VN news (June 10)

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

Hanoi may be crippled by acute power shortage
Vietnam plans solemn celebration of October revolution
U.S. envoy urges Hanoi to improve business climate
Japan to host next meeting of Vietnam donors 
Petronas waiting for Vietnam approval for Dai Hung
Intel introduces Pentium II to Vietnam
Vietnam: Reforms run into heavy weather
Textiles: Vietnam, EU in fight over quotas
Vietnam To Tighten Rubber Exports To China
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Hanoi may be crippled by acute power shortage

HANOI -- Soaring temperatures and unseasonally low rainfall have created
an acute power shortage in northern Vietnam that could cripple Hanoi. 

A heat wave which began in Hanoi about a week ago has strained power
supplies to such an extent that for the first time, power plants in the
south have been supplying northern users, the Saigon Times Daily reported
yesterday. Quoting Mr Bui Thuc Kiet, director-general of Electricity of
Vietnam (EVN), the daily said the group had taken the unprecedented
decision to use a 500 kilovolt power line to supply between 500 and 600
megawatts per day [DS: megawatts per day?]

The line, which came on stream in 1994, runs from north of Hanoi to
energy-hungry Ho Chi Minh City in the south. 

It normally supplies the energy produced at Hoa Binh and Thac Ba
hydroelectric power stations. 

Temperatures in the north have hovered around 35 deg C for the past week,
causing a surge in consumption of electricity by airconditioners by both
residential and commercial users. 

Brownouts have occurred during peak times of the day, and some
neighbourhoods of Hanoi have experienced entire blackouts during times of
peak consumption, said the official Vietnam News. 

Mr Kiet said that over the past few days, electricity demand country-wide
has jumped nearly 20 per cent from 51 million kilowatt hours (kwh) to 60.2
million kwh. 

Supplies of electricity to some remote areas were cut at the end of last
week, although he said EVN was working to prevent power cuts in towns and
cities. 

He said Hoa Binh, the country's biggest plant, could operate effectively
for another five or 10 days if there was no rain. 

Normally, heavy rains at this time of the year fill reservoirs supplying
Hoa Binh and Thac Ba, but according to the official Vietnam News, reserve
levels have fallen dangerously low and water flow was at 30 per cent of
last year's levels. 

Weather forecasters said showers were expected in the north of the country
later yesterday, although they said heavy rains were unlikely before June
20. 

EVN is planning to produce some 19.7 billion kwh of power this year and is
aiming for capacity between 26 and 29 billion kwh by 2000. 

It intends to continue capacity building after that to meet growing
consumption needs, which experts believe could top 60 billion kwh in less
than a decade from now. 

In April this year, Mr Tran Ha Anh, Director of Vietnam's Atomic Research
Centre, said the country's atomic-power research is focused on preparing
for a nuclear power plant between 2010 and 2015. - AFP, Reuter. 
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Vietnam plans solemn celebration of October revolution 

HANOI (AFP) - Vietnam has planned solemn celebrations marking the 80th
anniversary of the Russian Revolution.  According to an official directive
published in the Nhan Dan daily, the anniversary celebrations will affirm
"communist values" and the leading role of the party in fighting the
forces of destabilisation. 

The October Revolution followed widespread discontent among Bolshevik
workers, culminating in 1917 in a violent nationwide strike which brought
Lenin to power and saw the birth of communist Russia. 

The party's Politburo, the highest power in the land, said there will also
be ceremonies in February next year to mark the 150th anniversary of the
publication by Karl Marx and Friedrich Engels of The Communist Manifesto. 

"We will hold solemn celebrations of these events which mark an historic
turning point for humanity by teaching Marxism-Leninism and the thoughts
of Ho Chi Minh, and affirm the leading role of the party in the renewal of
Vietnam," the report said. 

No details of the celebrations were provided. 

"We must draw lessons (from the commemorations) for the Vietnamese
Revolution in this time of renewal, particularly on ideology and socialism
for young people," the directive said. 
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U.S. envoy urges Hanoi to improve business climate

HANOI, Vietnam (Reuter) - The United States' first ambassador to Hanoi has
warned that American firms will not invest in Vietnam unless the risks of
doing business there are reduced. 

"Without reforms in the concrete policies of the Vietnamese government,
American companies will continue to face difficulties in doing business
here," Pete Peterson told the World Affairs Weekly in an interview. 

Peterson, who took up his post a month ago, said the number of American
investors would rise sharply once the two countries sign a bilateral trade
accord and Vietnam's trade infrastructure becomes more stable. 

But at present, investors are faced with problems such as a weak banking
system and cumbersome bureaucratic procedures for obtaining licenses,
which make it difficult to make a profit. 

"In general, American companies will not come to Vietnam if the level of
business risk is not reduced," Peterson told the Ministry of Foreign
Affairs magazine. 

"Although American companies accept business risk, this should be
calculated on the basis of the profits that they can make. In the case of
Vietnam, the level of risk is very high and the potential for profit is
very low." 

Peterson said there were 400 to 500 American companies with a presence in
Vietnam. Government figures show that the United States ranks sixth among
some 50 countries investing in Vietnam, with $1.12 billion committed for
68 projects. 

The U.S. ambassador has made it clear that he wants to speed progress
toward a comprehensive trade agreement, which would lead to most-favored
nation trading status for Vietnam. 

Washington says Vietnam, whose experiment in reform along market lines is
now more than a decade old, must commit itself to further liberalization
of its trade and investment regimes. Vietnamese officials have countered
that the economy is not ready for such sweeping change. 

Peterson said President Clinton wanted to visit Vietnam but there were no
plans for him to do so this year. 

He said Secretary of State Madeleine Albright, who will visit later this
month, would discuss the issue of Americans still listed as missing from
the Vietnam War, which ended in 1975. 

She would also raise the issues of migration, the trade environment, human
rights and the possible establishment of strategic relations between the
two former foes. 

He said that Albright would be seeking Vietnam's view on developing
certain aspects of military cooperation, which at present is very limited. 
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Japan to host next meeting of Vietnam donors

HANOI, June 10 (Reuter) - This year's Western aid pledging session for
Vietnam will be held in Japan, the country's leading donor, diplomats said
on Tuesday. 

The World Bank-chaired Consultative Group meeting of donors is normally
held in Paris, but was held in Hanoi last year and next December's meeting
will take place in Tokyo. 

"The decision to hold the meeting in Tokyo was taken by the World Bank and
Vietnam as the recipient," said one diplomat. 

"Japan had indicated for some time that it might be a good idea." 

Donors have committed some $8.5 billion for the reforming communist
country since 1993, with Japan's share around 30 percent. 

The rate of aid disbursement has been extremely low, averaging around $644
million a year from 1994 to 1996, but aid officials say the rate is now
picking up despite continued delays on large infrastructure projects. 

One diplomat said it was unlikely that Japan, which last year pledged
around $830 million, would cut its commitments to Vietnam at a meeting
held in its own capital. 

But others said it was not a foregone conclusion that aid levels would
continue to rise, especially given Vietnam's poor record of disbursement
and constraints on Tokyo's aid budget. 

"Some Japanese are saying that it would be a shame if the pledging turned
out to be lower," said one. "But it's a fact of life that budgets are
being cut back all over the world." 
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Petronas waiting for Vietnam approval for Dai Hung

KUALA LUMPUR, June 10 (Reuter) - Malaysia national oil firm Petronas is
still awaiting Vietnam government approval to raise its stake in the Dai
Hung oil field, president and chief executive Hassan Marican said on
Tuesday. 

The Broken Hill Pty Co Ltd agreed earlier this year to sell its 43.75
percent in the field to Petronas, which already holds a 20 percent stake
in the field. 

Marican, speaking on the sidelines of an oil and gas conference in Kuala
Lumpur, did not elaborate. 

The other shareholders are Petrovietnam with 15 percent, and France's
Total SA and Japan's Sumitomo Corp share 10.625 percent. 

In March, Petrovietnam said Petronas would receive the same terms as BHP
on becoming the major shareholder. 

President Ngo Thuong San said the application was in the hands of the
Vietnamese Ministry of Planning and Investment. 

The Dai Hung field was originally estimated to hold 800 million barrels of
crude, but the estimates have gradually fallen to 100 million barrels. 
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Intel introduces Pentium II to Vietnam

By Nguyen Van Phu

(SGT HCMC) Intel introduced last week the Pentium II processor to the
Vietnamese market, just one month after it first made its debut in Hong
Kong. "The time gap between our products' appearance in the U.S.  and
European markets and in Asia, including Vietnam has been reduced
significantly," Rob Eckelmann, Intel's director for emerging markets in
Asia-Pacific said. It took about two years for Intel's 386 processor to
reach Vietnamese users back in 1993. 

"With the launch of the Pentium II processor synchronized around the
world, Vietnam will no longer be a viable market for older, slower
technology," Eckelmann said. 

Pentium II combines the technologies of the Pentium Pro processor with the
capabilities of Intel's MMX media enhancement technology. The new chip is
available at speeds of 266-, 233-MHz in desktop systems. The 300-MHz
processor will be available in workstations in the third quarter. 

"To meet [new] demands, PCs will need to deliver on three key elements of
microprocessor performance: floating point, multimedia and integer," Ho
Vinh Khanh, Intel's manager in Vietnam said. "The Pentium II processor
delivers superior performance on all three." 

The chip has the Dual Independent Bus architecture, first implemented in
the Pentium Pro, which addresses the bandwidth limitations of previous
generation processor architectures. The MMX technology has been added to
the Pentium II to enhance performance for audio, video and graphics
applications as well as to speed up data encryption and compression. Other
features include Dynamic Execution technology and the Single Edge Contact
cartridge. While the first extends the raw performance of the processor by
allowing more data to be processed in parallel in a given period of time,
the second feature enables the broad availability of Pentium II and
provides headroom for future chips. 

Pricing in 1,000 units quantities is US$775 and US$636 for the 266- and
233-MHz parts. The 300-MHz processor is priced at US$1,981 each. 

Intel also showcased the high performance of the new chip via brandname
and locally assembled computers. "We tested Intel's Pentium II processor
under Windows NT and with an Intel motherboard and saw noticeable
improvements in both situations," said Nguyen Minh Tam, director of Saigon
Informatics Company. "We believe that users will experience increased
productivity with the Pentium II." 

Intel also announced the appointment of its second distributor in Vietnam,
Lac Hong in cooperation with DIC, Singapore. Its first distributor is
Phuong Lan Company. 
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Vietnam: Reforms run into heavy weather

Financial Times

By Jeremy Grant

The Vietnamese finance minister, Mr Nguyen Sinh Hung, was mingling at a
diplomatic reception recently when he found himself face to face with a
visibly upset US investor. 

After listening to a barrage of complaints, the minister squashed his
cigarette into an ashtray and thought for a moment. 

"Please understand. We are trying to follow the open door (policy).  But
there is something wrong with the lock." 

It was a rare show of candour in a political system where official
responses are usually anodyne. But it also underscored official concern
that Vietnam's economic reforms are running aground. 

It was a rare show of candour but it also offered a glimpse of official
worry that Vietnam's doi moi economic reforms may have run aground. "The
potential benefits of past reforms are nearly exhausted and...further
change is needed to sustain macro-economic stability and a high rate of
economic growth," said Mr Ari Kokko, an economist at the Stockholm School
of Economics, in a recent report. 

Economists cite two worrying issues: the continued dominance of the
loss-making state sector and a trade system tilted towards import
substitution. Reform of both areas is being blocked by vested interests in
the political elite. 

But the economists say Hanoi must tackle the issue for Vietnam to ensure
long-term growth. 

State-owned enterprises (SOEs) account for over 70 per cent of industrial
output but few are making money. Cosy links to the party ensure funding
via state-owned banks, creating a web of indebtedness that lies behind
much of the banking sector's recent ills. 

Vietnam nurses a large trade deficit, which reached $1.14bn in the first
five months of this year. That would be sustainable in the medium term if
the bulk of imports were being channelled into building up export-oriented
industries, the economists say. 

But Mr Kokko argued there is strong evidence that most imports are used by
SOEs manufacturing for the local market, protected by tariffs and
non-tariff barriers. 

Many SOEs are in joint ventures with foreign multinationals whose interest
in Vietnam's consumer market is, ironically, reinforcing the import
substitution tendency. 

Professor James Riedel of the international economics department at
Washington's Johns Hopkins University, said this approach was
unsustainable: "For Vietnam to follow an import substitution strategy
would be to ignore 50 years of economic history in which it has been
demonstrated not to work." 

Nor does it mesh with Vietnam's commitment to open markets, through its
application for World Trade Organisation (WTO) membership and its promise
to meet tariff reduction targets under the Asean Free Trade Area (Afta). 

Worse, Mr Kokko argued, the longer the leadership delays decisions, the
higher the cost of reform later. 

"The costs for liberalisation will increase with every dollar invested by
SOEs and foreign multinationals into import substitution investments that
will no longer be competitive when trade barriers are removed," he said. 

Observers are asking what will prompt a shift in current behaviour. 

Washington wants Hanoi to agree to a tough trade pact that would, US
officials claim, ease WTO entry. Asean is looking to Vietnam to cut
tariffs under the Asean Free Trade Area scheme. 

But Mr Richard Grant, head of the Asia-Pacific Programme at the Royal
Institute of International Affairs in London, dismisses external
pressures: "I don't see any constituencies in the west to put pressure on
the EU or US to get any real breakthroughs on Vietnam. Asean doesn't
operate that way anyway. I think that the other Asean members expect Afta
to go forward without Vietnam." 

Indeed, Vietnam is happy that Laos, Cambodia and Burma are to join Asean
as it will no longer be alone on a "slow track" Afta timetable. 

US officials play down US pressures as the Vietnamese economy is still too
small to be of serious interest. Internally, policymaking is confused.
Reformists in the leadership - those most likely to push for change - are
locked in a succession struggle with opportunist conservatives and
military figures who prefer the status quo. 

Some resolution is expected at a meeting of the powerful party central
committee which convenes today and which is expected to endorse top-level
personnel changes. 

Critics of any "shock therapy" approach to reform say the political system
is not ready for sudden change and that time is not on Vietnam's side. 

Referring to SOE reform, Mr Riedel said: "Right now, it's politically too
sensitive to deal with. What we should be encouraging them to do is create
a conducive environment for the private sector."  But, ultimately, debt
may force the issue. Foreign investment approvals fell by 19 per cent in
the first five months of the year, against the same period last year. 

The trade deficit, at around 16 per cent of gross domestic product is a
serious structural threat, according to economists. The banks are drenched
in red ink. 

SOE debt alone is reason enough for worry, according to Mr Kokko: "It is
not much of an exaggeration to characterise the present financial
situation of the SOE sector as a time bomb." 

The word "crisis" dances on many people's lips. But one party member said:
"A crisis is an opportunity for the reforms. It'll make people see the
current situation is untenable." 
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Textiles: Vietnam, EU in fight over quotas

Financial Times

By Jeremy Grant in Hanoi

Vietnam and the European Union are set for a tussle over textile quotas,
with Hanoi determined to win greater market access for its booming garment
industry and Brussels under pressure from textile federations to stem a
rising tide of Vietnamese imports. 

Hanoi wants a dramatic rise in quotas set under an existing bilateral
pact, which the two sides are set to renegotiate around September. In some
categories, it is seeking a five-fold increase in quotas. 

Textiles account for about 70 per cent of EU-Vietnam trade. 

That worries some EU member states, whose textile federations say any rise
would further threaten jobs. 

Vietnam's textile exports to the EU have grown rapidly in the past three
years, and the communist-run country is now the third largest exporter
after China and Indonesia. 

In addition, Vietnam wants the EU to give it the same level of quotas
enjoyed by other countries in the Association of South East Asian Nations
(Asean), of which Hanoi is a member. "We note our quota for textiles is
low in comparison with other Asean countries," said Mr Nguyen Dinh Hoan, a
senior official in the cabinet office. 

However, EU officials are taking a firm line, saying that Vietnam's
position fails to take into account its late entry into the market. 

"I think the EU will be as generous as we can be but we can't contemplate
treating Vietnam in the same way as other Asean countries because the
starting points are completely different," said Mr Riccardo Ravenna, EU
ambassador to Vietnam. 

The EU is also likely to take issue with Vietnam's discriminatory quota
allocation system, under which state-owned enterprises receive
preferential access to quotas, often at the expense of foreign joint
ventures - some involving European companies. 

Mr Ravenna urged Vietnam instead to diversify its garment production to
take advantage of categories not yet under quota. 

The EU is also seeking wider market access for its fabrics. 

Mr Hoan also struck a conciliatory note, suggesting that companies from
southern Europe - those most affected by Vietnamese exports - could set up
manufacturing joint ventures in Vietnam. "We have to avoid any activity,
any wording, that would not benefit our relationship" with Brussels. 

The EU would not feel under such pressure if Vietnam has Most Favoured
Nation (MFN) trading status from the US, which analysts say could absorb
the bulk of its textile exports. But that is unlikely for at least another
year. 
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Vietnam To Tighten Rubber Exports To China 

Hanoi (VNA) - The Vietnam Rubber Corporation (VRC) is requesting the
Ministry of Trade (MOT) to review rubber exports to China and take
measures to regulate this activity and put it in good order.

The VRC is also proposing the MOT to stop licensing imports of rubber
from Cambodia to re-export to China. At present, 20 per cent of the
rubber inventory at the Mong Cai checkpoint on the Sino-Vietnamese
border consists of imports from Cambodia.

According to the MOT, rubber exports from Vietnam are being priced
down sharply by Chinese importers. The price has fallen to 9,000 Yuan
per tonne from 10,500 Yuan per tonne in late April.

This plunge in rubber price has caused grave losses to Vietnamese
exporters who have been forced to stop selling, resulting in a bulging
inventory of 5,000 tonnes of rubber at the Mong Cai checkpoint.

VRC has decided not to reduce its sales price any further and
encouraged its exporters to look for other markets.

Vietnam Courier quoted an MOT official as saying that last year
Vietnam exported about 100,000 tonncs of rubber to China, grossing VND
1,400 billion (US$127 million). However, most of the payment was made
through private remittance channels, making it difficult for the
Government to keep track of the operation. Many cases of default by
Chinese importers have been reported as a result of this mode of
payment.

At present, over 30 Vietnamese firms are reporting problems in getting
Chinese importers to pay for their imports.
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