Presentation on Vietnam’s Business Outlook and Opportunities for U.S. Companies in a Developing Vietnam

Good morning, Ladies and Gentlemen, friends,

           First of all, I would like to thank the Mark O. Hatfield School of Government and the beautiful city of Portland, Oregon for inviting me to your beautiful city.  Portland State University has a growing number of Vietnamese students and I know the University is a resource both for the city and for even countries as far away as Vietnam.  I also would like to thank Mr. Christopher W. Runckel, President of Runckel & Associates and a longtime friend of Vietnam for organizing this event, giving me the opportunity and the honor to talk to you today about Vietnam – US trade and economic relations and about business opportunities in Vietnam.

          Needless to say how pleased I am to be here with you to talk about possibilities of expanding the business ties between the State of Oregon and Vietnam. We in Vietnam attach great importance to the development of trade and economic ties with the United States in general, and with the US Pacific Coast states in particular because the states like Oregon, California and Washington are facing the Asia – Pacific Region, so it is natural that they have more business interests in the region than other American states.  This is the second time I have been in Portland, but in future I hope to come here more often and also hopefully will have the chance to both visit the Mark O. Hatfield School of government and also have the opportunity to meet with many of you again.

 1. Vietnam began the policy of reform (in Vietnam we call it a policy of Renovation) in 1986 and since then Vietnam has engaged in a process of transforming from a command- economy into a market economy. According to the World Bank, IMF and other international financial institutions, for the last nearly two decades, Vietnam has been a good example of the successful transformation from a highly-centralized economy into a market one. From a food – importing nation, Vietnam has become the second biggest exporter of rice in the world.  Vietnam has doubled its GDP in the decade of 90s and is showing further improvement in the 21st Century. At the beginning of the 90s, Vietnam managed to get out of the deep social – economic crisis it had faced and engaged in the new development. Vietnam managed to reduce the rate of inflation from a 3 digit figure in the late 80s to a one digit in the 90s and has successfully kept it low until now.

            In the last three years (2001 – 2003), despite great difficulties and challenges (such as SARS and other factors) the Vietnamese economy kept developing at an increasingly high rate and in a positive trend. In 2001, the economic growth reached 6.9%, an increase of 0.2% over the year of 2000; this figure was 7.04% in 2002, again higher than that in 2001. In particular, the economic growth in 2003 continued its increasing trend and reached 7.24%, which was higher than 2002. This year, the Government hopes to again continue this growing trend upward and to have a GDP growth rate of 8% over the year of 2003. I must note that this is one of the highest GDP growth rates in Asia and the rest of the world.   This growth has not only benefited a few business people but has given benefits for our whole country.  It has created benefits of job creation, rising prosperity and better living conditions for many.  In recent years,  the World Bank, IMF, ADB and other international institutions have lauded Vietnam for its successes in poverty reduction and alleviation.

             Exports continue to increase at a high growth rate. The total export turnover of 2003 is nearly 20 billion USD; an increase of 16.7% compared with 2002 and exceeds the planned target set by the government.

             In 2003, the foreign direct investment (FDI) in new factories and other investments is 3.1 billion USD, an increase of 11% compared with 2002. Up to now there are around 2800 projects of FDI operating in Vietnam with total turnover of 16 billion USD. Those enterprises have exported 6.3 billion USD in 2003, which is 31% of Vietnam’s total exports. The year of 2004 began with good news about FDI in Vietnam: last January the FDI increased 196.6% compared with the same period last year.

             However, I would not try to paint a totally rosy picture of Vietnam for you. The reality is that Vietnam is still very much a developing country with GDP per capita of less than 500 USD and is facing many difficulties and challenges. The economy is still not competitive in many sectors. The currency is still not convertible and the country is still not a member of the World Trade Organization (WTO).  Thus we must not only look back at our successes but also forward at the challenges that still remain in building our country and improving our society.

            2. The Bilateral Trade Agreement (BTA) between Vietnam and the United States signed in July 2000 and entered into force in December 2001 is a new milestone in the relations between the two nations. It also concluded a long process of normalization of relations between the two countries, which lasted nearly a decade from the beginning of the Clinton Administration in 1993 when Mr. Runckel, an  Oregonian arrived in Hanoi as the first U.S. Diplomat and with others came to start working with us in improving the diplomatic relations between our two countries.  My work in San Francisco is a continuation of this joint work that both countries continue in building a new fair and stable relationship on the basis of open discussion, friendly consultations and mutual respect. 

             In two years of implementation of the BTA, the trade between the two nations has really boomed. In 2003, the two–way trade between Vietnam and the United States was about 6 billion USD.  This figure is more than double compared with the previous year and has grown quickly. The figure may be very small for the United States, but it is big enough for Vietnam. Though the trade relations sometimes are clouded by the legal disputes over catfish and now shrimp, but in 2003 for the very first time, the United States surpassed the EU, Japan and China and became the number one market for Vietnam. The main items of Vietnam exports to the US are garments, seafood, footwear, crude oil, furniture and handicraft items. The main items that the United States exports to Vietnam are aircraft and spare parts, machinery and industrial products.  As far as I know Nike, whose headquarters are in Portland, through its Taiwan and Korean subcontractors, is producing a lot of sport shoes in Vietnam and now with the BTA  implementation , you here in Oregon and throughout the U.S. can buy Nike‘s made in Vietnam sport shoes in the American shopping malls, even those here in Portland. 

             Despite the rapid growth in U.S. trade, American investment is still very small in Vietnam. Now it is about 1.4 billion USD – small potatoes by American standards. We sincerely hope that with the implementation of BTA and with the improvement of the investment and business environment in Vietnam that American companies will invest much more in Vietnam.

             3. Now, last but not least, I will try to answer a question: Why should American companies invest in Vietnam?

  I think that you should invest much more in Vietnam because of the following factors:

 First, Vietnam is one of the safest locations in the world. This is recognized by the international organizations and the world community. This factor became more and more important after September 11, 2001 when the United States and the world community have been engaged in the war against international terrorism. Yes, it is true that last year Vietnam and other East Asian nations were affected by SARS ( Severe Acute Respiratory Syndrome) and this year again Vietnam and the neighboring nations  are again affected by another menace - bird flu. However these challenges are short – term problems that the government of Vietnam takes it seriously and is earnestly working to resolve. Last year, Vietnam was the first nation recognized by the World Health Organization (WHO) to eliminate SARS. As far as the bird flu outbreak now is concerned, as we meet today the bird flu outbreak is easing off in Vietnam and there is no recommendation from the WHO or any other agency against traveling to Vietnam. Issuing visas to enter Vietnam is one of our Consulate General functions, and I can assure you that the bird flu outbreak has not made Americans cancel their trip to Vietnam, nor should it.  The threat of bird flu is serious but exceedingly small for most tourists and business travelers.  In my opinion, perhaps the threat of  car accident in the American cities  is greater than the threat of being infected by Bird Flu if one follows commonsense safeguards when  visiting  Vietnam. 

Second, Vietnam’s Government is strongly committed and in reality in recent years has done a lot to improve the investment and business environment in Vietnam. Nowadays, Vietnam is recognized by the international business community as one of the countries to have the most favorable investment and business environments in Asia.

 Third, with the implementation of the BTA, American companies are among the first to enjoy many advantages in investing in Vietnam.  It is true that now a lot of American companies are rushing to China. It is understandable because China is booming economically and is a very large market. However, I just want to remind all investors that there is a basic business principle saying that you should not put all yours eggs in one basket.  Vietnam is a good location to spread your production and build high quality production in addition to China and oftentimes instead of China.   

Fourth, don’t think of your factory in Vietnam as solely your entry to the fast growing Vietnamese market, which consists of 80 million customers,  think of it as your key to a much larger market.  Why is this?  It is because Vietnam is a member of ASEAN (The Association of the South East Asian Nations) and in ASEAN we have a free trade agreement called AFTA (the ASEAN Free Trade Area). AFTA is similar to NAFTA here in North America. This means that if you set up a factory in Vietnam, your products can go to all ASEAN countries without any significant taxation. The ASEAN countries are in the process of talking with China, Japan and other countries about setting up new free trade zones with them, so we can expect new trade zones established between ASEAN and China, and Japan in the near future. This means your factory in Vietnam can serve a population of over a half billion now to as much as a billion and a half when the agreements with China and Japan come into being.  The Vietnam Government is strongly committed to becoming a member of WTO in the near future, hopefully in 2005.  This will further speed reform and open many new opportunities for U.S. investors.  Thus, the time to look at Vietnam is now.  

Fifth, I see Vietnam and the American economies as complementary to each other. With the American capital, technology and know-how, you can combine with Vietnamese cheap and skilled labor.  Together this combination of resources will produce competitive products and create prosperity for both countries. One has to take into account the fact that though Vietnam is a developing country, the literacy rate of Vietnam is 94% of the population, which is very high among the developing nations.  This means that your workers will be easy to instruct and quick to learn.  In a continuously evolving society as the world today certainly is this skill is important to a company searching for a strong workforce and why Vietnam is a good choice for American companies.

Sixth, although in this political year, there is much talk of lost jobs and unfair trade – trade with Vietnam is fair and open.  The U.S. exports much factory equipment and industrial supplies and there are further opportunities for wood for making furniture, U.S. wheat, cotton and other products.  Vietnam’s trade balance with the U.S. is not unbalanced and is steadily growing.  U.S. companies and even Oregon companies should take advantage of the opportunities in Vietnam to help source products in Vietnam so they can offer those good quality products to their customers winning sales and decreasing U.S. inflation and customer savings.  Free and fair trade benefits the U.S.  It benefits Oregon and yes, it benefits Vietnam.  Vietnam reaches out the hand of friendship to American and Oregon companies who want to both trade and to invest in Vietnam.

  Now I am ready to answer any questions that you may have.

                  Thank you for your attention