U.S.-Vietnam economic relations - Joan E. Spero, Under Sec. for Economics, Business, and Agricultural Affairs - Transcript

US Department of State Dispatch, Oct 23, 1995

Good morning. Minister Cam, Minister Triet, and distinguished guests: It is a pleasure to be here to address the U.S.-Vietnam Forum at this important time in U.S.-Vietnam relations.

In July, President Clinton made a historic decision to normalize diplomatic relations with Vietnam and begin a new chapter in the relations between our two countries. Three weeks later, Secretary Christopher traveled to Vietnam, the first visit by a U.S. Secretary of State in more than 20 years. He opened the U.S. embassy in Hanoi and held wide-ranging discussions with Vietnamese Government leaders and U.S. business executives.

Our relationship with Vietnam takes another step forward this week with the visit to Washington of Foreign Minister Cam and Trade Minister Triet. Secretary Christopher had a very productive meeting with Ministers Cam and Triet on Tuesday. I, myself, had a good meeting with Minister Triet on Monday. The ministers have also met with other senior Administration officials this week, including Ambassador Kantor, and with congressional leaders. In these meetings, we have deepened the dialogue on our expanding political and economic relationships.

During his trip, Secretary Christopher stressed the breadth of U.S. policy interests in Vietnam. He spoke of the primacy of the POW/MIA issue for the U.S., our security interests in Southeast Asia, the importance of human rights and the rule of law, the need for further economic reform in Vietnam, and the prospects for expanding economic ties between our two countries. Today, I would like to discuss the economic dimension of our relations with Vietnam - Vietnam's recent economic performance and the need for further economic reforms, and our emerging strategy for expanding economic relations between our two countries.

Vietnam's Recent Economic

Performance

I accompanied Secretary Christopher on his visit to Vietnam last August and took away a lasting impression of a nation eager to transform itself away from the command economy. Ho Chi Minh City is alive with the hum of human enterprise. Even Hanoi's graceful, tree-lined streets are increasingly filled with the hustle and bustle of commerce. Billboards advertising Japanese computers spring up from rice paddies. Foreign business people crowd Hanoi's congested airport.

Of course, despite the bustle, Vietnam is still a very poor country, with about half its population living below the international poverty line. In 1993, its per capita GDP stood at just over $200, less than half of China's and only a fraction of its ASEAN neighbors Thailand and Malaysia.

But a closer look at Vietnam's recent economic performance demonstrates how quickly things are changing. Vietnam's economy grew at an average rate of 7% from 1989-93, and by over 8% in 1994 - one of the world's highest economic growth rates. Exports increased during that period by almost 30% per year. Inflation fell from almost 400% in 1988 to about 10% in 1994.

Since 1992, foreign investors have increasingly turned to Vietnam to take advantage of this economic growth and Vietnam's hardworking and well-educated labor force. Foreign investment approvals by the Vietnamese Government climbed from $600 million in 1990 to 3.8 billion in 1994. The 1995 figure is expected to top $6 billion. While actual investments are lower than the amount of approvals, there is clearly increasing interest in Vietnam by a variety of firms seeking to develop the domestic market or to manufacture for export.

This recent economic dynamism has its roots in the government's decision, in the late 1980s, to abandon the central planning system. That decision was followed by a series of policy reforms that put into place the basic building blocks of a market economy. Vietnam decollectivized its agricultural sector, liberalized prices, unified its exchange rates, and devalued its currency. It reduced the government's fiscal deficit, largely by restricting credit for state-owned enterprises.

Today, Vietnam is seeking to integrate itself into the regional and world economies. In July, it joined the Association of Southeast Asian Nations, a grouping of some of the world's most vibrant economies. ASEAN's members - which include Malaysia, Singapore, Thailand, and, now, Vietnam - have committed themselves to forming a free trade area by early in the next century. Although a potential rival for foreign investment and export markets, Vietnam's ASEAN neighbors are becoming increasingly important players in Vietnam's economic development. As of mid-1995, ASEAN members accounted for over 200 investment projects in Vietnam valued at over $2.4 billion, about 16% of total foreign investment. Intra-ASEAN trade is likewise expanding rapidly, a trend that will accelerate as Vietnam begins to implement its commitments under the ASEAN free trade area.

Economic Hurdles To Overcome

Chronicling Vietnam's recent economic performance is only half of the story. The other half is where Vietnam chooses to go from here and how the country chooses to solve its most pressing development problems.