US - Vietnam Relation to a New Height

US - Vietnam Relation to a New Height

MR. Seth D. Winnick

US Consul General

On the occasion of the 10^th anniversary of the establishment of diplomatic relations between the US and Vietnam, Vietnam Business Forum talked with Mr Seth         D. Winnick, the US Consul General in Ho Chi Minh City. He is a career member of the Senior Foreign Service of the United States, class of Minister-Counselor. In his twenty-three year career, he has specialized in economics, development and finance in industrialized and developing countries and in transition economies, as well as in multilateral diplomacy. He served most recently as the Director of Economic and Development Affairs in the State Department's Bureau of International Organizations. His foreign languages are French, Russian and basic Vietnamese.

What was your first impression when you came to Vietnam?

When I came to Vietnam I found a country where economic development is happening everywhere.  I could immediately see the bright prospects for the economy.  However, Vietnam is only growing at two-thirds of its potential; it could be performing even better.  To accelerate growth significantly, Vietnam needs to liberalize and deregulate the economy; to develop its services sector, and especially financial services in order to mobilize domestic savings for investment.  This will boost growth and signal a strong, healthy, emerging economy for both foreign and domestic investors.

Could you please tell us about the achievements in trade and economic cooperation between the U.S. and Vietnam in past years?

The U.S.-Vietnam Bilateral Trade Agreement (BTA) launched a new era of development for Vietnam and signaled a commitment by the government to begin to open the economy.  Vietnam's exports to the U.S. have increased by more than a factor of ten.  In the year before the BTA was signed, Vietnam shipped about US$500 million in goods to the United States.  Last year the figure was US$5.5 billion. While Vietnam has experienced great success in exporting goods like textiles and seafood to the United States, two-way trade also benefits both countries.  For example, Vietnam's furniture industry imports U.S. hardwood that it makes into furniture for export to the United States and the rest of the world.

WTO membership is the obvious next step for Vietnam, but membership requires fundamental changes in Vietnam's economic governance that go beyond the BTA.  WTO accession is more than just a means for Vietnam to escape from textile quotas, to have permanent normal trade relations with the world, and to access dispute resolution mechanisms.  WTO accession means a commitment to international norms and standards in Vietnam.  This is key for Vietnam's trade partners, but the greatest benefits from this process will be reaped by the people of Vietnam.

How many projects have American companies invested in Ho Chi Minh City and southern provinces so far?

American investment in Vietnam is strong and growing.  Many U.S. businesses are investing in Vietnam via third-countries, especially Singapore.  A recent study shows that when U.S. investment through third countries is included, the United States is one of the top investors in Vietnam. Much of this investment is in oil and gas, but investment in services is on the rise, and I believe there is great potential for further investment in services.  Vietnam has the potential to attract much more foreign investment, both direct investment and portfolio investment.  For example, the United States has tremendous expertise in finance, information technology and other services that could benefit Vietnam.atdtages of implementing these projects?

Investors are attracted to Vietnam for a variety of reasons, including a growing domestic market, high quality production es and an educated and growing workforce.  However, companies from all countries can become frustrated by cumbersome licensing procedures and intrusive restrictions on business activities as well as the inherent inefficiencies of the state owned sector.  Just allowing businesses to engage in any legal activity, instead of licensing each activity separately would enhance the investment climate.  Reducing paperwork, increasing transparency and deregulating would do even more to increase foreign investment in Vietnam.  Opening key sectors to all players and reducing the exclusive rights and privileges of state owned companies would turbocharge foreign investment infloWhat are your comments on trade activities between the two countries at the present time? What kinds of goods have a priority to enter the U.S. market at the momentTrade between the United States and Vietnam is booming; the United States is Vietnam's single largest export market.  I think an important way the Government of Vietnam can encourage trade is to seek the input of Vietnamese business in developing trade policy.  In general, the interests of foreign companies in Vietnam are identical to the interests of private Vietnamese enterprises.  The Vietnamese business community has excellent insight into doing business with the United States and can guide government policyBesides trade and economic cooperation, from your point of view what other problems are you most interested in?

Vietnam has experienced rapid growth largely through exports.  It now needs to focus more on the financial side of the balance sheet.  There is a great deal of capital in Vietnam that is not being used productively.  The further development of the banking system and other financial instruments like securities and insurance will allow Vietnam to tap into capital that is currently held in the form of gold or cash.  Vietnam needs to harness the large amount of domestic savings that exists in this country.

On the foreign side, the policies that will mobilize domestic capital will attract foreign capital as well.  Currently Vietnam's main forms of foreign investment are remittances, FDI, and official development assistance (ODA), in that order.  In some ways, ODA hinders the development of commercial financial markets and investment because Vietnam relies heavily on soft ODA financing for infrastructure development.  Commercial financing can complement ODA and provide more economically viable investment opportunities that will help the country in long term international competition.

I am also very interested in the problem of rural development and agriculture.  With 80 percent of the population dependent on agriculture, it is almost too simple to say that raising incomes depends on rising agricultural productivity. The introduction of appropriate biotechnology offers tremendous potential for improving incomes and nutrition in Vietnam.

 What do you think about the current Vietnamese economy?

In 2005 Vietnam has set a growth target for 8.5 percent; a respectable goal but also a conservative one. Vietnam has the potential to achieve a 10 to 12 percent sustained annual growth rate. Some provinces are already growing faster. To achieve this at the national level, Vietnam will have to tackle deregulation. Countries that are most successful in world markets have governments that play a limited role in the economy.  There is much discussion in Vietnam about reforming money-losing SOEs. But Vietnam also needs to examine profitable SOEs, many of which act as monopolists and inhibit growth. Competition spurs growth. This is especially true in key sectors such as energy and power generation as well as tourism and retail distribution.

What are your own ideas for developing trade and economic cooperation between U.S. and Vietnam and to promote American investment in Vietnam in the future?

There are well over one million Americans who were born in Vietnam and every year there are more American tourists and visitors and greater bilateral trade.  In southern Vietnam, there is a great familiarity with American culture and customs.  The partnership between our two countries is an easy and natural one that was simply delayed by history.  Now both countries are making up lost ground and forging ahead. 

Thank you very much.