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

The second major impression I brought back from Vietnam is that, simply put, Vietnam is a very difficult place to do business. This point was repeated over and over again by U.S. businessmen and women working in Vietnam. Very few Vietnamese officials have a good understanding of market economics, and the government's efforts to regulate the economy suffer as a result. While the basic building blocks of a market economy may be in place, the Vietnamese Government restricts the operations of foreign businesses through an array of often non'-transparent and contradictory regulations on trade and investment activities.

There is a long list of specific regulations and policies which make doing business difficult in Vietnam. That list includes, for example, a highly protectionist and bureaucratic trade regime with import quotas and strict licensing of firms that trade. There are also broad restrictions on the types of foreign investment allowed, including an outright prohibition on the operation of commercial and retail establishments by foreigners, strict foreign exchange controls, and a lack of effective dispute settlement procedures. Weak protection of intellectual property rights is also a major concern.

The cumulative weight of these measures serves as a drag on Vietnam's economic growth and development. Vietnam needs to follow its ASEAN neighbors to undo these restrictions and embrace more market-oriented, outward-looking economic policies. It must liberalize its economy, energetically privatize its large state-owned enterprises, and modernize its legal and financial systems to develop highly competitive industries that combine the best of local entrepreneurship and skills with foreign capital and technology.

Vietnam must also find ways to open political participation and build a law-based, civil society. There is a growing recognition that sustained economic development is more likely where courts provide due process, where newspapers are free to expose corruption, and where business people can make decisions with free access to accurate information. In fact, our business people in Vietnam told us that legal reform is critical to Vietnam's continued economic success. As Secretary Christopher noted in his speech in Hanoi in August, the foundation of a market economy - rights that protect contracts, property, and patent - can only be guaranteed by the rule of law.

Vietnam needs to make changes in all these areas if it is to realize its economic potential. Some of these changes will take time. But in the short-term, the key economic factor depressing foreign investment and economic growth is the country's weak infrastructure. Vietnam needs billions of dollars of investments in roads, railroads, ports, telecommunication systems, power plants, and sewer and water systems.

The economic interests of the U.S. and Vietnam dovetail nearly exactly in this area. Vietnam needs capital, technology, and project management expertise. U.S. firms are world leaders in infrastructure systems and have the expertise, technology, and access to financial markets to be major players in helping Vietnam meet its infrastructure needs.