VietNamNet - The US, perhaps more then some trading partners, is deeply committed to working with Vietnam to achieve a level of openness that is not for our benefit per se, but which is consistent with the kind of development model that Vietnam is pursuing. Said Mr. Seth Winnick, US Consular General to HCM City, in his talk with VietNamNet.

President Bush on the VN Prime Ministers visit highlighted his high support for Vietnam’s entry into the WTO. But the negotiation with the US has not been concluded. Where is the problem?

The U.S. bilateral is still under negotiation.  I’m not going to comment on the timing of Vietnam’s accession, Ministers and Deputy Ministers have been talking about that in the press and that’s really a question for Vietnam.

Let me talk about what it means to join WTO.  Clearly the United States wants Vietnam to be a member of the WTO. What that means is the U.S. wants Vietnam to achieve a WTO standard of economic governance, of openness to trade, and participation in the global economy. That’s what it means when the President says we strongly support Vietnamese accession.  It doesn’t mean accession with no conditions. It means we want Vietnam to reach that level of integration into the world economy, because it is important for Vietnam’s development and it is important for the world trading system. That’s kind of the bottom line.

What does a WTO compliant economy look like -- especially a big one?  Well, it is an open economy. It is an economy that’s not absurdly regulated, that doesn’t have very high tariff barriers to all sorts of products. It is an economy that doesn’t differentiate between domestic companies and foreign companies in terms of who can import or export products, who has a license to distribute as opposed to produce and so forth and so on. There are real issues that Vietnam needs to address to become a WTO compliant economy. Some of those are legislative, some of those are done through regulation and implementing decrees.

But the challenge for Vietnam is to reach that level of openness that defines globalized trading economies. As soon as that happens, accession happens. What I think has been slowing the process down, speaking very frankly, is that there has been too much focus on the negotiating table -- let’s not give up more then we have to, let’s give a little bit and see what we can get -- and not enough focus on creating the kind of economy domestically that’s going to grow really fast, and that is the big distinction.

The U.S. is not looking for special favors or special deals from Vietnam to join the WTO, that’s not what it’s about. What we are looking for, what we’re hoping for, is the sort of liberalization, of openness of economic governance that will make Vietnam a WTO standard economy. And when we get there, it’s going to spur growth domestically and it’s going to yield a very rapid accession because this is a powerhouse of a trading economy.

Vietnam has concluded the bilateral talks with China, Japan, South Korea, and it has taken a long time to conclude the talks with the U.S. What do you think the difference is between the U.S. and other trading partners?  Could you comment on this?

I could, but I might not be a diplomat if I did. There are a couple of factors here.  Everybody knows that the U.S. is a very serious negotiator on these issues and so a lot of countries are very happy to let us, the U.S., negotiate on their behalf, because whatever is achieved in any one of these bilateral negotiations applies to everybody.  The terms and conditions that country X agreed to with Vietnam on tariffs on moon cakes apply to every producer of moon cakes around the world. So many countries, knowing that the U.S. is a very serious negotiator, are only too happy to just stand back and let the U.S. negotiate.  They become what are known as free riders on the back of the U.S. negotiations. And that’s okay.  We are the largest economy in the world and part of the price you pay when you’re the largest economy in the world is that people will be free riders on your negotiations.

Also a certain number of countries are looking to the multilateral negotiations to achieve key objectives rather than to the bilateral negotiations. So for instance I understand that some trading partners that have reached bilateral agreements are much more focused now on the outcome of the multilateral in Geneva. So that is also a factor.

And finally, the United States, perhaps more then some trading partners, is deeply committed to working with Vietnam to achieve a level of openness that is not for our benefit per se, but which is consistent with the kind of development model that Vietnam is pursuing. I think very genuinely we are not in negotiations with Vietnam to achieve a particular advantage in one sector or another. We are trying to get a system that will be an open and level playing field for business and development here.

Vietnam has always been expecting more and more US investors as the US is the biggest investor in the world. But US investment in Vietnam is still humble? What is the reason? Is Vietnam's investment climate, policy is not good enough to attract US investors?

Ky Ha Port in Chu Lai Open Economic Zone.

The level of U.S. investment in Vietnam is frequently underestimated because a large percentage of U.S. investment in Vietnam is conducted through U.S. companies based in Singapore.  Singapore is the regional headquarters of U.S. businesses for a variety of reasons, including tax reasons. So many companies that show up on the books here as Singaporean are really American. We’ve looked at these numbers, if you count American investment through Singapore as well as direct investment from the U.S. at this point we’re probably the fourth largest foreign investor in Vietnam, something along those lines.

 

The potential is clearly even greater; there is no question about that. What makes a good investment environment for foreigners is the same thing that makes a good investment environment domestically. There is no difference. This will be more obvious I believe when the new Enterprise Law comes into force, because the new Enterprise Law, as I understand, is going to eliminate the distinction between a foreign company and a domestic company. It will be a unified investment law and it should be more transparent.

 

Vietnam has set a very aggressive growth target for the next five years. The goal that the General Secretary has laid out is that Vietnam will no longer be a “least developed country” in five years.  If you do the numbers, that means going from about five hundred dollars annual per capita GDP now to about nine hundred dollars by 2010. That means annual growth in the ten to twelve percent range, and closer to twelve then ten. That is hard to do, but it is not impossible. The most successful provinces in Vietnam have achieved that level of growth over the last few years, and that includes parts of the Mekong Delta and the Ho Chi Minh City area and I think Hanoi is growing at that rate as well. 

 

But it is going to require a lot more investment both domestic and foreign. The financial system has to be modernized and updated. There is an awful lot of capital in Vietnam that is not being channeled into productive investment. It is going to real estate speculation, it is going into gold, it is held in cash (dollars) because people do not have effective investment opportunities.  That needs to change. Vietnam needs to create a system that allows small and medium sized companies to borrow effectively to grow.  Right now the collateral requirements that banks require for small business loans are completely unpractical and unfeasible.  Banks need to start lending based on cash flow rather than just against assets if companies are to grow.  There needs to be financial reform.  Right now the state-owned banks and state-owned enterprises have a cozy relationship where credit flows to the state-owned enterprises almost on an allocated basis, and it is not for the most productive investment opportunities. That has got to change if investment is going to move forward, both domestic and foreign.

 

Licensing and regulation has to change. Right now every single business activity has to be specifically licensed. If you are a company here, whether your company is foreign or domestic, and you are in the business of making widgets, and you decide that you want to produce wadgets instead of widgets, you have get a new license. You have to go through all of the hassles of getting a new license, and the people that control those licenses are in a position to collect all sorts of fees in the licensing process.  Because everything is licensed, people who hold a specific license, especially exclusive licenses, more or less have a license to print money.

For example, if I have the right to export product X, and others do not, then everybody who produces product X has to pay me to get their product exported.  This is not an efficient way to run an economy. When the state allocates economic rights, it creates a whole system for those rights-holders to collect economic rents. That kind of licensing makes this a more difficult business and investment environment whether you are a foreign or domestic company.

I read recently that the state had decided to give up its monopoly on the production of calendars. That is a very positive step, but it is indicative of the problem. The notion that a government, that a government official somewhere knows what kind of calendars people need better than publishing companies or better than the consumers who buy the calendars is frankly ridiculous.  It is indicative of a system that is still evolving from a centrally-planned economy to an open market economy. And that level of regulation is what has to be thrown overboard to really open Vietnam up and make it as effective as it can be.

 

As you’ve mentioned, the financial infrastructure is a problem in Vietnam? How long does it take to make the financial infrastructure become effective?

 

How long does it take to change?  That depends on how bold Vietnam is prepared to be. Things can be changed very quickly if people are prepared to accept the challenges and risks of rapid change. There is tension between rapid economic growth and stability.  Vietnam wants both.  By definition, an economy that is growing at twelve percent a year is not stable, it is unstable, and it’s unstable in a very positive way.

Fast growth means rapid economic change, people have more money, tremendous investment potential, and that is very different from having a nice quiet developing economy that chugs along at three or four percent. So there is tension between stability and rapid development.

 

The financial system as it stands now is an impediment. It could be liberalized very quickly.  Foreign financial service providers, banks, insurance companies, accounting firms all serve to push the development of the domestic sector. The more they can do, the more competitive they make the industry. And if they become more competitive, then their domestic counterparts are forced to become more competitive as well. You can’t keep on doing business the same old way if your competitor is doing a better job.

 

The domestic organizations have some real advantages, they have the client base, they have the business contacts, and they know the local environment. The foreign establishments have very good products and very competitive services. The foreigners are working hard to develop the client base and contacts. It is time for the domestic financial services industry to work just as hard to develop competitive services and products. Liberalization will bring enormous benefits to business as business gains access to capital.

 

What are your comments on the investment environments in central provinces with open economic zones i.e. Chu lai, Nhon Hoi and Dung Quat? Are these economic zones are open enough to attract US investors? What need to be changed?

 

I am planning to spend some more time in central Vietnam over the next few months. I am hoping to travel to Danang and Quang Nam. I am planning to spend sometime in Binh Dinh, which is a fairly successful province, and Quy Nhon seems to have some interesting things going on.  So I hope to have the chance to better understand the potential of some of the special economic zones.
 
Some countries have been very successful in developing their export industry through special economic zones. It is not completely clear to me whether that is the best model or whether you are better off covering you whole country as a special economic zone. Not having different condition depending on which side of the fence you are on. Vietnam has been very successful for the past ten years in export and growth. If it is going to grow more, and even faster, domestic growth is going to have to go up as well. It’s going to have to be a better balance between the foreign sector, the trading sector, and the domestic economy.

 

There is a tremendous need to develop infrastructure in Vietnam.  There is a tremendous need for capital equipment. There is still far too much in Vietnam that is powered by human labour, people carrying things, it doesn’t make any sense at this level of development.  That is where machinery should be introduced, and as machinery is introduced it will free up people, labour -- the guy who’s carrying the things -- to go and work in a factory and produce more value for higher wages.

 

Domestic growth, domestic-led growth, needs to catch up to export-led growth. I am not sure that a sharp division between special economic zones and ordinary industrial parks, or between the export sector and the domestic sector is necessarily helpful at this point in Vietnam’s development.  The conditions needed to spur domestic growth, to create a virtuous circle of high levels of domestic investment leading to higher wages and higher consumption that is what will lead to a doubling of the growth rate.

 

In Vietnam, we are experimenting with economic zones, like Chu Lai and Nhon Hoi. If those economic zones are successful, all the country will then open like such economic zones, do you think that’s a good idea?

 

The more open, the better.  If it works in a special economic zone like Chu Lai, then maybe it should work in an entire province or the entire country.  This doesn’t mean that there isn’t a role for export zones of course.  There is a good role for export zones and a numbers of countries have been very successful on this basis.

 

But Vietnam is not Singapore, Vietnam is not Hong Kong, it is not a city-state. It is a big country of eighty million people. This is the fourteenth or fifteenth largest country in the world in terms of population.

 

I always get a chuckle when Vietnamese leaders present themselves as representatives of a small developing country.  Eighty million people is a BIG MARKET. There is great potential for domestic-led growth, this is not just an export oriented economy. The domestic sector has to develop at the same time.

 

This is a fabulous market for all sorts of products.  8mil Vietnamese consumers are eager to consume more next year than they consumed last year. There should be more production that is focused on the domestic market.  It is worth taking a look at China in this regard. China of course is larger, it is enormous, but China has been very effective in moving from producing just for the export market to taking advantage of its domestic market to develop products and develop industry. Vietnam is obviously much smaller, but it’s still a market of eighty million people.  That’s bigger then all but a few European countries.  It is something that needs to be considered.

 

Interviewer: Khanh Linh

VietNamNet – Since receiving autonomy, many poor provinces have been speeding up their development. However, some places with special advantages have failed to take the leading role as expected. How to take advantage of the autonomy to make breakthrough in development? Seth Winnick, US Consular General to HCM City, talked with VietNamNet about his interesting observations.

Seth Winnick, US Consular General to HCM City

 You have traveled to many provinces from Hue to the South. What are your observations of potentials for socio-economic developments of Southern provinces of Vietnam, where you are the highest US government official? 

One of the things that is interesting to discover about Vietnam, that I did not understand before coming here, is how much authority resides at the provincial level. There is an impression that Vietnam is a country that is controlled very much from its capital, very centralized, but in fact it is not. There are tremendous differences between one province and the next. This becomes obvious when you visit different provinces, and it shows up even looking at two provinces that are right next to each other.  You have some provinces, for example Dong Nai and Binh Duong, that have been two of the most successful provinces in terms of economic development in Vietnam. And some of the provinces that are quite close to them have been much less successful. 

Fundamentally, I have found that the most important differences are those of political leadership. The provinces that have been the most successful, or the most successful relative to their neighbors, are those that have a leadership that is prepared to be open and transparent, to create a good business environment, and that means create a good business environment both for people who live in that province as well as for foreign investors. There is not really a big difference between what make a good business environment on the domestic side and a good business environment for foreign investment.  

Provinces that continue to have a very heavy reliance on state-owned enterprises and state control, provinces where the People’s Committee wants to have an ownership stake in all the important enterprises, tend to be less successful than they could be. It does not mean that they are not successful at all. Some provinces have great natural advantages, whether for tourism, industry, exploitation of natural resources or agriculture; these provinces are successful. But those that liberalize the economy, those that are open, those that restrict the role of the state to maintaining order, providing infrastructure, services, and regulation, as opposed to having the state as the owner and manager of businesses, those are the provinces that are the most successful.  

This conclusion was also demonstrated by the Vietnam Provincial Competitiveness Index that was sponsored by the VCCI with U.S. technical assistance. That study revealed the extent to which the quality of governance is a key factor for economic development at the provincial level. So even a province that is relatively poor -- some of the provinces in central Vietnam have few natural resources, very difficult climates and little arable land -- some of them are much more successful than others based on how well they have been managed and administered.

You have traveled to the Central VietNam, HCM City, the Mekong Delta and the Central Highland? What areas are you impressed the most? 

It is not a question of one or another. The southern portion of Vietnam is absolutely fascinating, and each area has particular attributes and particular advantages. From an economic development standpoint, the southern economic industrial zone, the iron quadrangle of Ho Chi Minh City, Dong Nai, Binh Duong and Ba Ria Vung Tau is very impressive. Growth has been extraordinary. Social-economic development has moved very rapidly.

The Delta is also an unbelievably interesting area. From an economic standpoint there are really two parts to the Delta. The coastal delta has seen rapid growth and rising income as a result of the introduction of aquaculture to replace marginal rice growing.  

The inland delta is again very interesting from an economic standpoint because rice agriculture has become so intensive, production has become so high and there is a tremendous amount of growth that has come from that. But the problem that both of those areas are going to face is that they cannot produce much more using current technology and agricultural techniques. 

In the Delta, you have areas that produce over three rice crops per year; you can’t do more than that, you can’t grow five rice crops a year, it’s not physically possible. And therefore, they face a real challenge of moving up the value chain and raising agricultural productivity.  There is a real need to go from growing more intensively to growing more intelligently.

What should Vietnamese scientists do to help farmers in the Delta to sustain the best the natural advantages? 

There is great potential for biotechnology in this region, and Vietnam has a lot of expertise and capacity in biotechnology.  Unfortunately, genetically engineered varieties have not yet been approved to be released to the farmers. Vietnamese scientists have done excellent work in the laboratory but they do not have the ability yet to put these products out to the farmers.

If you look at the Delta, well, the same holds true in Vietnam overall, over eighty percent of the population makes a living from agriculture either directly or indirectly.  The only way to raise income is to raise agricultural productivity, which means you need to use less people to produce the same amount. You need to use better technology, and more capital equipment to continue to grow.
 

The Central: Smart tourism development 

The Central Coast is interesting because while it’s an intrinsically difficult environment -- not an easy place for agriculture, but you do have a tremendous potential for industry. You’ve got a series of cities along the coast, all of which have immediate access to the sea for transportation and substantial populations of educated people, potentially very good workers. 

 The question is whether this part of Vietnam is going to be able to develop its full industrial potential. And this is one of the areas where an open business environment – reducing the level of state control, state-owned enterprises, regulations, licensing, permits - and focusing government on infrastructure, education and health could create a strong environment for industry.  There is great potential there, especially if Vietnam can effectively harness its offshore energy resources. 

There is an awful lot of offshore gas that can be developed to fuel industry. The key question once again is whether Vietnam is prepared to open up its investment regime quickly enough to foster that development.  Offshore gas can produce vast amounts of power for industry along the Central Coast, but industrial development all the way from coastal Thua Thien Hue to Nha Trang and Phan Thiet is only just beginning. 

There has been a lot of focus on tourism of course.  Every city and province wants to be the next major international tourist destination.  The region has beautiful beaches all throughout that area, but this sector needs to be developed intelligently.  People need to identify those areas that are the most attractive and work with top tier international developers who can attract the clientele that Vietnam wants. 

Central Highland 

Let’s turn to the Central Highlands.  Vietnam became the world’s second largest producer of coffee because of the Central Highlands.  But as in the Delta, there is not a lot of land left to plant with coffee or pepper or cashews. The growth in that area is going to have to come by increasing quality and moving up the value chain rather than just by increasing volume.  

There is also a tremendous need for social development in the Highlands.  Ongoing tensions between the ethnic Kinh and the ethnic minorities in the area need to be addressed by continuing to improve social services and education. There is pressure over land tenure as well.  The issues of ethnic minorities and indigenous people are difficult issues anywhere in the world, but something that Vietnam needs to continue to address.

 If you look at all four regions, HCM City and its neighbors, the Delta, the Coast, the Highlands, it makes for a very interesting consular district and it means that I get to go to lots of different places and do a lot of different things.  It also means that Vietnam has a wide variety of resources and advantages that it can bring to bear if the overall policy environment is right, and that policy environment really should extend beyond any one region.  Opening up the economy, liberalizing, decontrolling, and allowing the Vietnamese people to do what they do so well, which is business, investment, trade and development, can work just as effectively in all of these regions.

 Each area of Vietnam has its own particular strengths and weaknesses in terms of its physical environment, population and so forth. But in terms of a policy environment, I think that there are certain things that can be applied to any of these regions. 

Governments at the provincial level that are more open, that encourage private initiative --  whether by foreign investors or domestic investors --  that focus their resources on providing key services like education, health, and roads, and that do not try to be competitors in business themselves, are provinces that are more successful.

 That is the sort of approach to economic governance that works anywhere, and that’s where you see contrasts between provinces, sometimes even neighboring provinces.  This comes out in the Competitiveness Index as well. So yes, the fundamental conditions are different in different parts of the country, but there are some principles that apply across the board.

 HCM City is the biggest and the most dynamic center of Vietnam, what about the prospects for cooperation and trade potentials between the city’s businesses and US businesses in the near future?

 In the last five years, the U.S. has become the single largest market for Vietnam.  It is an extraordinary statistic -- Vietnam is exporting about six billion U.S. dollars worth of goods to the U.S. now.  Exports have grown by a factor of ten as a result of the Bilateral Trade Agreement and most of that flows through HCM City.

 The engine of exports is in the south and in HCM City.  Even the petroleum industry is increasingly focused and headquartered here in HCM City though the petroleum itself is offshore. This is the trade center of the country; there is no question about that. 

We see quite a number of U.S. business delegations coming through looking for opportunities, both for investment and for trade as well. One of the things that makes my job enjoyable is the dynamic business environment here.  There are so many opportunities, and many American companies are really still at the discovery phase, coming to Vietnam sometimes they’re just so surprised by what they find, surprised by the potential of the market here for one product or another. 

(Next: Where is investment flowing to)  

Interviewer: Khanh Linh

American young political leaders with cultural expert Huu Ngoc.

Delegates of the Young American Political Leader’s Council have little memory of the Vietnam War, as most were small or not yet born. For some, though, their association was still intimately tied with America’s involvement in the war, or of Vietnam as a backward country. After visiting for the first time, many have discovered a “kind-hearted, friendly and active” Vietnam, which they will relate to other Americans.

Senator Flowers, Mississippi: Vietnam increasingly attractive to the world

For me, the trip is a great honour. Vietnam is a very beautiful country; I love the food and draught beer as well! Vietnamese hospitality and politeness is impressive: everywhere you can see the smiles of people.

 

I have many things in common with Vietnam’s population: two-thirds are under 40, like me, and we are not obsessed by the war. I was born in 1968; at the time the war was about to end. I have almost no memory of it.

 

However, it is still a sensitive issue for many Americans. We lost 58,000 people and 14,000 are still in missing in action. But we do appreciate the Vietnamese government’s assistance in seeking our MIA soldiers.

 

I think that a diplomatic mission like ours is very meaningful for collecting accurate information. When we finish this trip, we can tell American people that Vietnamese people are real friends of the USA, and that the Vietnam of the 1970s is not the Vietnam of 2005. The things many Americans know about Vietnam do not relate to Vietnam today. The relationship between Vietnam and the US has made strong progress.

 

When I come back, I will tell my people that Vietnam is a changing society, a growing economy and an open market for foreign investment. The Vietnamese Government is trying to improve human rights and change the image of a country after war. Clearly, Vietnam is becoming more and more attractive to the world.

 

Theodore Edward Rokita, Secretary of State of Indiana: Vietnam a friend of the US

 

Mr Theodore Edward Rokita in a meeting with Deputy Prime Minister Vu Khoan.

I’ve visited a couple of Asian countries, such as China and Taiwan, but Vietnam has brought about a fresh and different feeling. Vietnamese food is wonderful and Vietnamese people are friendly and peaceful. They have similar thinking and common goals. While individualism is an outstanding feature in the US, community spirit is something the US can learn from Vietnam.

 

Americans are still obsessed about Vietnam, mostly understood through television and Hollywood films, which often focus on the Vietnam War. During the recent presidential election, CNN presented the Vietnam War as a regular theme, although 30 years have passed. During the visit I joined a direct broadcast programme on Vietnam on Indiana radio. I wanted to send a message that Vietnam is looking to the future, and that Vietnamese have any animosity regarding Americans.

 

Youth in the US now have a more positive view on Vietnam. I think that Americans are seeking friends all over the world. After September 11, we want to know who will join forces with the US if a similar event occurs. It is not a Yes or No issue, but one of unity and sharing. Vietnamese people are very kind-hearted and I believe would stand beside America in the event of any terrorist activity. When Hurricane Katrina hit the US, despite being a poor country, Vietnam still sent goods to help American victims.

 

Paul John Scapicchio, member of the Council of Boston City: The cloud of our shared past has been lifted

 

I’ve read a lot of books about Vietnam, and when I was a student, I pursued a course on the Vietnam War. My impression about Vietnam before coming was like a curtain of cloud. Now I have a real feeling of the country and people here. This trip has been a wonderful experience.

 

Upon my return I hope that I can help my colleagues surmount their embarrassment and fear when talking about Vietnam. I hope to help them understand more about a peaceful Vietnam, not continue their obsession of the war. But of course, nothing can change over night.

 

The trip also helped me answer many difficult questions, for example those concerning human rights and trade balance. I have some Vietnamese friends who studied in Boston, who are now very successful businessmen in Vietnam. I think that they can become a bridge between the US and Vietnam.

 

In the future, to help American people understand more about Vietnam, I think that Vietnam needs to attract more tourists. When I return home, I will think of ways of furthering cooperation. I have a friend who is the owner of a very big Asian market in Boston and he plans to do business in Vietnam. I hope to meet with him and discuss what we can do.

 

Viet Lam