VN news/ business news (Mar 8-9)

[Dam Son <son@fermi.phys.washington.edu>]

   Mar 09: Vietnam Legislature To Convene April 1 - Report
   Mar 09: Vietnamese premier arrives in Dhaka to boost ties
   Mar 09: Nearly a fifth of Vietnam's state enterprises making losses...
   Mar 08: FEATURE-Romancing Vietnam takes toll on foreign investors

                                      
   Sunday - Mar 09, 1997 [28]... Back to headlines 
   
   _[INLINE] Vietnam Legislature To Convene April 1 - Report_
   
   Hanoi (AP-Dow Jones)-- Vietnam's national legislature will meet from
   April 1 to May 10, with seven major laws on its agenda for debate and
   probable approval, an official media report said Sunday.
   
   Among draft laws to be debated by the National Assembly will be ones
   on: a value-added tax; corporate income tax; commerce; and banking,
   the newspaper Lao Dong (Labor) said.
   
   The National Assembly typically holds two, month-long sessions each
   year.
   
   This will be the final sitting of the current Assembly. A new one is
   due to be elected in July.
   
   The Assembly basically passes every law presented to it by the
   government, but it isn't a complete rubber stamp body. In recent
   years, debate at legislative sessions has become livelier and less
   predictable. The Assembly is able to force amendments to bills, a fact
   that means the passage of some laws gets delayed until at least
   another sitting of the Assembly.
   
   According to some talk in Hanoi, the draft banking law might face that
   fate - a delayed passage.
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   Sunday - Mar 09, 1997 [30]... Back to headlines 
   
   _[INLINE] Vietnamese premier arrives in Dhaka to boost ties _
   
   Dhaka (dpa) - Vietnamese Prime Minister Vo Van Kiet arrived Sunday on
   a two-day official visit to Bangladesh to boost political and economic
   ties with the south Asian country, officials said.
   
   Kiet is the first head of government from Vietnam to visit Bangladesh
   since the two countries set up diplomatic ties in 1973.
   
   The Vietnamese leader was greeted at the airport by Prime Minister
   Sheikh Hasina amid a booming 19-gun salute when he flew in from New
   Delhi on a special aircraft.
   
   Foreign Minister Nguyen Manh Cam and Trade Minister Le Van Triet are
   among the 39-member delegation accompanying Kiet.
   
   Bangladesh officials said an agreement on setting up a joint
   commission for economic, cultural, scientific and technological
   cooperation will be signed after formal talks between Kiet and Hasina
   on Monday.
   
   The chambers of commerce of the two countries will also sign a
   cooperation agreement during the visit.
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   Sunday, Mar 09, 1997 [30]... Back to headlines
   
   _[INLINE] Nearly a fifth of Vietnam's state enterprises making
   losses..._
   
   Hanoi (AFP) - Nearly one fifth of Vietnamese state-owned enterprises
   (SOEs) are operating at losses, a report said Friday, but foreign
   observers said the figure could be even higher.
   
   Seventeen percent of the country's 6,250 state enterprises are
   suffering losses, the official Nhan Dan daily said.
   
   All Vietnamese state enterprises are facing a liquidity crunch, with
   many carrying domestic and external debts amounting to as much as two
   and a half times their equity capital, the communist newspaper said.
   
   However a consultant to the World Bank said that given the nature of
   accounting at most SOEs, the figure could be far higher.
   
   "Any figure is arbitrary because accounting is so bad. It's anywhere
   from zero to 100," he said.
   
   Vietnam's bookkeeping practices are notoriously bad, and there is
   strong resistance to financial accountability of SOEs, he said.
   
   The lack of transparency is the legacy of a Vietnam's former centrally
   planned economy when the state automatically subsidised loss-making
   companies.
   
   Since the launch of economic reforms more than a decade ago, most SOEs
   have been subjected to the rigours of the market economy. Though many
   have foundered (the number has been reduced from 12,000 in 1989), many
   SOEs, especially in key sectors, continue to enjoy implicit subsidies.
   
   Other foreign analysts have called for a level playing field that will
   allow the private sector to compete with state behemoths.
   
   The most recent United Nations Development Programme report said "the
   advantages enjoyed by the SOEs, such as greater access to land, credit
   and other valuable resources...as well as monopoly powers in some
   cases, are probably 'crowding out' the development of a dynamic,
   non-state sector."
   
   The World Bank consultant said the financial health and ultimate
   existence of all but the roughly 300 largest SOEs matter little to the
   economy.
   
   "You could do anything you want with them. Give the assets away or
   dissolve them, it wouldn't really matter," he said.
   
   However the future of the 300-odd companies was crucial he said. SOEs
   are either dominant or hold monopolies in key sectors such as
   aviation, telecommunications, energy, and trade.
   
   Taxes contributed by these state-owned enterprises account for 65
   percent of government tax revenues, he said.
   
   A foreign banker familiar with Vietnam Airlines, considered one of the
   financially strongest SOEs, bemoaned the level of management
   competence, and rudimentary financial record keeping.
   
   "They ask you to help them finance the purchase of a 50-million-dollar
   airplane and hand you a four-line income statement. It's incredibly
   shoddy", he said.
   
   There is still strong resistance to public accountability in Vietnam,
   where economic statistics are handled in a culture of secrecy.
   Ministries hoard data considered routine in more developed countries
   and the government refuses to disclose details of its own public
   spending.
   
   The banker also said the government had only paid lip service to the
   "equitisation" of SOEs -- the word "privatisation" is taboo in Vietnam
   -- putting small unprofitable companies on the block and keeping gems
   like the airlines to itself.
   
   So far only 10 companies have raised a few million dollars by selling
   shares since the equitisation programme was launched in 1992.
   
   However the World Bank consultant said SOE reform would be an uphill
   battle.
   
   There are so many vested interest groups here. It's no different than
   in more developed countries. Your resistance is likely to come from
   government departments which get power over what the SOEs are doing,"
   he said.
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   Saturday, Mar 08, 1997 [31]... Back to headlines
   
   _[INLINE] Feature-Romancing Vietnam takes toll on foreign investors _
   
   Hanoi (Reuter) - Ten years ago, Vietnam unveiled its first foreign
   investment law. Five years ago, the romance with overseas investors
   was in full bloom.
   
   ``Today, it's crazy,'' says Japanese businessman Yoichi Shibaike.
   
   ``The environment is not changing at all. Regulations are still
   shifting, government officials are always being replaced and even
   after decrees are announced, implementation takes a long time,'' he
   says.
   
   Shibaike, head of a joint venture involving Japanese motor
   manufacturer Daihatsu, is not alone in his frustration.
   
   Over the past 18 months a series of high-profile failures, strident
   and sometimes xenophobic state rhetoric, tightened controls plus
   declining head-office interest has focused attention on the
   difficulties of doing business in Vietnam.
   
   _INVESTMENT SENTIMENT SUFFERS AMID CLIMATE OF UNCERTAINTY_
   
   Hanoi-based foreign executives privately talk of scaling back projects
   or moving south to Ho Chi Minh City, the country's main economic
   engine and considered a safer business bet.
   
   ``You could say the pendulum's swung the other way,'' says a Hanoi
   analyst. ``Before, people had an overly romantic view of Vietnam. Now,
   they're probably over-negative. But maybe the truth is that Vietnam
   itself hasn't changed.''
   
   Change or none, the battered-husband image of the foreign investor is
   being reinforced by a climate of uncertainty, and by hardening
   attitudes on either side of the marital divide.
   
   In early March, the authorities in Ho Chi Minh City announced fines
   and punitive measures for alleged business law violations against
   Peregrine Capital Vietnam -- a Hong Kong-based company once considered
   a leading foreign investor.
   
   The protracted and acrimonious wrangling between international
   construction and oil companies and state firm Petrovietnam over plans
   for foreign involvement in the country's first refinery is also being
   seen as a bad sign.
   
   ``Nobody's going to be surprised if this whole thing falls apart,''
   says a local legal consultant. ``Why? It's a white elephant. Nobody
   seriously thought it would ever work.''
   
   _OFFICIALS SAY EFFORTS ARE BEING MADE TO TACKLE PROBLEMS_
   
   Government officials are adamant it's just not that bad.
   
   Policy is being tuned to tackle some of the more notorious foreign
   investment gripes such as poor infrastructure, overlapping
   regulations, heavy-handed bureaucracy and poor quality controls.
   Efforts are also being made to rein in rampant corruption.
   
   Officials also quote data showing that foreign investors had earmarked
   some $27.3 billion toward 1,687 projects by the end of 1996, of which
   $9.7 billion has now been disbursed.
   
   Additionally, they say more than 40 percent of foreign businesses are
   operating at a profit.
   
   Nonetheless, analysts say there is scant evidence, despite recent
   changes to the foreign investment law, that any fundamental
   enlightenment on Hanoi's part is on the cards.
   
   A recent critical report by a prominent Australia-based
   Vietnam-watcher warned that increased political uncertainty meant the
   chances of the situation improving in the short-term were rated at
   only 20 percent.
   
   The report afforded a 60 percent likelihood to a 'no change scenario'
   and another 20 percent rated for a distinctly pessimistic
   'anti-foreigner' outlook.
   
   Unsurprisingly, government officials dismiss such talk. Technocrats at
   the Ministry of Planning and Investment say the fact that some foreign
   companies are withdrawing is a ``normal phenomenon.''
   
   ``Recently some companies, after carrying out careful studies related
   to their projects, have given up their investment initiative,'' an
   official said in a written response to Reuters questions about
   investor sentiment, adding:
   
   ``However, at the same time, some other companies have expressed their
   interest in replacing them.''
   
   _ECONOMISTS WORRY THAT Vietnam'S REFORMS MAY BE FADING_
   
   This take-it-or-leave-it approach can be cold comfort for investors.
   
   For international economists, however, it's cause for deeper concern
   that Hanoi's enthusiasm for the decade-long process of economic and
   social reforms, known as Doi Moi, may be waning.
   
   A United Nations Development Program report issued late last year
   warned that reforms must continue, and be accelerated if growth is to
   be maintained.
   
   But it also highlighted two key concerns: the absence of reliable
   basic information for investors, and more seriously, the potentially
   huge proportion of overseas investment that is being debt-financed
   with direct or implied state guarantees.
   
   ``Far better information and understanding of the underlying nature of
   this debt...is urgently needed,'' says UNDP economist Robert
   Glofcheski, referring to concerns over Vietnam's medium-term
   creditworthiness.
   
   ``The foreign investment law allows for up to 70 percent of investment
   to be in the form of debt. Investment decisions over the next five
   years will need to be highly strategic to generate a rate of return
   that can service the financial obligations and sustain development.''
   
   _EXECUTIVES SAY COSTS OF DOING BUSINESS ARE DECEPTIVE_
   
   Other analysts say the problems are more immediate.
   
   As Shibaike sits at his desk in a small Hanoi office, he taps out the
   costs on a calculator of paying a skilled local employee a take-home
   salary of $1,000 per month.
   
   ``I'm talking about $4,000-$5,000 after we pay all the taxes and
   social insurance fees,'' he says. ``So where's the local labor cost
   advantage?''
   
   World Bank and International Monetary Fund economists say it's easy to
   paint an overly gloomy picture of Vietnam, and point to enviable
   macroeconomic fundamentals for a war-torn country that had to rebuild
   its economy virtually from scratch.
   
   Growth is expected to reach 7 percent to 9 percent this year.
   Industrial output stood at 13.9 percent in February compared with the
   same month in 1996, January-February exports were up 23.7 percent and
   inflation is at 3.7 percent.
   
   Government officials and Vietnamese analysts say the concerns of
   foreign investors are not being ignored, but they caution against
   expecting too much too soon.
   
   ``Vietnam is open for investment,'' says a Ho Chi Minh City economist.
   ``Yes, the government should try to explain more. Yes, some officials
   don't understand that signing a business contract doesn't mean you're
   doing someone a favor.
   
   ``But a cool head is what's needed. Investors should not jump in if
   the frying pan is too hot.''
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