~ Le Viêt Nam, aujourd'hui. ~
The Vietnam News

[Year 1997]
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[Year 2000]
[Year 2001]

Chinese school for success

HANOI - Snuggling under Chinese blankets, zipping around on Chinese motorbikes, and amusing their children with Chinese plastic toys, Vietnamese consumers count on their large northern neighbour to churn out affordably cheap goods. But as consumers race to spend, Vietnamese officials are racing to learn. Rather than be smothered by an avalanche of Chinese products--or resort to knee-jerk protectionism--Vietnam is now looking seriously at emulating the economic reforms successfully launched in China. A sure sign came in late December, when, for the first time, a senior team of Vietnamese economists sat down with Chinese economists to hash over past experiences and future plans for reform. The four-day summit at Hanoi's state-run Institute of Economics covered a broad range of substantive issues, particularly on how to restructure state-owned firms, liberalize trade, attract foreign investment, revise rules on land ownership and spur village-level enterprises.

"We learned a lot of lessons from China," says Ha Huy Thanh, vice-director of the institute. Most important, says Thanh, Vietnam is studying how to avoid the "shock therapy" applied in the former Soviet Union when indebted state-owned firms were closed virtually overnight and price controls were lifted. Instead, it's looking into adopting China's more gradual approach to reform in order to maintain a balance between market reforms and social stability. Even so, bold moves are required to stave off inertia. One stimulant: Vietnam may follow China's lead in allowing foreigners to purchase larger stakes of state-owned firms--49% in Vietnam's case, instead of 30% as presently permitted. In order to improve Vietnam's trade leverage, officials are hoping to learn from China how to hone their bargaining skills with the U.S. and other World Trade Organization countries. Most sensitive, perhaps, is re-examining the economic role of Vietnam's Communist Party and the military. Re-ducing corruption is a key goal. Debate over such sensitive issues is sure to surface in March at the ninth party congress. While some members want a green light to engage in private enterprise, others seek to limit cadres' economic clout. "Now, a lot of land belongs to the army, the party, and the mass organizations. It's not used very efficiently," says Thanh. "How do we solve this problem? We have to learn from China's experiences." For instance, the military in China was ordered to give up its business empire in 1998.

Rash of exchanges

While the December 25-28 meeting was ground-breaking, it didn't yield any definitive blueprint for reform. That's still for the politburo to decide. Sixteen high-ranking officials, including one politburo member, got a taste of economic reforms in southwest China during an extraordinary visit in June. Now the party's economic committee, along with a host of government advisers, is delving into two hefty tomes that emerged from the economists' December summit. These give detailed accounts of reform in China and Vietnam. A third, comparative, volume will be finished in July. The three books are to be launched with fanfare in both nations by October. Warming political relations between the two former enemies are setting the stage for intensified exchanges of economic know-how. Capping a flurry of high-level meetings, Vietnamese President Tran Duc Luong visited Beijing in December and signed the Tonkin Gulf agreement on the two countries' sea border. An important land border pact had been reached a year earlier.

Meanwhile, international agencies such as the United Nations Industrial Development Organization, or Unido, are supporting Vietnam's moves to emulate China. Unido experts involved in Chinese rural industrial development are peppering Vietnamese officials with comparative perspectives. Japanese academics are similarly pitching in. Recent trade missions from Yunnan and visiting Chinese commercial delegations have provided advice from the horse's mouth. Unido, meanwhile, is flying in lecturers from Beijing to give advice on private-sector development, and sending Vietnamese delegates to China to grasp the mechanics of WTO membership. "The Vietnamese are very keen to follow development in China," says Markku Kohonen, Unido's representative in Hanoi. "Of course, Vietnam has to select its own way, and come up with a tailor-made Vietnamese model. We are just at the very beginning of a very long road."

By Margot Cohen - The Far Eastern Economic Review - January 11, 2001.


Economic invasion

LAO CAI - The road to Chinese-style prosperity for Vietnam is mined with suspicion and resentment. Behind friendly diplomacy lies anger in Vietnam over the deluge of cheap, low-quality Chinese goods coming into the country, both through smuggling and legitimate border trade. Vietnamese makers of agricultural equipment, CDs, garments and other items complain bitterly over their competitive disadvantage. Many believe China is using Vietnam as a convenient dumping ground for surplus products. Other developing countries are also raising a ruckus about the debilitating effect of cheap Chinese goods. But the relationship between Vietnam and China is infused with memories of ancient feudalism and wartime aggression. Now, charges of trade sabotage are undercutting China's efforts to be a benevolent big brother offering economic advice.

"China makes the Vietnamese market saturated with cheap, poor-quality goods so there's no room for Western companies to supply better-quality products," grouses a Vietnamese business consultant. "Their aim is to slow down the Vietnamese economy and make sure it doesn't go in the right direction." Low-quality Chinese products have led to government losses. In one recent scandal, 1.8 billion dong ($125,000) was squandered on radios to help ethnic minorities in Ha Giang and Cao Bang provinces follow state news. But because of faulty Chinese components, the villagers couldn't pick up Vietnamese stations, according to local newspapers. In agricultural machinery, where Chinese products have up to 60% of the market, some state-owned firms are pressing for credit and low interest rates to encourage farmers to buy local products. "The sector will not develop further, or may face hardship, without government assistance," argues Tran Ngoc Ha, head of marketing at the state-owned Hanoi-based General Corporation of Engineering and Agricultural Machinery.

But others warn against slamming the gates on Chinese goods. "We should not provide too much protection for these import-substitution industries," argues Pham Chi Lan, executive vice-president of Vietnam's Chamber of Commerce and Industry. "The import of Chinese products can put pressure on Vietnamese manufacturers to adjust their production and produce at a better price." The pressure is certainly rising on joint-venture producers of motorbikes. More than a million Chinese machines have flooded Vietnam since early 1999, spurring a public outcry over traffic jams in Hanoi and Ho Chi Minh City. While they are of lower quality than the prestigious Honda brand, the price is enticing: $550 against Honda's $1,700. Late last year the government decided to ban spare parts made under the copycat Chinese brand name "Hongda" on grounds of poor quality. Joint-venture producers, meanwhile, are moving to cut their prices. Vietnam's textile and garment firms are taking a different tack by focusing on more upscale markets in the United States and Europe. "China is not a serious competitor because its products are of such low quality," boasts Le Lam, deputy head of planning and marketing for the state-owned firm Vinatex. Vietnam is also trying to even out the trade balance by selling more crude oil and natural rubber to China, which is now the second-largest importer of Vietnamese products after Japan. (Chinese purchases in the first 11 months of last year came to $1.2 billion.) But Vietnam's raw-material exports--which also include chromium ore, coal and pharmaceutical materials--are no match for the Chinese value-added products pouring in.

In the northern province of Lao Cai, Vietnamese porters wheel bicycles piled with bananas across a bridge linking the two nations. On the Chinese side, Vietnamese scoop up bolts of cloth and armloads of sweaters, electronics, and floor tiles. Big trucks roll across the border toward Hanoi while Chinese tourists sashay home empty-handed. True, Vietnam has successfully fought Chinese domination in such markets as plastics, beer and bicycles. But officials say they still have a lot to learn. This year, for example, Vietnamese customs officers will go to China to study computerized management of trade so they can keep more-comprehensive records on imports, exports and duties. "China's economic policies are more attractive and more open," says Nguyen Van Tham, vice-director of Lao Cai's investment and planning department. "We should help each other to be equal."

By Margot Cohen - The Far Eastern Economic Review - January 11, 2001.