Vietnam: successful reforms - new regional and world player by HE Vu Quang Minh, Viet Nam Ambassador on 11-Jun-2012

HE Vu Quang Minh, Viet Nam Ambassador to London
with William Hague, Foreign Secretary Viet Nam [Vietnam] has undergone many changes in the past couple of decades. The Đổi Mới reforms have led to many changes and the country is now a significant regional and world player, with a rapidly-developing economy. HE Vu Quang Minh, Viet Nam Ambassador to the UK tells Roger about the development of the country and how it is successfully overcoming the challenges of shifting from a centrally-planned to a market-led economy.

q:  How did your career bring you to be Ambassador here in London?

a:  I am what they call a 'career diplomat'. I joined the Foreign Ministry after my graduation from the Moscow International Relations Institute. I had high marks at the college entrance exam which meant that I received a scholarship to go to study at the Institute in Moscow from 1982 to 1988.

It was a particularly fascinating time as Gorbachev came to power in 1985 and back in Viet Nam we initiated the Đổi Mới reform (or renewal) process in 1986. The latter reformed the country from a centrally-planned to a market-based economy.

After 1988, I returned to Ha Noi [Hanoi] and applied for a post in the Foreign Ministry and then worked there for over 20 years. I was in several departments at the Ministry and my previous posting before the UK was in Washington DC. That was a very fascinating post - between 2002 and 2006 - and after, I returned to Ha Noi for some time to work at the Ministry. After about five years, the opening in London came up and I applied. I was lucky to be chosen for this 'hot posting', particularly as we have just elevated the relationship between our two countries to a 'strategic partnership'.

I really feel that I am blessed to be here, particularly as it is my very first Ambassadorship. Before, I was a Counsellor - head of the Economic Section in Washington. I feel that this will be the most memorable posting for me in my life and I am very lucky to be here.

q:  It is a very important time for Viet Nam - UK relations?

a:  Yes. As we decided to elevate our relationship to becoming strategic partners, it is a very important and exciting time. We only have two effective strategic partnerships in Europe: first with the UK and later with Germany.

We have much to learn from the UK and your government. We admire the way that you manage your society and organise life here - we look up to you and can learn a lot.

q:  Viet Nam is sadly not that well-known in the UK. What are the main changes that Viet Nam has undergone after Đổi Mới?

The Viet Nam Embassy team

a:  You are correct. Viet Nam does need some additional effort to promote her image here. More and more British people are getting to know Viet Nam, but it would be good to increase awareness. Every year we have around 150,000 tourists from the UK (increasing by around 10% per year) and we also want to do more due to the strategic partnership.

Of course, there have been many changes over the past 26 years or so since the 1986 reforms. After 1986, there seems to be a pattern that after about every ten years significant things happen. Of course, before that we had 1975 when Viet Nam reunified and, of course, 1973 when the UK recognised Viet Nam officially. The UK has been a very close ally with the US over the years, but during the Viet Nam war, the UK officially opposed it. British people demonstrated against the war and we remember their support. The establishment of official relations in 1973 was at the time of the Paris Agreement and before the fall of Saigon - very early in our history - and that is also warmly remembered.

In 1995 Viet Nam became a member of the regional association ASEAN [Association of Southeast Asian Nations]. That was very significant, as before that time the regional nations had split allegiances with the Eastern European block and the USA. ASEAN is the regional 'family' so that is very important for us all.

1995 was also the year when we normalised our relations with the US - 30 years after the war ended. We also signed a co-operation framework agreement with the EU and submitted our request to join WTO [the World Trade Organisation]. Viet Nam was integrating into the regional and world economies. Our membership of WTO was not finalised until ten years later in 2005, but this was the start of an important journey for us.

Hai Van salt field

As I mentioned, it wasn't until 2005 that we signed the final agreement with the US and WTO after many multilateral meetings and discussions. Another ten year landmark - and in 2006, we auspiciously became the 150th member of WTO.

Before that period, our GDP per capita was below $1000 and we were a low-income economy, but in 2009 we broke the threshold and officially became a mid-income country. Of course, we are still at a low level of development, but that was an important milestone for us.

We continue to integrate ourselves into the world economy and, together with ASEAN, we also entered into the FTA [Free Trade Agreement] with Australia and Japan. There is also the Trans-Pacific Partnership (the TPP) which includes the US, Australia, New Zealand and Chile and in 2010 we became a 'negotiating party' to this, a very powerful group.

We have become a fully-integrated partner in the world. We are now the number one exporter of pepper and other agricultural products. We are also the second largest exporter of coffee - second only to Brazil. People don't realise this as we supply the raw materials, but don't have any processed brands. We are also second (to Thailand) for rice. Footwear is important - 60% of Clarks shoes are made in Viet Nam - and clothing - we produce high-quality products, but people are not really aware of it.

q:  Viet Nam has gown steadily over the past decades - why is that?

a:  The liberalisation of the economy with Đổi Mới has enabled us to incentivise workers and companies alike. It means that everyone tries their best - both for their own happiness and also for the growth of the economy. Because we had a low starting point, it meant that our growth could be quite rapid. Of course, for economies like the UK, a growth rate of 2% is fantastic, but we could develop much faster from our weaker position.

We are very committed to our reforms. As a result, we have very attractive FDI [Foreign Direct Investment] opportunities - amongst the most attractive FDI laws in the region. This has already and can contribute more to our development. Countries investing in Viet Nam include the UK which is about 17th, but the top ones are such as Taiwan, Singapore, Malaysia, Japan and other countries in our region.

q:  Are you targeting more FDI from the UK?

a:  We are looking at where the UK has its main strengths. Of course, that includes financial services and banking and could include telecoms where the UK is a leader. For example, we don't have Vodafone at the moment, but we have others.

We have a good relationship with the City of London - the Lord Mayor has visited us in the past and this year's Lord Mayor will visit later in the year. We have strong links with the finance community, the Stock Exchange and so on, as we are looking towards London to help us develop our institutions. Our Minister of Finance visited London in December last year too and we had an important meeting with the Lord Mayor and his team. This helped us plan how to further develop our deep links and co-operation. We aspire to be a regional finance centre - either Ho Chi Minh City or Ha Noi - so both cities are very keen to develop better relationships and a strong synergy for both Viet Nam and the region.

We also see the UK having a leading edge in hi-tech industries such as medical, chemicals and even food processing. Also in education, engineering (such as Rolls Royce) and agriculture. We would like to see an increase in trade in these areas. Tesco already outsources in Viet Nam, but we are hoping to have a deeper co-operation with them if they feel that there are opportunities - but the competition is fierce.

Many UK universities are already represented in Viet Nam and the number is increasing with joint degrees and sandwich courses. There are between 6000 and 8000 Vietnamese students in the UK at the moment (from A-Level to post graduate) and we hope that the number will increase to around 10,000 in the next couple of years. A-Level studies are important, so that students can prepare for university entrance - the UK is lucky to have such a good educational system and also, of course, the English language!

q:  What about natural resources?

a:  Viet Nam is rich in minerals and natural resources such as gas and our people are very hard working, intelligent, well educated and fast learners. Our literacy rates are very high (95 to 97%) and we have invested heavily in education - both the government and families themselves. In fact, we are second only to Thailand in terms of our investment in education as a percentage of GDP.

We are also in a very dynamic and favourable environment geographically - we are next to China, for example, and this poses both opportunities and challenges. China is a huge market, as is AFTA [the ASEAN Free Trade Area] with more than 500 million people.

The growth of GDP has been steadily maintained over the past ten years - on average 7% per year - even during the Asian crisis in 1987 we had positive growth. Last year it was 5.8% which was very good given the world economy.

q:  The rapid growth must have led to some big changes in society. Has it led to any particular challenges?

a:  You are quite right. There are often many conflicting goals and it is difficult. Achieving a balance is sometimes very challenging - growth, the environment, equality, efficiency, equity ... there are many trade-offs and it is a headache to manage at times.

Like all developing countries, we have experienced a migration of workers from the countryside into the cities. This is a big challenge and it is difficult to keep up with the growing demand for social services and the infrastructure - housing, education, public transport - everything. Also, because many of our main products are agricultural, this has led to a challenge in the rural areas. However, the increase in rural productivity has compensated for that, but we still need to modernise the rural areas so that a big gap doesn't develop between them and the cities. The standard of living and the provision of social services are critical to both urban and rural areas and the government has good policies in place to address the issues.

There are a number of main areas which are important to maintaining a balance and equality in society. Infrastructure - roads, transport, the flow of goods and people - is very important. Energy - such as electricity - is also critical and the third area is communications. Telephone, wireless networks and internet access are vital and telecoms companies are getting some good incentives to encourage them to develop the areas.

We have 35 million internet users in Viet Nam - about half the population - a rapid growth since 1990 when it first arrived. The backbone infrastructure is developing and we have underwater cables linking with the likes of Australia for very high-speed access. In terms of mobile phones, 3G is also developing and to support the internet. All hotels and places you stay in Viet Nam offer free internet access which is very important. Online business, e-commerce, internet banking are all critical to the development of the country. This has led to companies doing software development in Viet Nam and the outsourcing business.

The final area is education. Rural areas must have a good education system for the next generation. All these areas are very important, so we can keep good people in rural communities so the areas can develop.

Nha Moi

Housing in the new urban areas is very important - the development of the suburbs for workers and the development of the infrastructure there. Of course, it is easier than for remote rural areas. We are working on developing an effective public transport system to try to overcome traffic congestion and pollution and to help the people get to work every day. We have bus networks at the moment and have started the first underground lines in Ho Chi Minh City and the first over-ground line is being built in Ha Noi - it is elevated like a 'flyover bridge'.

Urban and rural development are challenges for all developing nations.

q:  Did the reforms have an impact on the political environment?

a:  We don't really have political changes per se, but we do have changes in the way the government manages the economy and also changes in the way the state sector functions. The reforms are having a big impact on the way the state sector is managed as you would expect with a change from a state-driven to market-driven system. You have to change the rules of the game. The state no longer dictates what sort of products are made, the quantity and the price, for example, as you have to follow the market forces - supply and demand.

It has had an impact on the way things are managed, of course. The market system relies far more on individuals, so it is important to introduce incentives and such as favourable taxation. The main challenge is how the state-owned companies are managed. Before there were directives - it was command and control, but now all sectors are equal so the state-owned companies have to compete as equals in the market. The management now has autonomy and accountability, which means that it is important to find the right management board members.

There is also a decentralisation of the government itself. Many decisions are now being passed to the local level - such as investment incentives offered for FDI projects. Of course, in some sensitive areas related to national resources and security, things are still centralised. This is another area in which we are learning - balancing things like efficiency with other goals like the preservation of the environment, the impact of development and harmonising it with the preservation of culture, environmental and cultural issues.

q:  Is the environment a big challenge?

a:  Yes. Especially when we have to balance it with development of industry and the cities. The delegation of responsibility to local authorities also adds to the challenge.

We are now getting tougher with investors who bring in outdated technology or technology that isn't environmentally friendly. In the past few years, a number of companies have been fined as they were caught polluting the rivers, for example. We have now passed through the period when we had to accept any kind of investment and we now make sure that it has a balance of all the considerations. It isn't only important for Viet Nam - we are all connected globally and share the same environment, so it is important that we look after it.

The Mekong river is a focus for us in terms of development and the environment. It is a good example of how such things are shared between countries, so we co-operate closely with Thailand, Cambodia, Laos and Myanmar in the preservation of the environment and management of the water resources.

We have also looked at the ship building and breaking industries, but we realised its impact on the environment, so we are having to reconsider the situation. From an economic point of view, it is attractive in some ways, but environmentally it is a challenging industry.

We have all the necessary legal instruments in place - the question now is the implementation and enforcement. We like to look at this in terms of incentives, so that we can attract good quality investment. For example, in terms of energy, we are concentrating more on wind and solar power. We have considered the difficulties with hydroelectricity. Of course, it is environmentally good in one way, but its impact on the local area and communities can be huge. You have to build large dams, flood areas and change the local environment significantly, so we are concentrating more on the other forms of energy generation.

Ha Long bay

q:  Is tourism developing well?

a:  That is another area in which the UK and Viet Nam can co-operate. It is important for development, but, again, we have to keep a balance with environmental and cultural issues. Cultural and adventure tourism are both important to us, as well as meetings and exhibitions.

Viet Nam has many beautiful natural resources - for example, we have the largest cave in the world - you may have seen it mentioned in recent adverts 'big enough to put a jumbo jet inside' - and another even bigger one has just been discovered. We have wonderful beaches, a lovely climate and stunning countryside.

We are also working with our ASEAN neighbours so that such as visa requirements are facilitated for travellers enabling tours to cover three or four countries. That way it reduces the cost for travellers and increases the tourist flow from one country to another. In particular, Viet Nam Airlines is working to promote the 'four countries, one tour' concept.

HE Vu Quang Minh on his way to present his Credentials
to Her Majesty the Queen

q:  How do you see the Viet Nam - UK relationship developing?

a:  2011 was a very good year in terms of the strategic relationship with the UK. We had high-ranking visits in both directions, we signed some MOUs for co-operation in a number of important areas and I have recently signed the 2012 action plan with your Minister. Of course, last December, we launched direct flights from the UK to Viet Nam and we held a promotional event at Buckingham Palace hosted by the Duke of York in which some 200 UK companies participated.

This is a very exciting time for me to be in the UK. We love your country, your football, your literature and so many things about your society and I am honoured and delighted to be here and I am really looking forward to continuing to develop our excellent ties even more in the coming years.

You can find more information and contact the Embassy of Viet Nam in London here: www.vietnamembassy.org.uk

For information on tourism in Viet Nam please visit: www.vietnamtourism.com

Tweets by @biz_works