Preliminary country paper On Competition Scenario in Vietnam Prepared by the Central Institute of Economic Management (CIEM) for the 7-UP MARK II Project Launch Meeting 23rd-24th, April Hanoi, Vietnam

1.1. Geographical location, population  Land territory: Total: 330,991 sq km.  Borderline: Total 4,567 km, inclusive of 1,150 km bordering Cambodia, 1,350 km with China, and 2,067 km with Laos.

1.1. Geographical location, population (Cont.)  Population: 80.7 million (in 2003) Male Pop: 39.2 million, Female Pop: 41.5 million; Urban Pop: 19.9 million (or 20%) Male Pop: 39.2 million, Female Pop: 41.5 million; Urban Pop: 19.9 million (or 20%)  Population growth rate: 1.31%

1.2. Economic performance The average growth rate for 91-95, , and Agriculture: 4.1%, 4.3%; 3.6% Agriculture: 4.1%, 4.3%; 3.6% Industry: 12%; 10.6%; 10.1% Services: 8.6%; 5.7%; 6.3% GDP: 8.2%; 6.9%; 7.1%

1.2. Economic performance (Cont.) Economic Structure of agriculture, industry, and service 1990: 31.8%; 25.2%; 43% 1995: 26.2%; 29.9%; 43.8% 2000: 23.2%; 35.4%; 41.4% 2003: 21.0%; 38.5%; 40.5%

1.2. Economic performance (Cont.) The inflation has been kept at a low rate since The inflation rate in 2000 was -0.6%, in 2001: 0.8%, in 2002: 4%, and in 2003: 4%. The fiscal deficit stayed at a level less than 5% of GDP. The external debt is controlled at a level of about 40% of GDP

1.2. Economic performance (Cont.) The average annual growth rates of exports and imports during the period are 20.9% and 15.5%, respectively. the exports and imports per capita are still very low. In 2003 the export and import values per capita are equal to USD and , respectively.

2.1. Industrial Policy Industrial development strategy is not clearly set up. The “freeze” and “fever” are alternated from year to year in commodity market. the leading role of the state sector is emphasized state corporations was established by administrative measures (Decision 90/TTg and 91/TTg), not by market forces

2.1. Industrial Policy (Cont.) The non-state sector is at a more disadvantageous in comparison with the state sector. A large share of investment spending has concentrated on key capital-intensive import-substitution industries.

2.2. Trade Policy The extensive trade reform has been undertaken since The state monopoly on trade was abolished. In 1989, quotas and quantitative targets on all but seven exports and twelve import items were eliminated; all direct export subsidies were eliminated.

2.2. Trade Policy (Cont.) The new tariff schedule (Decision 110/2003/QÐ- BTC) has 4,200 additional tariff lines in comparison with the old one. The new tariff schedule has 15 tariff rates: 0%, 1%, 3%, 5%, 7%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, 80%, 100%, less 5 rates than the old schedule. The average tariff rate is 18.2% compared to the average rate of 16.8% of the old tariff schedule.

2.3. Privatisation and regulatory reform policy The 1992 Constitution recognizes the right to business freedom of enterprises and the development of a multi-sector economy. In Vietnam the “equitisation” terminology may be understood as a “quasi- privatisation”. It means that SOEs are allowed to transfer to one of the ownership forms defined by the Enterprise Law.

2.3. Privatisation and regulatory reform policy (Cont.) a five-year SOE reform plan was set in March SOEs are subject to SOE reform measures, mostly through equitization (1440), divestiture (140), or liquidation (220). An additional 200 SOEs will be merged or consolidated. the idea to unify the enterprise law, the SOE law into a common law is considered. The unification of the law on domestic investment promotion and the law on foreign direct investment is also considered

2.4.Investment Policy The domestic investment environment is vitalized by the Enterprise Law. During , about 75 thousand of enterprises were established, while in the period there were only 45 thousand enterprises. The total registered capital was about USD 10 billion, much higher than FDI and 4 times higher than the investment of enterprises during the previous period.

2.4.Investment Policy (Cont.) Since 1997 FDI has reduced significantly. The improvement has started since 2000, but not reached the level before Some improvements have been made in the Law on Foreign Direct Investment in June Its guiding document is Decree 24/2000/ND-CP. The stock exchange market is still at the early stage of its development; the size is very small.

2.5. Government Procurement Policy The process of establishing a modern procurement framework for public expenditure in Vietnam, based on the principles of open competitive bidding, began after the first procurement review in Decree 66/2003/ND-CP on June 2003 amended a number of articles in Regulation on Bidding, attached to Decree 88/1999/ND-CP and Decree 14/2000/ND-CP.

2.5. Government Procurement Policy The process of establishing a modern procurement framework for public expenditure in Vietnam, based on the principles of open competitive bidding, began after the first procurement review in Decree 66/2003/ND-CP on June 2003 amended a number of articles in Regulation on Bidding, attached to Decree 88/1999/ND-CP and Decree 14/2000/ND-CP.

2.5. Government Procurement Policy (Cont.) Some weaknesses of the legal and regulatory framework in regard to the government procurement: lack of clarity due to overlapping and conflicting provisions; restrictions in the use of open, international competitive bidding do not allow for a level playing field; no regulation concerning time limits and participation in bid opening; lack of clear guidelines for advertising the Draft Ordinance on Procurement is under preparation

2.5. Labour policy About 90% of total jobs are created in the non-state sector; the rest 10% are created by the state and foreign invested sector. The new Labor Code implemented in 1995 and related Decrees cover three types of labor regulations: minimum wages, non- wage compensation, and laws regulating employment termination.

3. The further research issues The issues needed the further research are: a) Nature of market/competition; b) Sectoral policies c) Anti-competitive practices; d) Consumer movement

Thank you very much!