First privately owned airline approved in Vietnam

Vietnam’s government has approved the establishment of the country’s first privately owned carrier, setting an important precedent in a market that is forecast to continue growing rapidly in the coming years.

The government at the end of November said it had approved the aviation license application of Vietjet. The new low-cost carrier will be based in Hanoi and will have a secondary base in Ho Chi Minh City. It plans to launch operations late in 2008 or early in 2009 and will use either Airbus A320s or Boeing 737-800s.

Vietjet will initially operate between Hanoi, Ho Chi Minh City and Danang, expanding later to international destinations such as Bangkok, Hong Kong, Singapore and points in southern China. In the longer term it plans to serve points in Japan and South Korea.

Vietnam’s air transport market has been growing rapidly (see chart) with particularly strong traffic growth rates being recorded by national carrier Vietnam Airlines. The country currently has two other government-controlled airlines, Pacific Airlines and Vietnam Air Service (VASCO). Pacific, a low-cost carrier, recently became minority owned by Qantas Airways.

With a large population and a small number of air trips per capita – but an economy that is growing rapidly – the market is seen as having huge potential for airline growth. As a result several other groups are also looking to establish new airlines in Vietnam, including Malaysia’s AirAsia.

Vietjet is capitalised at 600 billion dong ($37.5 million) and is owned by a group of local businessmen led by entrepreneur Nguyen Thanh Cong. It says it has “no plans to bring in a foreign airline as a partner as we are building a Vietnamese airline to reflect the best the country has to offer”.

Little Saigon crowd takes protest against China to L.A.

Vietnamese Americans rally against Chinese occupation of islands in Asia.

A large group left Little Saigon this morning in six buses and two minivans, said Loi Cao, one of the protest organizers.

Protesters had also rallied in Little Saigon over the same issue Saturday afternoon. A recent move by the Chinese government to include three of the islands to form a Chinese county sparked the string of protests here and in Vietnam.

The ownership of this cluster of more than 200 islands rich in oil and gas deposits has been a subject of debate among several Southeast Asian nations that border the islands.

Protesters in Los Angeles held banners and shouted anti-communist slogans, said Truong Diep, a Midway City Sanitary District board member, adding that he was there to observe the rally. They shouted slogans in Vietnamese, such as “Down with Red China” and “Stop the Chinese Land Grab,” Diep said.

On Sunday, protesters said they were upset that the Vietnamese government is doing little to stop the Chinese occupation of the islands. However, Associated Press news reports state that Vietnam’s Communist Party did criticize China’s military exercises on Paracel Islands through its newspaper, Nhan Dhan.

Chinese local official denies plan to designate islands as city – HK paper

(BBC Monitoring Asia Pacific) Text of report by Hong Kong newspaper South China Morning Post website on 19 December

[Report by Kristine Kwok: “Plan To Designate Islands a City Denied”]

The diplomatic row with Vietnam over the designation of disputed islands at China’s southern tip as a city took another turn yesterday when a Hainan official denied such a plan was on the agenda.

A Wenchang government representative said there was no plan to set up Sansha, a 2.6 million sq km county-level city to govern China’s claims in the Spratly and Paracel islands, a source of territorial disputes between China and its Southeast Asian neighbours.

It had been reported that Wenchang would administer Sansha, an abbreviation for Xisha, Nansha and Zhongsha, the terms Beijing uses to refer to territory it claims in the two island groups.

“There is no such thing. In Hainan, we only have Sanya, but not Sansha,” the official said.

Another official from the Hainan provincial government said the authorities had not received any documentation from the central government on redesignating the area as a city.

News that Beijing ratified a plan last month to create Sansha was first reported by Vietnamese media and followed up overseas. In sharp contrast to the attention outside China, no mainstream mainland media have covered the issue, which would otherwise be a source of pride.

But the reports have been discussed in many internet chat rooms and widely circulated through personal blogs. In one of the few available reports by mainland media, , a website affiliated with the official Hunan Daily , said the new city would administer a quarter of China’s total area.

It also said the Wenchang government had pledged in a Communist Party Committee meeting it would promote the State Council’s plan to change the status of the islands.

But the Foreign Ministry gave a rather vague response yesterday when asked to confirm such a plan, with spokesman Qin Gang saying it was normal for China to conduct activities in its own territory.

Mr Qin said Beijing was concerned by anti-China protests in Vietnam over the past two weekends in response to the alleged Sansha plans.

“We require the Vietnamese government to take practical and effective measures to prevent the situation from getting worse,” he said.

Rallies in Hanoi and Ho Chi Minh City on Sunday attracted several hundred demonstrators and followed similar protests in the cities a week earlier. Analysts said the protests were the most damaging in the relationship between China and Vietnam, where demonstrations are a rarity.

A territorial dispute between the neighbours in 1979 sparked a brief border war.

Zhang Xizhen, of Peking University’s School of International Relations, said the border war remained a scar between the two countries despite warming trade and political ties.

But Anthony Wong Dong, chairman of the International Military Association in Macau , said a more pressing issue than the scars of history was the right to explore energy in the disputed areas. The Spratlys and Paracels are claimed, in part or in full, by the mainland, Taiwan, Vietnam, the Philippines, Brunei and Malaysia, and are believed to have oil and gas reserves.

Spratlys row gives Vietnam youth a taste for protest – Feature

Hanoi – For two weekends in a row, hundreds of young people have marched and chanted in the streets of Hanoi and Ho Chi Minh City, waving protest banners and dodging phalanxes of helmeted riot police. The cause they are demonstrating for is one the government approves: Vietnam’s claim that it, and not China, owns the Spratly and Paracel Islands in the South China Sea.

But authorities are trying to tamp down the protests, which threaten to damage relations with Vietnam’s giant northern neighbour and to encourage students to participate in politics in other ways.

For their part, the students are elated.

“I was so happy to be able to raise my voice,” said 24-year-old university student Nguyen Van Nhat, who marched with the protestors in Hanoi last Sunday. “I think it’s the right thing for me to do.”

The protests were triggered by China’s decision earlier this month to establish an official locality, called Sansha, which it claims administers the Spratlys and Paracels. Vietnam officially protested the move on December 3, as government spokesman Le Dung said the issue should be resolved through peaceful dialogue.

The demonstrations in front of the Chinese Embassy in Hanoi and the consulate in Ho Chi Minh City began the following Sunday. The fact that police tolerated the first demonstration for roughly an hour before dispersing it led to speculation that it had been instigated by the government.

In fact, the protests appear to have been largely spontaneous, organized by students through blogs, online communities and mobile phone messaging, with some participation by veteran pro-democracy activists and dissidents.

“We found out about the demonstration through blogs and emails,” said 23-year-old student protestor Ngo Quynh. “I joined the demonstration based on my love for Vietnam.”

Vietnamese have used blogs like (named for the Vietnamese term for the Paracels) and networking sites like Yahoo360 to spread the word about the demonstrations. The blogs have continued to discuss the Spratlys issue furiously.

A number of democracy activists were also active in the demonstrations. They include Le Quoc Quan, a lawyer who spent six months in the United States earlier this year on a fellowship from the National Endowment for Democracy, and was imprisoned for three months by the Vietnamese government on his return.

Quan said he had participated in the demonstrations in Hanoi on December 9, but that police prevented him from reaching this past Sunday’s protests. He said his brother, Le Quoc Quyet, was arrested at Sunday’s demonstrations in Ho Chi Minh City, and held for four hours before being released.

Quan said police at the demonstration had also arrested and released one of his uncles and his uncle’s friend.

Last Sunday’s demonstrations, in contrast to those on December 9, were met by dozens of riot police who had pre-emptively blocked off the street in front of the Chinese embassy and the adjacent park. Vietnamese blogs related the stories of three students who were arrested at the demonstrations in Hanoi, and released several hours later.

Vietnamese police sources refused to comment on the arrests, except to confirm that they had occurred.

But the harsher police response followed a Chinese statement condemning them last week. The Chinese news agency Xinhua reported Wednesday that Chinese Foreign Ministry Qin Gang had urged Vietnam to prevent any future anti-Chinese demonstrations, which he said could harm bilateral ties.

Vietnam’s government-controlled press has printed numerous articles over the past two weeks laying out Vietnam’s claim to the islands. They rely on documents dating from medieval Vietnamese emperors and from 17th-century European explorers.

The arguments are widely taken for granted by Vietnamese, who view China’s claim to the islands as the latest in a long series of Chinese incursions on Vietnamese territory.

The dispute has intensified because the waters surrounding the Spratlys and Paracels are believed to contain substantial petroleum deposits. A Vietnamese agreement with British Petroleum to begin exploration in waters near southern Vietnam was scrapped earlier this year because of concerns over the sovereignty conflict.

The protestors say they will try to march again this weekend. That will present the government with a dilemma, as it tries to restrain protests involving independent democracy activists it opposes, but which also reflect widespread patriotic and anti-Chinese sentiment.

“When we were marching in Hanoi in the demonstration, passers-by were excited, and some of them joined us,” said university student Nhat. “There must be measures to stop China’s conspiracy to invade the islands.”

“I think the best solution is democracy,” said Quynh. “The issue must be discussed publicly so that all people will know about it, not just the Communist Party, so that we can unleash the nation’s power.”

Such unauthorized political activity, however, is precisely what Vietnam’s government would like to avoid.

Vietnam Pushes State-Owned Firms to Diversify

HANOI, Vietnam — In the fume-choked western suburbs of this nation’s capital, scrawny cows wander the streets as bulldozers churn up a patch of dusty soil that will soon become a $300 million five-star hotel.

The company behind the luxury resort isn’t a well-known hotel chain. Instead, it’s PetroVietnam, the country’s national oil and gas group.



The Situation: Some of Vietnam’s biggest state enterprises are diversifying into new businesses as the country gears up for increased foreign competition.

What It Means: The move is creating uncertainty about the depth of commitment to free-market overhauls.

What’s Next: Vietnam’s government says it will ensure a level playing field for state-owned, private and foreign companies.

The oil company’s foray into the tourist trade is part of a bold — and divisive — push by Vietnam’s prime minister, Nguyen Tan Dung, to create state-owned conglomerates that can stand up to the international companies that are making inroads here as Vietnam’s economy booms. The government expects growth in gross domestic product to top 8.5% this year.

Vietnam’s drive to create more-powerful state companies sits awkwardly with the prime minister’s carefully crafted image as a supporter of liberal economics. It reflects some nervousness among the Communist Party elite about entirely surrendering its grip on the economy, even though there is little threat to its political control. Among the concerns: Without a bold makeover, state enterprises may struggle to secure sufficient credit once Vietnam opens up to foreign banks as part of its commitments in joining the World Trade Organization.

In recent months, Mr. Dung has signed a series of orders directing large state companies to diversify into unexpected new businesses, in some cases asking them to compete directly with privately owned firms. State shipbuilding company Vinashin, or Vietnam Shipbuilding Industry Corp., will soon start brewing beer. Mining company Vietnam Coal Corp. is investing in electricity generation. Several other state companies, including PetroVietnam, formally known as Vietnam Oil & Gas Corp., are establishing their own banks to help finance their expansion.

Mr. Dung’s critics contend that building these new businesses risks crowding out Vietnam’s vibrant private sector, the backbone of the country’s economy. Around 60% of Vietnam’s GDP is generated by local and foreign private businesses, compared with less than half a decade ago, according to the Asian Development Bank.

Mr. Dung has strong credentials as an economic liberalizer. He ran Vietnam’s central bank in the late 1990s and helped steer the country’s entry into the WTO. Yet, he is also steeped in the traditions of Vietnam’s strongly nationalist military.

[Nguyen Tan Dung]

Mr. Dung began his career as a child soldier in 1961, signing up as a messenger with the Viet Cong guerrillas when he was 12 years old. He rose through the ranks to become a political commissar, and was wounded several times in battles with U.S.-backed southern Vietnamese troops in the 1960s and 1970s. His army bosses sent the young Mr. Dung to the Communist Party’s elite leadership academy, and he became the youngest-ever member of Vietnam’s 14-member Politburo. He became prime minister in 2006 at the age of 56.

Some of Mr. Dung’s mentors are surprised at his plans for bulking up Vietnam’s state sector, which had been gradually diminishing in importance as economic overhauls have progressed. Former Prime Minister Vo Van Kiet, who engineered Vietnam’s painful transition to capitalism in the 1990s, has warned his protégé that creating giant state-run conglomerates threatens Vietnam’s hard-won free-market credentials.

“These groups will hoard market share, material resources and business opportunities that are the lifeblood of Vietnam’s private sector,” wrote Mr. Kiet, who is now 85, in an article published in a state newspaper earlier this year. “And that prevents businesses from expanding their important role in the Vietnamese economy.”

Mr. Kiet also warned that, among other things, the presence of PetroVietnam in the tourism business will hurt Vietnam’s image as a free-market economy. Just the perception of a strong state hand steering the economy might be enough to ensure that the U.S. and European Union can continue levying tariffs on Vietnam for allegedly exporting goods at below-market prices.

Government spokesman Le Dzung says Vietnam’s leaders are committed to ensuring a level playing field for all business, whether private, foreign or state-owned.


At PetroVietnam, the head of planning for its northern Vietnam projects says the company plans to begin construction on its hotel in earnest in the next few months. Nguyen Ngoc Lich says PetroVietnam plans to hold a 30% stake in the venture, with the rest being offered to a selection of local — mostly state-run — banks.

Some government economists share Mr. Kiet’s fear that Mr. Dung’s new tack risks undoing some of the momentum that has helped Vietnam become a fast-growing and attractive manufacturing hub for global names such as Intel Corp., Canon Inc. and Hon Hai Precision Industry Co. Government officials expect Vietnam to attract $16 billion in foreign direct investment this year. In the first eleven months of the year, foreign companies committed $15 billion to the country — a record.

A burgeoning middle class is patronizing luxury boutiques and golf courses that are sprouting across Hanoi and the old southern capital, Saigon, now known as Ho Chi Minh City.

Last month, U.S. Commerce Secretary Carlos Gutierrez traveled to Vietnam to meet with Mr. Dung, and described the country as “Asia’s newest economic tiger.” In an earlier interview with The Wall Street Journal, Mr. Dung pledged that more overhauls are on the way to draw in more foreign investment. Chief among them are plans to introduce transparent, predictable laws that will enable private business — both local and foreign — to play a bigger role in sustaining Vietnam’s heady growth.

“We can’t clap with one hand. We need private business, too,” says Mr. Dung. Two of his three children have studied in the U.S. and have entered private business in Vietnam.