Asia Times: Bush threatens vital Vietnamese trade deal


	May 10, 2001	atimes.com

Southeast Asia

Bush threatens vital Vietnamese trade deal
By Robin Newbold

HANOI - Vietnam's economic strategy is ensuring a smooth transition from a rigid economy into an effective and open economy, according to Ho Chi Minh City-based economic analyst Dr Nguyen Xuan Oanh. With a new reformist advocate elected head of the Communist Party coupled with a raft of recent stimulus packages things are likely to improve. However, a trade pact with the United States that appears to be the key to real growth is now being held hostage by the administration of US President George W Bush, which is threatening to delay its implementation.

Vietnam claims the landmark trade accord with the United States is an important milestone in the country's integration into the world economy. Trade Minister Vu Khoan said the deal created favorable conditions for Vietnam's admission to the World Trade Organization and put the seal on the normalization of relations with Washington begun five years ago with the restoration of diplomatic ties, although Bush may have other ideas.

The deal, seen as crucial to Vietnam's role as a developing economy, is in danger of being scuppered by the new administration in Washington - which has taken Hanoi to task over its record on human rights - according to the American Chamber of Commerce in Vietnam in a speech last week. The body fears any delay could hit the normalization of trade relations between Vietnam and the United States.

The bilateral trade agreement was four years in the making and promised to give the two countries greater access to each other's markets but has still not been ratified by US Congress. The agreement was signed in July during the Clinton administration and enjoys widespread bipartisan support in Congress.

The Vietnamese government, together with US business interests, had hoped that ratification would take place within the next few months. But now the Bush administration is planning to delay the legislation in order to try and meet its broader trade objectives. The US Chamber of Commerce is especially critical of US Trade Representative Robert Zoellick, who they believe is going to delay ratification of the agreement between the two countries.

"An omnibus bill that could take years working its way through the Congressional committees would be tantamount to the United States reneging on the promise it made when it signed the agreement," said the president of the US Chamber of Commerce in Vietnam, Tom Siebert. The Chamber of Commerce argues that holding up the bilateral trade agreement for so long could seriously affect the economic reform process in Vietnam. In 10 years, said one US businessman, when people ask "What went wrong with Vietnam?", they will only need to look to Robert Zoellick's decision.

The delay by the Bush administration has come amid US criticism of Vietnam's human rights record. The US Commission on International Religious Freedom, an advisory body to the US Congress, has recently attacked Hanoi for its intolerance of religion. And religious groups close to the Bush administration are determined to raise the religious freedom issue, which has also been used in the debate about China's trade rights.

In an escalating war of words that doesn't bode well for the bilateral deal, Vietnam's Communist Party's newspaper criticized the US commission. "The ignorance of public opinion is pointless, ridiculous and affects US Vietnam relations, which have improved in line with the aspirations and interests of both sides," it said. "Connecting religious issues with ratification of the bilateral trade agreement is something against the interests of the United States and it will be opposed by US public opinion."

Hanoi rejected a similar trade deal in 1999, which commentators say was due to in-fighting in Vietnam between reformists and conservatives. It is crucial that the reformists succeed if Vietnam is to move forward in economic terms, and in this respect the recent election of 60-year-old Nong Duc Manh to the country's most powerful decision-making position as general-secretary of the Communist Party is a positive move.

Manh, selected at a closed-door meeting of the party's Central Committee, is recognized as being far more receptive to economic reforms than the man he has ousted, Le Kha Phieu. Indeed, economic and social reforms that started 15 years ago to open Vietnam's economy and reduce the role of state enterprises slowed under Phieu's rule. Nevertheless, many people still believe Manh, who lacks military ties, will face resistance from communist officials who fear changes will loosen the party's grip on power.

Speaking after his appointment, Manh told the Congress, "I am very moved and proud that I have won the trust of the party." He said it had opened "a new era" for Vietnam's development. "The future of our nation is very bright, but there will be a number of difficulties and challenges," he said. "The success of the reform process depends on our ability to grasp opportunities and overcome dangers. We have to heighten our patriotism and self-reliance but at the same time broaden our relations with our friends in the world."

Nevertheless, Prime Minister Phan Van Khai, seen as one of the strongest advocates of reform, cautioned that opening the country's economy too much could cause political unrest, highlighting the difficult path the Vietnam has to negotiate on the road to economic liberalization.

Economic expert Nguyen Xuan Oanh of Ho Chi Minh City-based International Business, Management and Finance Consulting, maintains the country's transformation is a "miracle" in East Asia, and said growth of Vietnam's economy over the last 26 years was "beyond imagination".

Economic regeneration began in 1987 and since then annual economic growth has averaged 9-10 percent, with the budget deficit accounting for about 1 percent of gross domestic product and inflation dropping to single digits. The value of foreign trade has increased about 20-fold over this period. Before regeneration, turnover from the country's export and import businesses stood at just US$500 million. By 1998, more than 40 countries had invested $36 billion in 28,000 projects in Vietnam.

"The greatest change is that the new economic policy has accelerated the reconstruction of the nation's economic policies, and streamlined the administrative apparatus towards eradicating red tape and bureaucracy. All this has been done for the ultimate goal of escaping from the limitations of poverty and under-development and advancing towards happiness and prosperity," says Oahn.

In terms of an economic miracle the figures bear him out, although a further quantum leap requires serious reform and the ratification of the US trade deal. Even he stressed that Vietnam must work harder to integrate into the global economy, adding that its scientific base needs broadening to accelerate the process of modernization and industrialization, while a strong banking and financial system is vital to meet the demands of a market-oriented economy, Oahn says.

The country's education sector needs reform to better prepare its youth for the future. It must also harness information technology applications to boost economic growth, he adds. "The nation needs to produce outstanding, skilled people to keep pace in a dynamic, progressive world," Oanh said.

Oahn claims that the people's quality of life has improved during the last few years. According to the municipal General Statistics Office (GSO), during the last five years the proportion of people with "low living standards" fell from 10.9 percent in 1996 to 8.7 percent last year, while those with "medium living standards" rose from 35.7 percent to 37.8 percent in the same period.

Significantly, the proportion of people with "decent living standards" rose from 18.8 percent in 1996 to 20.2 percent in 2000. The municipal GSO also highlighted increased expenditure by people during the last five years. Expenditure on accommodation, water and electricity rose by 55.07 percent; on home appliances, by 49.99 percent; on education, by 34 percent; and on health care services, by 20.3 percent. It also reported that 88.5 percent of the city's households have television sets, 61.1 percent have video players, 81.4 percent have cassette players, 77 percent have motorbikes, 43.4 percent have refrigerators, and 33.4 percent have telephones.

Despite increasing affluence, however, there is evidence that the gap in living standards between urban and rural people has increased in recent years. Statistics show that urban residents spent an average of VND596,385 ($40.9) a month last year, while rural people spent a mere VND351,911 a month, down VND24,110 on 1999. More confirmation that Vietnam's transition from an agrarian-based primitive economy into an industrial-based globalized market is likely to be long and painful, with many sections of the population excluded from the benefits.

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