDI investment in infrastructure development. Introduce incentives for private

sectors investing in infrastructure projects, particularly those in transport, seaports and

electricity. Encourage FDI investment in key projects in telecommunication and informa-


“… The Government of Vietnam is

committed to effectively implement the

public administration reform and step-

up the fight against-corruption in order

to continue creating favorable business

and investment environment.” Opening remarks by Prime Minister

Nguyen Tan Dzung at the 16th Consultative

Group Meeting (Hanoi, 4 December 2008)

1 Decree No. 65/2008/ND-CP dated May 20th 2008 on functions, tasks, authority and organizational structure of the Government

Inspectorate; Decree No. 91/2008/ND-CP dated August 18th 2008 promulgating the Regulation on publicity of audit results and

results of implementation of the State Audit’s conclusions and recommendations; Decision No. 115/2008/QD-TTg by Prime Minis-

ter dated 27 Aug 2008 issuing Regulations on management and use of public assets in governmental authorities, semi-public insti-

tutions and other organizations authorized to manage and use public assets.

Dialogue on anti-corruption between the Government of Viet-

nam and donor community in 2008


tion technology.

- Effectively implement the decentralization of FDI management and enhance the

capacity of public agencies and officials to satisfy requirements by Law on Investment.

Simplify administrative procedures in FDI management, introduce single-window proce-

dure and timely deal with the issues related to investment licenses.

- Accelerate the implementation of the Plan for education and training; further in-

vest in the development of vocational training schools; revise the Labor Code to prevent

illegal labor strikes and harmonize benefit between employers and employees.



ODA MOBILIZATION AND UTILIZATION IN VIETNAM

1. Reviewing 15 years of development cooperation between Vietnam and the

international donor community

The year 2008 celebrates the 15th anniversary of development cooperation between

Vietnam and international donors since the first Consultative Group Meeting for Vietnam

(CG Meeting) in Paris (France) in November 1993. Reviewing the mobilization and

utilization of ODA over the past 15 years, one could see that ODA has played an important

role in Vietnam’s development process, contributing to its socio- economic development

and poverty reduction and deepening its partnership with the international donor

community. CG Meetings have become interactive fora where government and donor

community meet and have dialogue on Vietnam’s socio- economic development strategies,

plans and policies.

The international donor community has increasingly expanded and there have so far

been 51 donors for Vietnam, including 28 bilateral donors and 23 multilateral donors,

including both OECD-DAC and non-OECD members. Most donors have established their

long and medium term strategies on development cooperation with Vietnam. Many donors

like ADB, Japan, EU, Australia, etc… have already included Vietnam into their lists of

prioritized recipients.

Over the past 15 years, Vietnam has

always been accorded with strong support

by the international donor community. The

total committed ODA has reached around

47.5 billion USD, of which, a record 5.4

billion USD was committed at the 2007

CG Meeting. Despite the current downturn

of the world economy due to the global

financial crisis, donors reaffirm their

strong support for Vietnam's development

by committing a large amount of 5.014

billion USD for Vietnam at the 2008 CG

meeting from 4-5 December 2008. So far,

Vietnam and donors have signed ODA

agreements worth 35.217 billion USD (as

of October 2008), accounting for 82.98%

of total ODA volume, of which 22.065

billion USD has been realized equivalent to 52% of total committed ODA.

Based on the socio-economic development strategies of Vietnam and close

consultation with donors, ODA in Vietnam has been primarily targeted to the development

of pivotal socio-economic infrastructure such as energy, transport networks, agriculture

and rural development, education and training, health care, and environment protection.

Although ODA accounts for merely 3-4% of total GDP, it has been an important source of

capital for infrastructure development and served as a ”catalyst” for mobilization of other

ODA MOBILIZATION AND UTILIZATION

3.74

4.45

5.43

5.014

0

1

2

3

4

5

6

2006 2007 2008 2009

Committed ODA in recent years (billion USD)

capital resources like FDI, private

investment, etc. ODA implementation in

Vietnam has been effective and made

positive contribution to the improvement of

production capacity and competitiveness of

the Vietnam economy.

Transport and telecommunication

sectors has received the largest share of

ODA with 9.88 billion USD focusing on

improvement and development of road

networks, railways, air transport, seaports,

etc... ODA-funded transport works like

National Road No. 5, Road from Ho Chi

Minh City to Moc Bai, Hai Van Tunnel,

Tien Sa deep seaport, Bai Chay bridge, My

Thuan Bridge, Tan Son Nhat airport, etc.. have produced spillover effects and made

important contribution to the development of Vietnam. The energy sector also received a

large portion of ODA with 6 billion USD to upgrade and develop large-scale power plants

such as Phu My 2.1 thermal power plant (280 MW), Pha Lai II power plant (600 MW),

Ham Thuan- Da Mi hydro-power plant (475 MW), O Mon thermal power plant (600 MW),

Phu My I plant (1.090 MW), etc.

Agriculture development and poverty reduction are also given priority in ODA

utilization and have so far received 5.5 billion USD. Many large-scale projects and

programs funded by ODA such as Population and Development Program, Rural Clean

Water Program, Rural Transport Program, Rural Electrification Program, Mekong Delta

Irrigation Program, etc… have contributed greatly to the development of agricultural and

rural infrastructure and improvement of living standards of rural, mountainous and ethnic

minority people. Poverty rate by the national standards in Vietnam declined rapidly from



Hai Van Tunnel - an effective project by Japan ODA

11%

22%

43%

24%

Agriculture, Irrigation,

Forestry, Aquaculture and

Agriculture and Rural

Development, Hunger

Elimination and Poverty

ReductionEnergy and Industry

Traffic, Telecommunications,

Urban water supply and

drainage

Heath, Education and

Training, Environment, Others

ODA structure signed by sector and field (from 2006 to 30 October 2008)


58.1% in 1993 to 15.5% in 2007. With its great success in

poverty reduction, Vietnam became one of the first countries

that fulfill the millennium development goals (MDGs) in

terms of poverty reduction and, therefore, was praised by the

UN as an example in translating high economic growth into

poverty reduction and social progress.

Health care, education and training and environment

protection are also significantly funded by ODA with the

total committed amount of 4.3 billion USD. ODA projects

have contributed to education reform, capacity building in

education management and training of tens of thousands of

Vietnamese students in different sectors. Most ODA in health care was in the form of grant

aid and focused on the improvement of health care facilities, development of hospitals at

different level, and prevention of HIV/ AIDS and epidemics, etc… Environmental protec-

tion and sustainable development have been actively supported by donors through various

programs and projects in the field of forestation, development of natural protection areas,

national parks, environmental sanitation, etc.

2. Effective utilization of ODA

Enhancing ODA effectiveness is a crucial factor and

a pre-requisite in the ODA mobilization and utilization pol-

icy of Vietnam in order to avoid foreign debt insolvency.

Vietnam has been widely recognized by the international

financial institutions (IMF, WB, ADB, etc…) to have a safe

level of foreign debt. Donors share the view that Vietnam is

a “spotlight” in terms of effective utilization of ODA. Aid

effectiveness in Vietnam has been demonstrated by its sig-

nificant contribution to the development of Vietnam. WB,

Japan and other donors recognize that their ODA- funded

projects have achieved their pre-set objectives and develop-

ment outcomes. Followings are reasons to explain the effec-

tive use of ODA in Vietnam.

First, according to the Development Aid Committee (DAC/ OECD), by the end of

2007, Vietnam ranked ninth out of 10 biggest ODA recipient countries in the world. More-

over, Vietnam is also in the top-ten ODA recipient list of nearly half of DAC members.

History proves that ODA usually flows to developing countries with high political stabil-

ity, impressive economic growth, and rapidly improved living standards of people, particu-

larly the poor. Vietnam is such an example.

Second, Vietnam is one of few pioneering countries in enhancing aid effectiveness.

The Government of Vietnam ratified the Paris Declaration on Aid Effectiveness and subse-

quently translated this Declaration into the Hanoi Core Statement on Aid Effectiveness in

line with the development conditions of Vietnam. Immediately after the Accra Action

Agenda (AAA) was approved internationally, Vietnam ratified and enforced this Agenda


“The Asian Development Bank

(ADB) joins other development

partners in congratulating the

Government for its active partici-

pation and contribution to the

formulation of the Accra Agenda

for Action (AAA) at the Third

High-Level Forum on Aid Effec-

tiveness in September 2008 in

Ghana.” Statement by ADB representative at

CG Meeting 2008


with various activities including knowledge building and formulation of joint work plans

with relevant donors, etc.

Third, ODA utilization in Vietnam has been mainly targeted to support the realiza-

tion of development goals such as poverty reduction, infrastructure development, education

and training, health care, development of remote, mountainous and ethnic minority areas,

and improvement of the legal system in line with Vietnam’s economic development and

international integration, etc.

3. ODA remains an important complementary resource in upcoming time

Despite its significant socio-

economic achievements after 20 years of

the Renovation (Doi Moi), Vietnam re-

mains a low-income developing country.

Poverty rate has fallen rapidly but is still

high at 13% by the end of 2008. The chal-

lenge of poverty reduction sustainability

remains since most households escaping

from poverty now live in rural, mountain-

ous and ethnic minority areas with income

of just 5-10% above the poverty line.

Vietnam’s infrastructure system is under-

developed in comparison with other re-

gional countries. Human resources are

abundant but lack skilled workforce. Do-

nors and foreign investors viewed the

weaknesses in infrastructure and workforce as “bottle-necks” that Vietnam need to over-

come to sustain high growth momentum in the upcoming years. The global financial crisis

and economic recession could hamper the economic growth of Vietnam, particularly

through adverse impacts on vulnerably poor people. Besides, Vietnam is also faced with

increasing challenges like climate change, natural disasters, epidemics, environmental pol-

lution, etc.

In the upcoming stage of development, Vietnam will continue to accelerate eco-

nomic reforms and international integration and mobilize and effectively use different capi-

tal sources, of which ODA plays an important role. ODA utilization shall be focused on the

followings:

- ODA shall be continually pri-

oritized for large-scale infrastructure

projects or programs that could pro-

duce spillover effects to support cross-

sector and inter-regional development

such as power plants, express ways,

urban transport infrastructure, sea-

ports, airports, hi-tech projects, etc.

- The utilization of ODA, par-


“Development of infrastructure remains to be ma-

jor priority for Vietnam. Japan has been working

with Vietnam for its infrastructure build-up, in-

cluding the three major projects requested to the

Japanese Government by Prime Minister Nguyen

Tan Dzung, namely, North-South Speed railway,

North-South Highway, and Hoa Lac High-tech

Park.” Statement by Mr.Mitsuo Sakaba, Ambassador of Japan to Viet-

nam, Consultative Group Meeting 2008

Infrastructure - a bottleneck of Vietnam economy


ticularly less preferential ODA loans, shall be priori-

tized for programs and/or projects with high profits

after 2010;

- To facilitate the access to ODA, including

access for the private sector through the development

of public- private partnership.

To further enhance the effective use and speed up the disbursement of ODA in com-

ing years, Vietnam will continue: (i) to reform administrative procedures in ODA manage-

ment and fight against corruption; (ii) to harmonize Vietnam’s regulations with donors’

procedures; (iii) to accelerate the implementation of the Paris Declaration and Hanoi Core

Statement on Aid Effectiveness and the Accra Action Agenda (AAA); (iv) to strengthen

the monitor and close supervision of the allocation, utilization and evaluation of ODA; (v)

to strengthen capacity- building for agencies and staff at all levels in ODA management.


Mr Ayumi Konishi, Country Director,

Asian Development Bank (ADB):

“ADB advances together with Vietnam

toward the future”

FOSTERING COMMUNICATION BETWEEN THE GOVERNMENT

AND BUSINESS CIRCLES

Since early 2008, due to the adverse impacts by the global economic downturn, the

Vietnam’s economy faced with a lot of difficulties and caught much of attention from in-

ternational business circles, particularly on the Government’s policy response. Several pes-

simistic opinions even supposed that Vietnam fell into a “crisis”. Government’s policy pri-

ority to curb inflation was widely welcomed and created confidence in the medium and

long-term development outlook on Vietnam economy. However, concern was raised on

whether the anti-inflation measures would be effectively, consistently and resolutely car-

ried out. Most international institutions and investors stressed a need to strengthen the con-

fidence of business circles on concrete actions besides strong commitment and determina-

tion. According to WB Acting Country Director in Hanoi, only good policy itself was not

enough to alter the mood of business communities but good communication was equally

important.

Source: Report: “Assessment of Vietnam’s economy and prospects for 2008-2009” , World Bank, 9/2008

The two above charts clearly show that in early 2008, the Government had introduced a series of

measures to curb inflation and stablize macroeconomy. However, it is apprarent that those measures

started to take effect in the second half of the year after a wide range of communication between the

Government and business circles such as the Mid-term Consultative Group (CG) Meeting(early June

2008), the video conference with investors (lately June 2008) and other dialogues.

Given uncharted moves of the global and domestic economic environments, to pre-

vent speculative activities and inaccurate information related to the Vietnam’s economy,

the Government strengthened communication and dialogue with international and domestic

business circles, donors, economic researchers in order to release transparently economic

COMMUNICATION BETWEEN THE GOVERNMENT AND BUSINESS


12,000

14,000

16,000

18,000

20,000

22,000

24,000

26,000

28,000

30,000

2-Ja

n-08

1-Feb

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4-Mar-08

3-Apr-08

5-May

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4-Ju

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5-Aug

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5-Sep

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poin

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NDF - 12 M CDS - 5 YR

Credit

tightening

begins

8-po int

package

anno unced

bas ic inte res t ra te

ra is ed to 14%bas ic inte res t

ra te ra is ed to 12%

12,000

14,000

16,000

18,000

20,000

22,000

24,000

26,000

28,000

30,000

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1-Feb

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4-Mar-08

3-Apr-08

5-May

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NDF - 12 M CDS - 5 YR

Video -co nference

with inves to rs

Mid-te rm CG

meeting

Good policy is not enough … Communication matters


information. These efforts were closely sup-

ported by business and donor communities

and increasingly consolidated their confi-

dence.

The year 2008 began with the

“Business Roundtable with the Government of

Vietnam” entitled "Vietnam - A Rising Star in

Asia", co-organized by the Ministry of For-

eign Affairs and the Economist Conferences

(8-9th January 2008 in Hanoi), which gathered

around 120 leading groups like GE, Canon,

BP, Coca-Cola, Posco, Boeing, Shell, SCG,

Nokia, AIG, Indochina Capital, Motorola,

Toyota, SK Telecom, Dragon Capital…

Prime Ministers, Ministers and other high-

level officials of Vietnam attended this Con-

ference. The conference was a platform for

foreign businesses to directly interact with the

Government on their concerns about the Viet-

nam’s economy. As said by Mr. Dominic

Scriven, Managing Director of Dragon Capi-

tal, business circles were offered a unique op-

portunity to explore the Government’s devel-

opment directions and shared their views with

the Government for mutual benefit.

The Government’s communication ef-

forts continued at different international fora,

such as, inter alia, the 18th Asia Society con-

ference (Tian Jin, China, May 2008), the

“Future of Asia” Conference (Japan, May

2008), the World Economic Forum (WEF)

Conference on East Asia (Kuala Lumpur, Ma-

laysia, June 2008), etc… At these confer-

ences, Vietnam leaders had exclusive interac-

tion sessions with international business cir-

cles by updating Vietnam’s economic situa-

tion and affirming the Government’s commit-

ment to curb inflation and ensure macroeco-

nomic stability in hand with acceleration of

reform and international integration.

It is noteworthy that an online video conference was organized for the first time on

19th June between Financial Minister and Leaders of relevant Ministries and domestic and

foreign businesses. Frank dialogue and interaction were prevailed during this conference.

Official information on Vietnam’s economic situation, particularly on financial and bank-


Government – Business Dialogue

in 2008

January: Business Roundtable with

the Government of Vietnam entitled

"Vietnam - A Rising Star in Asia"

May: Asia 18th Asia Society in Tian

Jin, China; “Future of Asia” Confer-

ence in Japan

June: Online video conference be-

tween Government of Vietnam and

international and domestic investors

July: “Vietnam Leaders in Develop-

ment Program”.

September: Dialogue between the

Government’s Standing Committee

and domestic and foreign experts

and businesses.

December: Vietnam Business Fo-

rum.

ing sector, and Government’s policy response was updated and widely discussed. For the

first time, the Governor of the State Bank of Vietnam (SBV) announced Vietnam’s foreign

exchange reserve of 20.7 billion USD and reaffirmed that “Vietnam has no policy to de-

valuate the Vietnamese dong currency”. The practice to enhance information transparency

and publicity significantly strengthened market confidence.

As an annual practice, Vietnam Business Fo-

rum was held in early December 2008 on the occasion

of the Donor Consultative Group Meeting for Viet-

nam. In the Forum, practical proposals by domestic

and international business circles, particularly recom-

mendations on business environment improvement in

all sectors such as capital market, infrastructure, distri-

bution services, land, human resources, etc… were

submitted to the Government. Despite prevailing con-

cern on short-term challenging, business communities

showed strong confidence in the favorable medium-

term outlook of the Vietnam's economy and believed

that Vietnam can navigate successfully through whirl-

wind sea.

Not only dialogue, the Government has also increased close consultation with inter-

national institutions (WB, IMF, ADB, UNDP, etc…) and researchers, who are experienced

of Vietnam, and seriously considered their valuable and practical recommendations in

macroeconomic policies making process. To name the first was the seminar co-organized

by Ministry of Foreign Affairs, Harvard University and BP in July for in-depth interaction

between the Government’s policy makers and domestic and foreign senior experts on short

-term macroeconomic stabilization as well as long term development directions in Viet-

nam. Secondly, a dialogue between members of Government’s Standing Committee, do-

mestic and foreign researchers and experts was hold in late September to exchange views

on macroeconomic situation in Vietnam. And last but not least, the Professor Michael Por-

ter’s visit to Vietnam had been deeply cultivated by series of talks with Vietnam’s policy

makers, business circles on direction for developing Vietnam competitiveness policy in its

new stage of development.

Consolidated confidence

Press Release of the Mid-term Consultative Group Meeting (June, 2008) stated that

“Vietnam’s long term prospects remain strong, despite domestic and international macro-

economic turbulence”. VinchiCapital investment fund said, “Vietnam’s fundamentals re-

main strong”. The Special Report “Vietnam: a cyclical crisis in a structural uptrend” by

BCA Research (United Kingdom) noted that Vietnam’s long-term growth prospects

“remain better than in many other emerging economies” and all emerging economies have

undergone similar difficulties, etc... It is clear that the efforts by the Government to

strengthen communication and information transparency not only effectively support its

stabilization policy package but also significantly consolidate confidence of domestic and

international business circles. Despite short- term economic difficulties, the year 2008 wit-



Vietnam Business Forum 2008


nessed many delegations of world- class corporations to visit Vietnam for exploring invest-

ment opportunities such as the delegation of ASEAN- US Business Council (March, 2008),

CEOs of World Economic Forum (June, 2008), hundreds of business accompanying for-

eign state leaders visiting Vietnam, etc. As a result, the optimism and expectation by inter-

national investors has been translated into a record FDI flow with nearly 64 billion USD

into Vietnam during 2008.


“Foreign investors’ confidence in Vietnam has been underlined throughout 2008, with

strong portfolio investment inflows and FDI hitting record levels with disbursed fund-

ing of close to US$ 10 billion. Inflation has shown significant declines in recent

months, underlining the successful fiscal and monetary policy imposed in the second

quarter of the year. The trade deficit has slowed its growth and foreign currency re-

serves are strong, all encouraging factors in terms of Vietnam’s ability to maintain

both growth and stability in the face of significant concerns elsewhere in the world”.

Mr Alain Cany – Chairman of EuroCham presented at Vietnam Business Forum 2008

WHAT THE WORLD SAYS ABOUT VIETNAM

SAY ABOUT VIETNAM


“Congratulated the Government of Vietnam for overcoming

the various economic challenges of 2008. 2009 will bring

about new and more difficult challenges. But the meeting

clearly concluded that Government will be sustaining its

efforts at economic and social reforms and that as a result,

Vietnam can count on the donor community for continued

support.” Mr. James Adams, Vice

President of the World

Bank in East Asia and

Pacific

“The global economic downturn would hit Vietnam but at

slower pace than other economies. Vietnam needs to take

flexible and quick responses to possible impacts. Vietnam is

perceived as reacting well to the crisis with its impressive

performance this year, demonstrating the resilience of its

economy.”

Mr. Martin Rama, World

Bank Acting Country

Director

“Congratulated the Vietnamese Government for effectively man-

aged macro economic difficulties this year. But given the global

economic downturn, 2009 will not be easier. We hope the Govern-

ment will closely monitor the situation, and carefully analyze and

balance various risks. We are particularly concerned about the pos-

sible adverse impacts on the poor, small and medium enterprises

and the vulnerable people. Together with other development part-

ners, we would like to provide strong support to the Government

in responding to the emerging situation. We will stand ready to do

whatever we can to help Vietnam maintain critical development

expenditures.”

Mr. Ayumi Konishi,

Country Director of the

Asian Development

Bank in Vietnam

“Vietnam continues to be a shining light internationally because of its commitment to us-

ing aid well. The question is how can Vietnam make real changes in aid delivery practices

at the sectoral and sub-national levels. There are some promising developments, but more

has to be done to address the challenges, such as capacity constraints at local levels, im-

proving the consistency in the country systems across ministries, and enabling the civil so-

ciety to maximize its potential to contribute to Vietnam’s development.” Mr. Allaster Cox, Ambassador of Australia to Vietnam


SAY ABOUT VIETNAM

“2008 has been a year of

dramatic challenges in

the world economy, and

for Vietnam, with macro-

economic turbulence,

high inflation and large

trade and current account

deficits. We commend

your Government’s

largely successful meas-

ures to stabilize the situa-

tion and preserve the

confidence of economic

operators, in consultation with the IMF and oth-

ers. 2009 will also be a challenging year. The

encouraging results shown in recent months by

declining inflation & trade deficit should of

course not lead the Government to reduce its

vigilance … We particularly interested in the

Government’s continued commitment to struc-

tural economic reform… and how it may en-

courage small and medium enterprises, which

are the most productive and promising con-

tributors to Vietnam’s economy.”

“Despite the eco-

nomic turbulence

of this year and a

dif f icul t year

ahead, the medium

term outlook for

Vietnam remains

favorable, pro-

vided that the gov-

ernment sustains

the momentum of

economic reforms

that have brought

so much success

this decade. The

government needs

to be cautious in setting objectives for

2009, especially for growth and in-

vestment. It is also equally important

to design appropriate economic poli-

cies that balance the growth and ex-

ternal risks confronting Vietnam,

safeguard institutions, improve data

quality and communication, and ac-

celerate structural reforms."

Mr. Hervé Bolot, Ambas-

sador of France to Viet-

nam

Mr. Shogo Ishii,

Assistant director

of the Interna-

tional Monetary

Fund Asia and

Pacific Depart-

ment.

While Vietnam has experienced impressive growth over the last

two decades, its reforms have been insufficient to move the

country to a middle income economy. To truly improve its

standard of living, the country must adopt a long-term eco-

nomic strategy. Vietnam boasted a host of competitive advan-

tages, such as political stability, the increased decentralization

of economic policymaking responsibilities, and an acceptable

level of debt. However, Vietnam’s lack of openness would re-

tard further competitive upgrading.

Professor Michael Porter, Harvard Business School

SAY ABOUT VIETNAM


“Recent months have seen truly extraordinary events both in

Vietnam and around the world as the global financial crisis has

shaken both developed and developing economies to their core.

While Vietnam has not emerged entirely unscathed, the nation’s

relatively low levels of exposure to the global financial

markets, along with the policies put in place following

Vietnam’s own crisis earlier this year, mean the effects of the

global downturn are likely to be less severe here than

elsewhere.

Eurocham and its members have a firm belief in a great

potential of Vietnam, both as a regional leader and as

destination European investment and we are happy to contribute in any way we can

to help the nation consolidate an build on its successes.”

Mr. Alain Cany,

Chairman Eurocham

“Amcham applauds the Government for the substantial changes that have taken

place to comply with the requirements of participating in the World Trade

Organization. We appreciate the Government’s willingness to listen to our

concerns and take action in many areas.

Although Vietnam is facing some tough economic challenges, the country

remains an attractive destination for American investment. AmCham will

continue to work hard to increase the understanding among U.S. companies

about the growing opportunities to do business here, and we remain committed

to working with our partners in Vietnam to improve the business environment.”

Mr. Michael J. Pease, Chairman Amcham


VIETNAM’S EXPORT DIRECTION IN 2009

Export value in 2009 is targeted to reach

about 72 billion USD, an increase of 13% year-on

-year. To reach the above-set target, the following

will be implemented:

- Implement comprehensive measures to

improve the quality of commodities and products

quantity of which is difficult to increase (e.g. over

-dependent on weather, land, etc…), particularly

agro-products.

- Increase investment in expanding pro-

duction scale, technology and equipment renova-

tion to boost up production and export of prod-

ucts, that could significantly contribute to export

turnover and job creation, such as textile, foot-

wears, wood furniture, plastic products, cable,

etc…

- Enhance trade promotion and expand markets for potential and local- material in-

tensive products such as handicrafts, rubber products, processed food, cosmetic and chem-

istry productions, mechanical devices, software services, etc.

- Make full use of traditional and key export markets, at the same time develop mar-

kets in neighbour countries.

- Take full advantage of free trade agreements; attach export markets to import mar-

kets in order to increase export and reduce trade deficit, particularly deficit with partners

having large surplus with Vietnam.

As for export markets: Given worse economic condition in the US and Europe,

export to these markets is much unlikely to grow rapidly. As a result, it is a need to

strengthen market multi-lateralization and diversification, continue increasing export to

key and traditional markets in Asia (Japan, ASEAN, China, Korea, Taiwan, Hong Kong),

Europe (mostly EU and Russia), North America (the US, Canada), and actively penetrate

to potential markets such as Africa, South West Asia, Middle East, Latin America, Austra-

lia, etc…

ANNEX

Mr Vu Huy Hoang, Minister of Industry and

Trade: “In 2009, the exports is aimed to ex-

pand 13% compared to 2008. This is impos-

sible task unless there are concerted efforts

of all relevant Ministries and enterprises.”


SOME MEASURES TO PROMOTE TOURISM DEVELOPMENT

IN VIETNAM IN 2009

Under the negative impacts of the global financial crisis and economic downturn,

the recovery of the tourism industry will take time. To regain growth momentum and

achievethe target of receiving 4.5 million international arrivals, Vietnam focuses on

strengthening promotion and marketing activities, enhancing quality and reducing costs:

1. Develop programs to attract visitors in early 2009:

- Exploiting sea tourism.

- Developing new products for Lunar New

Year season, particularly the launching of promo-

tion campaign “Impressive Vietnam”.

- Travel companies shall co-ordinate with

Vietnam Airlines to develop unique products

with price incentives.

- Reducing cost of tours, accommodation

and other service charges.

- Promoting the establishment of tourism associations.

- Supporting tour operators to attend international and regional tourism exhibitions

such as reducing marketing cost, joint booths, etc...

- Vietnam Airlines, in collaboration with Vietnam National Administration of Tour-

ism, deploys the Visit JATA World 2008 to open new air links to attract foreign visitors to

Vietnam.

- Strengthening the close linkages among

tour operators, hotels and airlines to develop

special tour programs in the first quater of 2009.

2. Increase investment in products and

services.

- Investing in improvement of product

quality, services and tourism infrastructure.

- Promulgating legal documents on provid-

ing guidelines for the implementation of the

Tourism Law.

- Providing specific guidelines in tourism

expertise and planning.

ANNEX

Hạ Long Bay

- Strengthening tourism workforce

training, especially skilled service staff,

tour guides, etc...

- Encouraging tour operators and

hotels to cooperate with the Vietnam Na-

tional Administration of Tourism and

Travel Association to develop new prod-

ucts.

3. Enhance the coordination in tour-

ism

- Strengthen close coordination

among relevant agencies, particularly in

investment and development of integrated

tourism products. Establish a cross-sector

working group, including culture, sports, tourism and aviation to implement joint business

plans.

- Support enterprises through investment incentives, tax incentives, non-

discriminatory rates of electricity and water services, etc...

4. Strengthen marketing and promotion

- Design promotion plans for the period 2009 - 2010 and by the year of 2015.

- Make full use of effectively promotional activities (farm trips, Vietnam’s culture

days, MICE...).

- Enhance close coordination with Vietnam Airlines, Ministry of Foreign Affairs to

strengthen tourism promotion abroad.

- Enhance the role of tourism associations and closely coordinate with local authori-

ties to ensure promotion effectiveness.

- Open new markets and nurture traditional markets.

ANNEX


Sa Pa

VIETNAM’S ENERGY DEVELOPMENT STRATEGY

TOWARDS 2020 AND 2050

1. Goals and targets:

1.1. Goals: To ensure national energy security, provide enough energy for the socio

– economic development; to effectively exploit and utilize domestic energy resources; to

diversify energy investment and business models, develop healthily competitive energy

market; to accelerate the development of new and renewable energy, bio-fuel and nuclear

energy to satisfy the need of the socio - economic development; to develop energy indus-

tries rapidly, effectively and sustainably in hand with environment protection

1.2. Specific targets

- Primary energy supply is expected to reach 47.5 – 49.5 million TOE, 100 – 110

million TOE, 110 – 120 million TOE and 310 – 320 million TOE by the years of 2010,

2020, 2025 and 2050 respectively.

- Strengthen cooperation with other countries in seeking, exploring and exploiting

coal, oil, gas and other energies abroad to supplement domestic shortage.

- Develop power sources and grid, ensure electricity supply for the socio – eco-

nomic development and electricity supply reliability up to 99.7% by the year 2010.

- Develop oil refinery plants to satisfy domestic demand for oil derivatives; and in-

crease oil refinery capacity to 25 - 30 million tons by 2020.

- Increase the share of new and renewable energy to 3% of total commercial pri-

mary energy in 2010; 5% in 2020 and 11% in 2050.

- Increase the percentage of households using commercial energy for cooking to

50% in 2010 and 80% in 2020. Electricity shall reach 95% of households in rural areas in

2010 and all households in 2020.

- Develop long-term environment standards appropriate with regional and interna-

tional standards and the country’s development conditions. Control and reduce pollution in

energy sectors and all energy projects must satisfy environment standards by 2015.

- Introduce market mechanism in electricity, coal, oil and gas sectors. Establish

coal, oil and gas business markets from now to 2015 and electricity retail markets after

2020.

- Actively prepare necessary conditions for putting the first nuclear power plant into

operation by 2020, and then increase the share of nuclear power in the national energy

structure. Nuclear power is targeted to occupy 15 – 20% of total commercial energy con-

sumption by 2050.

ANNEX



- Strengthening energy international cooperation. It is expected that in 2010 – 2015,

regional electricity grid will be created and in 2015 – 2020 regional natural gas system will

be constructed.

2. Major directions for energy development :

2.1.Electricity

- Ensure electricity supply for the

country’s development. Priority is given to

appropriate development of hydro power,

coal and natural gas-based thermal power.

Encourage the development of power plants

using renewable energy.

- Develop electricity industry in the

direction of diversified ownership. An-

nounce the list of public investment pro-

jects, encourage all economic sectors to

participate in electricity production and dis-

tribution.

- Diversify the modes of investment

in power production and distribution.

- Continue pilot equitization and

gradually expand the equitization of power

plants and electricity distribution enterprises.

- Establish and develop Vietnam’s electricity markets.

- Accelerate the research and development of nuclear power plants.

- Ensure sustainable development and minimize negative impacts on the environ-

ment.

2.2. Coal:

- Strengthen the exploration and evaluation of coal reserves in Quang Ninh coal

mine.

- Mobilize capital resources for the exploration, evaluation and feasibility study of

coal reserves in other areas.

- Develop coal industry on the sustainable basis to serve the socio- economic devel-

opment and ecological environment protection.

ANNEX

Na hang Hydroelectric plant

- Encourage different economic sectors to invest in coal exploitation, production

and distribution. Formulate a roadmap for the equitization of coal enterprises and develop-

ment of coal markets.

2.3. Oil and Gas

- Formulate and improve the legal

framework for oil and gas industries, par-

ticularly licensing for gas transport and dis-

tribution, gas pricing, gas distribution fees,

technical standards, etc...

- Encourage and enhance the oil and

gas exploration. Development a transparent

and effective mechanism for supervision of

contract implementation, periodical revision

and amendment of oil and gas contracts,

etc…

- Encourage investors to explore and

exploit natural gas mines. Diversify the

modes of investment and encourage the es-

tablishment of joint-venture to develop gas

power plants.

- Encourage foreign investors to apply high technologies in the exploration and ex-

ploitation of oil and gas mines, to establish joint ventures to build oil refinery plants and

distribute oil derivatives with appropriate market shares. Encourage oil derivatives dis-

tributors to participate in joint ventures to develop oil refinery plants in order to enhance

the production- consumption linkages and profit harmonization between production and

distribution.

- The Government encourages and protects the oil exploration and exploitation

abroad conducted by Vietnamese businesses.

2.4. Development of new and renewable energy

- Explore and make planning for new and renew-

able energy.

- Enhance the public awareness to increase the

use of new and renewable energy.

- Include the use of new and renewable energy

into energy saving programs and other national pro-

grams such as rural electrification programs, forestation,

clean water programs, etc….

- Encourage businesses to invest in production,

ANNEX



assembly and amendment of new energy facilities such as small- scale hydro power, wind

engines, bio-gas, etc… Encourage hi- technology transfer in new energies like solar en-

ergy, wind energy, etc…

- Support investment in research, manufacture and pilot operation of new and re-

newable energy establishments through tax incentives for the import of equipments and hi-

technologies, production and distribution, protection of copyright of inventions and techni-

cal patterns, etc…

ANNEX

VIETNAM HIGHWAY NETWORK DEVELOPMENT PLAN BY 2020

AND VISION BEYOND 2020

1. Goals

- To quickly develop the national ex-

pressway network and ensure the connection

among key economic centers, major border

checkpoints and important transportation hubs.

To concentrate on the development of North-

South Highway with priority given to road

links connecting major cities (Hanoi, Ho Chi

Minh City, Da Nang) with seaports.

- To strengthen the use of multi- mode

transportation for closer transport integration

with other countries.

- Expressway networks must be closely

linked with the current road networks.

- To solve traffic congestion, particularly in major cities such as Hanoi and Ho Chi

Minh City.

2. Planning for highway network development in Vietnam

a) North - South Highway Route includes 2 routes, 3,262km

- The Eastern North - South Highway 1,941km;

- The Western North - South Highway 1,321km.

b) 07 routes connected to Hanoi 1,099km

- Lang Son - Bac Giang - Bac Ninh, 130km;

- Ha Noi – Hai Phong, 105km;

- Ha Noi – Viet Tri – Lao Cai, 264km;

- Noi Bai – Ha Long – Mong Cai, 294km;

- Ha Noi – Thai Nguyên – Cho Moi (Bac Kan), 90km;

- Lang – Hoa Lac – Hoa Binh, 56km;

- Ninh Binh – Hai Phong – Quang Ninh, 160km.

c) Highway networks in Central and Highland regions, including 03 routes, 264km

ANNEX



- Hong Linh (Ha Tinh province) –

Huong Son (Ha Tinh province), 34km;

- Cam Lo (Quang Tri province) –

Lao Bao (Quang Tri province), 70km;

- Quy Nhon (Binh Dinh province)

– Pleiku (Gia Lai province), 160km;

d) The Southern highway net-

works including 07 routes, 984km

- Bien Hoa (Dong Nai province) –

Vung Tau (Ba Ria – Vung Tau), 76km;

- Dau Giay (Dong Nai province) –

Da Lat (Lam Dong) 209 km;

- Ho Chi Minh City – Thu Dau Mot (Binh Duong province) – Chon Thanh (Binh

Phuoc province), 69km;

- Ho Chi Minh City – Moc Bai (Tay Ninh province), 55 km;

- Chau Doc (An Giang) – Can Tho – Soc Trang, 200 km;

- Ha Tien – Rach Gia (Kien Giang province) – Bac Lieu, 225 km;

- Can Tho – Ca Mau, 150 km.

e) Ring-roads in Hanoi and Ho Chi Minh, 264km.

ANNEX

My Thuan Bridge

NATIONAL PROGRAM ON RESPONSE TO CLIMATE CHANGE

1. Principles and directions

1.1. Principles

- Responses to climate change is based on

sustainable development, systematic, integrated,

cross-sector and inter-regional, gender equality and

poverty reduction principles.

- Climate change response activities are im-

plemented with specific focuses, ensuring a good

response to both short- term and long- term im-

pacts. Investment in climate change responses is of

crucial importance to secure the sustainable devel-

opment

- Climate change responses are responsibilities of the whole society, all citizens and

needed to be implemented with high public consensus and resolution.

- Climate change responses must be institutionalized into laws.

- Climate change response activities must be in conformity with principles as set

forth in the UN Convention on Climate Change.

1.2. Implementation roadmap

- Phase I (2009 – 2010): Start- up.

- Phase II (2011 – 2015): Implementation

- Phase III (after 2015): Development.

2. Objectives:

Key objectives are to evaluate impacts by climate change on specific sectors and

regions in each period and develop viable action plans for effective response to climate

change in both short-term and long-term periods with a view to ensure the sustainable de-

velopment, to develop a low- carbon based economy and cooperate with the international

community in an effort to mitigate climate change impacts.

3. Some directions

The core tasks include:

1. Evaluate impacts by climate change in Vietnam;

2. Formulate solutions to deal with climate change;

ANNEX



3. Design science and technology programs in response to climate change;

4. Strengthen the capacity in response to climate change;

5. Enhance the public awareness and develop human resources;

6. Strengthen the international cooperation;

7. Integrate climate change into social- economic development strategies, programs

and plans.

8. Develop action plans of ministries, sectors and localities to deal with climate

change;

9. Design and implement projects, sub- programs of the national Program in re-

sponse to climate change.

In short run, it is a need to evaluate climate change developments and forecast cli-

mate change scenarios, particularly sea-level increase, and then assess impacts by climate

change on different socio- economic fields.

4. Financial mobilization

The Program is designed for the period 2009- 2015 with an estimated budget of

around 1,965 billion VND (about 110 million USD), of which 50% shall be mobilized

from domestic resources (governmental budget 30%, local budget 10%, other sources

10%) and the remain shall be mobilized from foreign resources.

ANNEX

Ministry of Foreign Affairs of Vietnam

Department of Economic Affairs

THE BOARD OF EDITORS

Address: No.7, Chu Van An Street, Hanoi, Vietnam

Tel:

84-4-37993235

84-4-37993241

84-4-37993242

Fax:

84-4-37993424

Email:

[email protected]

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