FACTBOX-Five political risks to watch in Vietnam

SINGAPORE, Oct 8 (Reuters) – Vietnam has weathered the global economic crisis relatively well, but the country is still seen as a risky and relatively opaque investment destination.

Following is a summary of key Vietnam risks to watch:

* CORRUPTION

Corruption is endemic in Vietnam at all levels of government, and acts as a major barrier to foreign investment. The authorities had announced aggressive plans to fight corruption, and encouraged the media to act as a watchdog, but these efforts lost steam after several journalists were detained for reporting on major corruption scandals. Progress on corruption will remain a key determinant of investment attractiveness.

Key issues to watch:

— Vietnam’s rank in corruption perceptions rankings. A strong improvement or decline would influence investors.

* GOVERNMENT EFFECTIVENESS

Corruption, lack of accountability and transparency, and burdensome bureaucracy all impact the effectiveness of the government in formulating and implementing policy. Economic reform and the restructuring of inefficient state enterprises are vulnerable to being undermined by entrenched interests and conservative elements in the government more focused on security.

Key issues to watch:

— While the government stimulus package has boosted the economy, there are questions over how the budget deficit can be financed, how inflationary pressure can be contained, and how the crowding out of private investment can be avoided. Hanoi has embarked on a plan to trim bureaucratic procedures in government, and how that scheme plays out will be something to watch.

— Investors frequently list poor infrastructure as one of the biggest barriers in Vietnam, and the government’s ability to coordinate swift, efficient development in this area is being keenly observed.

* EXCHANGE RATE POLICY

Vietnam’s fixed exchange rate policy frequently causes economic pressures to build. The authorities are widely expected to widen the dong’s trading band or devalue it again gradually in coming months, and this has prompted hoarding of dollars. For now, the risk of a sudden big devaluation is considered small.

Key issues to watch:

— Markets are closely watching for any clues to the likelihood and timing of changes to the exchange rate.

* SOCIAL UNREST

Vietnam has seen a rising number of strikes, protests and land disputes, often affecting foreign businesses. Disturbances have erupted in rural areas due to state expropriations of land and the corruption of local officials. But there remains no evidence for now that wider unrest is likely, or that there is any imminent risk of the regime being challenged from below.

Key issues to watch:

— Any sign that a broader national protest movement is emerging out of local disputes. So far, this seems unlikely.

— The role of the Catholic church. Catholics have been engaging in periodic protests over church land taken over by the government after 1954. The Catholic Church, while officially shunning involvement in politics, has 6-7 million followers in Vietnam and is quite well organised.

— Territorial disputes in the South China Sea. This issue is highly charged in Vietnam, where suspicion of China runs high. Any move by China to assert sovereignty over disputed islands in the South China Sea, or perceived weakness by Vietnam on this issue, could galvanise broad based support for demonstrations.

* THE ENVIRONMENT

Vietnam has great potential as a source of tradeable carbon credits under the Kyoto Protocol, but issues of expertise, transparency and financing have hindered progress. Environmental issues may also become a growing source of popular unrest, as in China. With its huge coastline, Vietnam is recognised as one of the countries that will be hardest hit by rising sea levels, particularly in the rice-growing Mekong Delta.

Key issues to watch:

— The extent to which the government manages to limit the environmental damage from Vietnam’s economic growth.

— Any evidence that extreme weather events affecting Vietnam are becoming more frequent as a result of climate change.

(Compiled by Andrew Marshall and John Ruwitch; Editing by Bill Tarrant)

http://www.reuters.com/article/latestCrisis/idUSSP476366

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Vietnam shuts down Web site in dispute with China

HANOI, Vietnam (AP): Vietnam has shut down a Web site it ran jointly with China, officials said Monday, as diplomatic tensions escalated over islands claimed by both countries.

The two sides created the Web site in 2006 amid great fanfare in order to promote bilateral trade. But it became embroiled in their dispute over the Paracel islands in the South China Sea, over which both countries claim sovereignty.

The dispute over the Web site began when China posted an article blasting Vietnam’s claim to the Paracels. The article was posted by the Chinese Ministry of Trade, which ran the site with Vietnam’s trade ministry.

The episode has aroused nationalist passions in Vietnam, which has fought several wars with neighboring China.

Monday’s edition of the Labor newspaper chided the Chinese statement, saying it was “untruthful, doing harm to Vietnam-China relations.”

The Web site was launched at a 2006 ceremony attended by Vietnamese Communist Party chief Nong Duc Manh, President Nguyen Minh Triet and Chinese President Hu Jintao, who was in Hanoi for a regional economic summit.

Tran Huu Linh, an official at the Vietnamese trade ministry, confirmed Monday that the Web site has been closed, but declined to give more details.

Officials at the Chinese Embassy in Hanoi could not be reached for comment.

The Paracel Islands consist of more than 30 islets, sandbanks or reefs over an area of nearly 6,000 square miles (15,000 square kilometers). The dispute over their ownership dates back several decades.

http://thestar.com.my/news/story.asp?file=/2009/5/18/apworld/20090518140443&sec=apworld

Vietnam top official on Japan visit

HANOI (AFP) — Vietnam’s most powerful official, Communist Party General Secretary Nong Duc Manh, was to arrive Sunday for an official visit to Japan, the country’s largest bilateral aid donor, the government said.

It is the second visit to Japan by Manh, whose last mission there was in 2002, the government said.

Manh was to stay until Wednesday.

“The trip is expected to beef up Vietnam-Japan exchanges and cooperation in all areas, especially in economy, trade, investment and official development assistance (ODA),” the government said on its website.

The state Vietnam News Agency said Japan is Vietnam’s second-biggest trade partner, after China, and is the country’s second-largest export market after the United States.

Manh’s visit comes less than one month after the two countries signed an agreement resuming the flow of aid loans — known as ODA — suspended during a corruption scandal.

Japan announced in December that it would suspend the loans after former executives of a Tokyo-based consultancy admitted paying kickbacks to a Vietnamese official overseeing a Japanese-funded road project.

In February, Tokyo said Vietnamese officials had given assurances that steps would be taken to prevent similar abuses. That led to the signing in March of a deal for low-interest loans covering infrastructure projects worth 83 billion yen (837 million dollars).

Vietnam has made efforts to improve the legal environment and increase measures to strengthen management and effective use of ODA projects, including fighting corruption.

Japan and Vietnam in December signed an economic partnership pact with a promise to cut tariffs on more than 90 percent of goods and services traded between the two nations within a decade.

Vietnam News Agency said that last year the value of Vietnam-Japan trade exceeded 15.5 billion dollars, and by the end of 2008, Japan had invested more than 17 billion dollars in more than 1,000 projects, ranking it third among foreign investors in Vietnam.

http://www.google.com/hostednews/afp/article/ALeqM5g76xdL_QMMZPQVFvhlxJjxhTUHag

In Vietnam, New Fears of a Chinese ‘Invasion’

By Martha Ann Overland / Hanoi Thursday, Apr. 16, 2009

Vietnamese workers walk along rubber trees in Vietnams Central Highland Gia Lai province in March 2006 Kham / Reuters

Vietnamese workers walk along rubber trees in Vietnam's Central Highland Gia Lai province in March 2006 Kham / Reuters


Thirty years ago, Vietnamese soldiers waged a final, furious battle in the hills of Lang Son near the country’s northern border to push back enemy troops. Both sides suffered horrific losses, but Vietnam eventually proclaimed victory. Decades later, diplomatic relations have been restored and the two nations, at least in public, call each other friend. Vietnam’s former foe is a major investor in the country, bilateral trade is at an all-time high, and tourists, not troops, are pouring in.

No, not Americans. Chinese. As part of an aggressive effort to expand its commercial and political influence in Southeast Asia, China is investing heavily in Vietnam. Chinese companies are now involved in myriad road projects, mining operations and power plants. Yet, despite the fact that cooperation between the two communist countries is being encouraged by Vietnam’s leaders, this friendly invasion does not sit well among a people who have been fighting off Chinese advances for more than a thousand years, most recently in 1979. Many in Vietnam worry that China is being handed the keys not just to their country’s natural resources but also to sensitive strategic areas, threatening the nation’s security. “The danger is that China has won most of the bids building electricity, cement and chemical plants,” warns Nguyen Van Thu, the chairman of Vietnam’s Association of Mechanical Industries. “They eat up everything and leave nothing.” (See pictures of the border war between China and Vietnam.)

Thu says he suspects some Chinese companies have won construction contracts by submitting lowball bids, which could mean they are cutting corners, threatening quality and safety. But Thu’s biggest concern is the influx of large numbers of Chinese workers, including cooks and cleaning staff, that are taking jobs from Vietnamese and threatening the country’s social stability. “Chinese contractors bring everything here, even the toilet seats!” declares Thu. “These are materials Vietnam can produce, and work that Vietnamese can do.”

The latest lightning rod for anti-Chinese sentiment is Hanoi’s plan to allow subsidiaries of the Aluminum Corporation of China (Chinalco) to mine bauxite ore in Vietnam’s Central Highlands. Bauxite is a key ingredient in aluminum, which China needs to fuel its construction industry. Vietnam has an estimated eight billion tons of high-quality bauxite, the third-largest reserves in the world. The environmental cost of extracting the mineral, however, can be high. Strip mining is efficient, but scars the land and bauxite processing releases a toxic red sludge that can seep into water supplies if not adequately contained. Several senior Vietnamese scientists as well as Vietnam’s burgeoning green movement have questioned the wisdom of giving mining rights to China, whose own mines were shut down because of the massive damage they caused to the environment.

But the real opposition appears to have less to do with the environment and more to do with Vietnam’s fear of its neighbor on the country’s northern border. Nationalist groups accuse Hanoi of caving in to pressure from commodities-hungry China by allowing the mining project to go forward. Bloggers are whipping up fears that the influx of Chinese workers is part of Beijing’s long-term strategy to occupy their country. Banned pro-democracy groups, which are happy for any opportunity to criticize the authoritarian government, call the mining venture an “ill-begotten scheme.” Earlier this month, a dissident Buddhist monk, Thich Quang Do, said that strip mining will destroy the way of life of the region’s ethnic minorities. He added that the project created “an illustration of Vietnam’s dependence on China.” There has been no such outcry against U.S. aluminum giant Alcoa’s plans to mine two sites in Dak Nong province in the Central Highlands.

Perhaps the most unexpected criticism has come from General Vo Nguyen Giap, a revered Vietnamese military leader who helped defeat the French and later the Americans. In a letter to Vietnam’s Prime Minister Nguyen Tan Dung, the 97-year-old war hero voiced concern over the presence of large numbers of Chinese in the Central Highlands, which is a strategic gateway to Vietnam, one where battles have been won and lost.

Other countries in the region are made uneasy by China’s thirst for resources. Last month, the Australian government rejected a $1.8 billion bid by Chinese mining company Minmetals to acquire debt-ridden OZ Minerals, the world’s second-biggest zinc miner, due to national security concerns. OZ Minerals has operations near Australia’s Woomera weapons testing site.

The Hanoi government says it is listening to concerns but it appears to be unmoved. Dung recently declared bauxite mining a “major policy of the party and the state.” Deputy Prime Minister Hoang Trung Hai reaffirmed the government’s support, and several local provincial officials were on hand at a recent mining conference to defend the project, arguing that despite the presence of the Chinese workers, development will benefit the impoverished ethnic minorities who live in the region.

The pressure on Vietnam to proceed as planned is enormous, says Carl A. Thayer, a Vietnam expert who teaches at the University of New South Wales’ Australian Defense Force Academy. Vietnam needs to trade with China, the world’s third-largest economy, to survive. Thayer acknowledges that no Chinese company operates independently of the government. “If you go up far enough you will find a military or a security connection,” he says. “But Chinese occupation? I don’t believe that.”

Some of the problems are of Vietnam’s own making, observes Thayer. The country has become increasingly dependent on foreign direct investment to buoy its economy. Last year, overseas investors sunk a record $11.5 billion into Vietnam. China last year had 73 investment projects worth $334 million in the country. But in the wake of the global recession, foreign direct investment plummeted 70% in the first quarter of 2009 compared to the same time period last year.

Hanoi has been calling for increased investment, and is even more desperate for external cash infusions now that its economy has flatlined. Vietnam has also racked up a massive trade deficit with China. As more Chinese companies venture across the border and sink millions into new investment projects, Hanoi can’t dictate all the terms. Nor can they just close the spigot. “The Vietnamese have to be careful of what they wish for,” says Thayer.

http://www.time.com/time/world/article/0,8599,1891668,00.html

Vietnam Delays Personal Income Tax Collection to Spur Spending

By Ta Bao Long

Feb. 9 (Bloomberg) — Vietnam will delay the collection of personal income tax until the end of May to help stimulate spending amid the global economic crisis.

Personal income including salaries, profit from real-estate and stock transactions and other investment returns won’t be taxed until May, the government said in a statement posted on its Web site today. The National Assembly will decide then if the payments will be waived completely or just delayed.

Vietnam’s economy expanded 6.2 percent in 2008, the slowest pace in nine years, as the global recession cut demand in the U.S. and Japan for Vietnamese exports. The government is targeting 6.5 percent growth for this year.

Vietnam will give a 30 percent discount on tax bills from the fourth quarter of last year and in 2009 for small and medium-sized firms, which have less than 10 billion dong ($572,000) in capital or employ fewer than 300 workers, the government said last month. It will also cut value-added tax by half in February for products including coal, construction materials, engineering equipment used to make other products, and automobile parts.

The country will lose about 1 trillion dong every month by “temporarily” not collecting personal income taxes for five months, the Tuoi Tre newspaper reported on Jan. 13, citing Deputy Finance Minister Do Hoang Anh Tuan.

Non-resident individuals won’t have to pay tax for income from financial investments, transactions, copyright and franchising until May, today’s statement said.

To contact the reporter on this story: Ta Bao Long in Hanoi at longta@bloomberg.net

http://www.bloomberg.com/apps/news?pid=20601080&sid=a6EcwRh24cbQ&refer=asia

Vietnam govt asks for restraint over Spratly debate

By LALA RIMANDO, abs-cbnNEWS.com/Newsbreak | 02/07/2009 12:26 PM

HANOI, Vietnam — Government officials on Friday asked the members of its Communist party to restrain from “doing anything that might complicate the situation” in the multi-country debate over the Spratly islands after the Philippine’s House of Representatives recently approved a baselines bill.

The bill (House Bill 3216) stipulates that the Philippine’s new archipelagic baseline boundary includes several islands that lie within the Spratly archipelago and the Scarborough Shoal. Vietnam is one of the countries claiming these resource-rich islands.

A February 6 article on Thanhnien Daily, one of Vietnam’s few English publications, mentioned Vietnamese Foreign Ministry spokesperson, Le Dung who was asked to comment during a press conference Friday, about Vietnam’s reactions.

The article quoted Dung as saying, “In our opinion, while seeking basic and long-term solutions to disputes regarding to the Paracel and Spratley archipelagos, the relevant parties should observe the United Nation’s 1982 Convention on the Law of the Sea and the Declaration on the Conduct of Parties on the South China Sea, and not to act to complicate the situation in order to maintain peace and stability in the region.”

In January, the Philippine senate ratified Senate Bill 2699 that did not include the contested islands named in the House Bill 3216.

The article cites that it is the Philippine government that has “approved” the new outline.

Vietnam is a single-party Communist state.

as of 02/07/2009 12:53 PM

http://www.abs-cbnnews.com/nation/02/07/09/vietnam-govt-asks-restraint-over-spratly-debate

NA Vice Chairman calls for reform

VietNamNet Bridge – National Assembly (NA) Vice Chairman Nguyen Duc Kien has said it was necessary to raise the role of the NA in law and justice reform.

NA Vice Chairman Nguyen Duc Kien. (Photo: VNN)

He said so while attending a seminar yesterday on law and justice reform, organised by the European Commission-funded Institutional Support Project to Viet Nam.

Kien said more efforts are needed to build and complete institutions.

“Because of a shortage of experience, Viet Nam’s legal system is still not complete so executive and justice offices still face many difficulties in law implementation,” he said.

Ham Farnhammers from a delegation of the European Commission to Viet Nam said the projects funded by the European Commission in general and the Institutional Support Project to Viet Nam in particular had contributed an important part in law and justice reform in Viet Nam.

The Institutional Support Project to Viet Nam, in co-ordination with the NA’s Office, Ministry of Justice, the Supreme People’s Court, and the Supreme People’s Procuracy had created many good results, he said.

Dr Nguyen Si Dung, deputy head of the National Assembly Office, said that after two years of global economic integration, the people expect the most in the NA’s role to the important decisions.

“The NA has partly manifested its role, as for the first time, the Prime Minister stood in front of the NA to answer questions by the NA deputies straightforwardly and responsibly,” he said.

A high-ranking expert of the European Commission, Ian Harris, clerk of the Australian House of Representatives, said strengthening of the legal and justice systems could not only bring benefit to legislative offices and relevant offices, but also help reduce poverty in long term.

At the seminar, many legal experts also agreed that law and justice reform helped implement hunger eradication and poverty alleviation in Viet Nam.

http://english.vietnamnet.vn/politics/2009/02/827234/