AGRICULTURE & INDUSTRY 9

TRADE & BALANCE OF PAYMENTS 10

ASIAN DEVELOPMENT BANK REPORT FOR 2002 10

CONSULTATIVE GROUP 11

Vietnam is located in South-eastern Asia, bordering the Gulf of Thailand, and South China Sea, alongside China, Laos, and Cambodia

Tropical in south, monsoonal in north with hot, rainy season (mid-May to mid-September) and warm, dry season (mid-October to mid-March)

Illicit drugs

Minor producer of opium poppy with 2,100 hectares cultivated in 1999, capable of producing 11 metric tons of opium; minor transit point for Southeast Asian heroin; opium/heroin/methamphetamine addiction problems.

Originating in what is now southern China and northern Vietnam, the Vietnamese people pushed southward over two millennia to occupy the entire eastern seacoast of the Indochinese Peninsula. Ethnic Vietnamese constitute about 90% of Vietnam’s 79.9 million population.

Vietnam’s approximately 2.3 million ethnic Chinese, concentrated mostly in southern Vietnam, constitute Vietnam’s largest minority group. Long important in the Vietnamese economy, Vietnamese of Chinese ancestry have been active in rice trading, milling, real estate, and banking in the south and shop keeping, stevedoring, and mining in the north. Restrictions on economic activity following reunification in 1975 and the subsequent but unrelated general deterioration in Vietnamese-Chinese relations sent chills through the Chinese-Vietnamese community. In 1978-79, some 450,000 ethnic Chinese left Vietnam by boat as refugees (many officially encouraged and assisted) or were expelled across the land border with China. The second-largest ethnic minority grouping, the central highland peoples commonly termed Montagnards (mountain people), comprise two main ethno linguistic groups—Malayo-Polynesian and Mon-Khmer. About 30 groups of various cultures and dialects are spread over the highland territory.

The third-largest minority, the Khmer Krom (Cambodians), numbering about 600,000, is concentrated near the Cambodian border and at the mouth of the Mekong River. Most are farmers. Other minority groups include the Cham—remnants of the once-mighty Champa Kingdom, conquered by the Vietnamese in the 15^th century—Hmong, and Thai. Vietnamese is the official language of the country. It is a tonal language with influences from Thai, Khmer, and Chinese. Since the early 20^th century, the Vietnamese have used a Romanized script introduced by the French. Previously, Chinese characters and an indigenous phonetic script were both used.

The history of Vietnam is best described as one long, continuous struggle for freedom and independence. It was ruled by the Chinese for nearly a thousand years; colonised by the French for almost a hundred years (1859 to 1945); occupied by Japanese troops during the Second World War; and fought the Americans between 1965 until April 1975. The country was eventually reunified (i.e. the South under the American influence and the North under the Vietnamese communists) as the Socialist Republic of Vietnam in January 1976 under the leadership of the Communist Party of Vietnam.

Ho Chi Minh declared Vietnam independent of French colonial rule on September 2, 1945, after Japan's surrender in World War II, but the French returned to rule Vietnam until their defeat at Dien Bien Phu in 1954. The Geneva Agreement divided Vietnam into north and south. For the next nine years, fighting between the Soviet-and Chinese-supported communist north and the United States-backed south intensified. In 1965, the US committed its armed forces to the war in Vietnam, where they remained until the 1973 Paris Peace Agreement. But fighting between Vietnamese forces continued until April 30, 1975, when communist troops captured Saigon and reunified the country.

In December 1978, following two years of Khmer Rouge attacks across the border, Vietnam invaded Cambodia and ousted the Chinese-backed Khmer Rouge regime of Pol Pot. China responded by launching a brief attack against Northern Vietnam. Facing a deteriorating economic situation and international isolation, Vietnam's Communist Party introduced free-market reforms in the late 1980s. In the ensuing years, Vietnam slowly mended relations with China, leading to exchanges of state visits by each country's top leaders every year since 1993 with the latest being the state visit to Vietnam by Chinese President Jiang Zemin in March 2002.

In the early 1980s, the Vietnamese leadership appeared committed to the advancement of reform although the continuing influence of hard-liners remained an obstacle to progress. In 1986, facing a deteriorating economic situation and international isolation, Vietnam's Communist Party introduced free-market reforms. The country's relations with the US were also strained by the period characterised by the Vietnam War, when in 1965 the Americans committed its armed forces. In 1994 Washington lifted its 19-year economic embargo and in July 1995 the two countries restored diplomatic relations. In July of 1995, the country became the seventh member of ASEAN.

Vietnam is one of the world's five remaining one-party communist states. Decision-making is shared by national and provincial government and agencies, slowing the political process and encouraging a cautious approach to major policy issues. Political power lies with the Communist Party of Vietnam. Its ultimate organ, the fifteen-member Politburo, holds authority over the implementation of social, economic, labour, defence, security and foreign policy and is elected by the Party's Central Committee made up of 150 members.

A new state constitution was approved in April 1992, reaffirming the central role of the Communist Party in politics and society, and outlining government reorganization and increased economic freedom. Though Vietnam remains a one-party state, adherence to ideological orthodoxy has become less important than economic development as a national priority.

The most important powers within the Vietnamese Government - in addition to the Communist Party - are the executive agencies created by the 1992 constitution: the offices of the president and the prime minister. The President of Vietnam functions as head of state but also serves as the nominal commander of the armed forces and chairman of the Council on National Defence and Security. The Prime Minister of Vietnam heads a cabinet currently composed of four deputy prime ministers and the heads of 31 ministries and commissions, all confirmed by the National Assembly. Notwithstanding the 1992 Constitution’s reaffirmation of the central role of the Communist Party, the National Assembly, according to the Constitution, is the highest representative body of the people and the only organization with legislative powers. It has a broad mandate to oversee all government functions. Once seen as little more than a rubber stamp, the National Assembly has become more vocal and assertive in exercising its authority over lawmaking, particularly in the recent years. However, the National Assembly is still subject to party direction. About 80% of the deputies in the National Assembly are party members. The assembly meets twice yearly for 7-10 weeks each time; elections for members are held every 5 years. There is a separate judicial branch, but it is relatively weak. Overall, there are few lawyers and trial procedures are rudimentary.

The present 15-member Politburo, elected in April 2001 and headed by Communist Party General Secretary Nong Duc Manh, determines government policy, and its nine-person Secretariat oversees day-to-day policy implementation. Although there has been some effort to discourage membership in overlapping party and state positions, this practice continues. In addition, the Party’s Central Military Commission, which is composed of select Politburo members and additional military leaders, determines military policy.

A Party Congress, comprised of 1,168 delegates at the Ninth Party Congress in April 2001, meets every 5 years to set the direction of the party and the government. The 150-member Central Committee, which was elected by the Party Congress, usually meets at least twice a year.

The Communist Party of Vietnam at its 9th Congress in May 2001 concluded with the appointment of Mr Nong Duc Manh, the former National Assembly Chairman as its new Secretary-General. The new leader replaces the outgoing General Le Kha Phieu whose conservative policies, old-fashioned views, hard-line approach and ineffective handling of Vietnam's struggling economy proved his downfall. Under Mr Manh's leadership, the National Assembly that once rubber stamped decisions made behind closed doors, became a forum for televised discussions of policy issues. His appointment did not affect the positions of the other two members of Vietnam's ruling Troika - Prime Minister Phan Van Khai and President Tran Duc Luong who remain in their posts. The new Secretary General is an ethnic minority leader and has been head of the National Assembly for nine years.

In recent years, the party's prestige has been tarnished by widespread corruption, red tape, poverty, religious repression and a growing irrelevance to the younger generation. In a damning report tabled at the Party Congress in May 2001, the party announced that it has expelled nearly 300 members and disciplined more than 16000 others in a drive against graft and mismanagement in the past two years. Up to 53 senior cadres including 11 members of the powerful Central Committee have been disciplined. A 2001 survey by the Hong Kong based Political and Economic Risk Consultancy found Vietnam the most corrupt country in Asia, scoring 9,75 on a scale of 10.

Manh has a reputation as a savvy politician who is effective in seeking consensus - a skill that could be put to good use since Vietnam remains divided on its political and economic path. While many officials believe reforms need to be accelerated to keep Vietnam from lagging even further behind its Asian neighbours economically, many also fear that the Communist Party will lose its grip on power if reforms go too far. The prospect of inequitable development and social disintegration, which some elements of the Party attribute to market forces, has also been a source of considerable debate within the Party. The Party's collective ambivalence towards reform is reflected in Vietnam's current leadership, representing a reformist and conservative mix. Vietnam finds itself at a political and economic crossroad after a decade of enacting economic reforms that have fostered a small but vibrant free market. In a world where Cold War politics have given way to the forces of globalisation, Vietnam is cautiously trying to adopt aspects of capitalism while not veering too far from Marxist-Leninist ideology.

Vietnam remains a one-party communist state with all the associated restrictions on civil and political rights. The CPV retains complete control over political power but the regime is not tyrannical and through the reforms enacted under the 'doi moi' process, individuals' economic freedom has increased significantly over the past 20 years and significant progress has been made in eradicating poverty. The Vietnam Development Report 2000 noted that the proportion of people under the national poverty line declined from 58% to 37% between 1993 and 1998. Citizens are not free to change their government, or to form or join other political parties nor is the judiciary fully independent of the CPV. Press freedom is still considered a problem. Domestic press routinely follow government guidance and the media is not allowed to function independently. Foreign correspondents routinely have their visa renewals refused when critical articles appear.

On 19 May 2002 Vietnamese voted for a new National Assembly, which faces a heavy five-year legislative agenda of tough reforms needed to integrate the country into the world economy. Going to the polls on the 112th anniversary of the birth of national founder Ho Chi Minh, Vietnamese voters sought to install a 498-seat assembly that will be in place for the next five years.

The National Election Council declared that at least 98.85 per cent of Vietnam's voters cast their ballots in the weekend elections.

The electorate of 40 million had limited choices, given that Vietnam is a one-party communist state in which calls for pluralism remain a criminal offence. The Communist Party oversees the selection of candidates. This year it allowed 13 independents onto the final list of candidates, but they still had to accept the party's constitutional monopoly of power. The number of private sector candidates remains tiny at 14 of the total 759.

The 498 members elected have a massive task to carry on the bid to reform the country's legal system and make laws to regulate ongoing economic reforms to ensure Vietnam’s successful implementation of the VN-US BTA and its ambitious bid to join the World Trade Organisation by 2005. Visible pressure also has been mounting from donors, including Western countries, Japan, the International Monetary Fund and the World Bank - which will provide US$2,4 billion in assistance to Vietnam during 2003 in exchange for speedy legal and economic reforms.

Increasingly widespread corruption and conspicuous wealth of senior officials have tarnished the image of the Communist-ruled Vietnam. A number of Communist Party officials and high-ranking government officials have been exposed for corruption and the National Assembly has stated that the Communist Party is determined to tackle corruption.

The reforms are expected to significantly improve the environment for private business and foreign investment, an area where Vietnam, like other Southeast Asian countries, is struggling to compete with its giant neighbour, China. The big tasks ahead have been reflected in an increasing, though still tiny percentage of candidates from the private sector and the fact that 125 delegates will sit for the first time as full-time paid representatives.

Since the collapse of the USSR, Vietnam has largely set aside ideological considerations in seeking to integrate itself into the international community. Joining ASEAN in 1995 marked a significant step forward in its regional integration. Although one of the more conservative ASEAN members, Vietnam is playing an increasingly active role in ASEAN, and in particular is a strong supporter of the ASEAN Draft Regional Code of Conduct on the South China Sea. Vietnam held the Chair of ASEAN and the ASEAN Regional Forum (ARF) during 2000/01 and attaches importance to its new membership of ASEAN.

Relations between Vietnam and her largest neighbour, China, are complex. The Chinese communists gave important support to the CPV after 1949, but despite ideological similarities, nationalist attitudes led to disputes, as did disagreements over Cambodia, which precipitated the brief Chinese invasion of Vietnam in 1979. Vietnam-China relations are however improving and Vietnam is putting considerable political effort into developing this relationship. China's Vice President and Premier visited Vietnam in 1998 and 1999 respectively. Former CPV General Secretary visited China in February 1999. The Vietnamese Prime Minister visited China in September 2000 and the Chinese President visited Vietnam in February 2002. Vietnam and China also signed a land border treaty on 30 December 1999 and concluded a maritime boundary delimitation agreement in the Gulf of Tonkin during a visit to China by the Vietnamese President in December 2000.

Vietnam enjoys close relations with its old allies who control the governments of Laos and Cambodia. However, there are still significant traces of latent antipathy towards the Vietnamese amongst the ordinary Cambodian population and to a lesser extent amongst the Lao because of the history of Vietnamese territorial expansion.

Vietnam's relationship with the USA continues to be complex. Full diplomatic relations were only established in 1995 and the two countries signed a Bilateral Trade Agreement in July 2000. The ratification of this agreement by both parties signified a major step towards the normalisation of relations. Former President Clinton became the first US President to visit Vietnam since the Vietnam War. In Vietnam, many elements interpret US concern over human rights issues and support for opponents of the regime as evidence of a desire to continue interfering in Vietnamese internal affairs.

Relations with Russia are still strong but of diminished trade and aid relevance. Japan is now Vietnam's major trading partner and bilateral aid donor. Russia will not renew its lease on the naval facilities at Cam Ranh Bay and will withdraw by 2004. The withdrawal will see the end of Russia's 26-year military presence. Prime Minister Khai visited Russia in September 2000 and during a visit to Vietnam by President Putin in March 2001, the first visit to Vietnam by a head of state from Moscow - Russian or Soviet, the two countries signed a strategic partnership agreement, intended to place relations on a renewed footing.

Vietnam’s relations with the EU under the presidency of Denmark has seen increasing pressure to address human rights issues, in particular the handling of minorities in mountainous and remote areas. The establishment of a human rights dialogue between MOFA and the EU has not succeeded in addressing these concerns and further pressure might be exerted by attaching certain conditionalities to its aid package. France remains one of Vietnam’s main ODA and trade partners while the French language and culture are still evident in the country.

Japan still remains the largest individual donor to Vietnam while Tokyo’s annual aid budget keeps shrinking. Following the debacle in 2002 when the Government suddenly imposed a ban on the registration of new motor cycles after having granted import licences in an effort to address the high incidences of traffic accidents - caused an immediate reaction from Japanese and Taiwanese companies and eventually resulted in the subsequent reversal of the decision. Japan’s aid and loans have therefore been pledged on condition that concrete steps are taken towards administrative and legal reform.

The Ministry of Foreign Affairs of Vietnam initiated the first African conference entitled "Vietnam-Africa: Opportunities for Cooperation and Development in the 21^st Century", held on 28 – 29 May 2003 in Hanoi, attended by 84 foreign delegates from 23 countries, 10 international organisations, including 8 ministers and vice-ministers. The Conference was divided into four main sessions : (1) Overview of Vietnam and Africa; (2) Agriculture and tri-partite cooperation; (3) Trade, finance, construction, industry and transport cooperation; (4) Labour, health, education and human resource development.

The Conference presented the opportunity for bilateral meetings with delegations with their Vietnamese counterparts and the signing of some bilateral agreements. Delegates paid a visit to the Ho Chi Minh Mausoleum, held a meeting with President Tran Duc Luong and a courtesy call on General Vo Nguyen Giap.

The two countries established diplomatic relations in December 1993. Vietnam's former Ambassador to Angola, Mr Ta Nguyen, presented his credentials as the first non-residential Ambassador to South Africa on 22 July 1997. Vietnam in 2000 moved its residential embassy from Luanda to Pretoria. South African Ambassador to Bangkok, Mrs Buyi M Pheto presented her credentials as South Africa's second non-residential Ambassador to Vietnam on 14 August 2001.

The late former Foreign Minister of South Africa, Mr Alfred Nzo, visited Vietnam in July 1998. Vietnam was represented by its former Vice-President, Madame Nguyen Tin Binh at former President Mandela's inauguration. The Deputy Minister of Foreign Affairs, Mr Aziz Pahad, visited both Hanoi and Ho Chi Minh City in September 2000 for high-level discussions.

After presenting her credentials to President Tran Duc Luong in August 2001, Ambassador Pheto accompanied by the Mission's Economic Counsellor, paid a follow-up visit to both Hanoi and Ho Chi Minh City in October 2001 during which they engaged several Ministries, Chambers of Commerce, business organisations and the media. All of their interlocutors stressed the need for SA to establish a residential embassy in Hanoi and to strengthen economic co-operation and bilateral trade.

Mr Nguyen Phu Binh, Vice/Deputy Minister of Foreign Affairs, represented Vietnam at the World Conference Against Racism in Durban from 31 August to 7 September 2001. During the visit, Deputy Minister Binh met the Deputy Minister of Foreign Affairs, senior officials at the Departments of Foreign Affairs, Trade and Industry and of Environmental Affairs & Tourism and the Secretary-General of the ANC. He also addressed a seminar hosted by the African – Asian Society.

During the meeting with Foreign Affairs, Mr Binh noted that Vietnam was eager to substantially broaden relations with South Africa in the promotion of trade, especially tea/rice/ textiles, which were seen as a high priority. He also alluded to third party trade in Africa and Asia and joint projects in agriculture in third countries. The Vietnamese government is also eager to obtain SA investment especially for fertiliser and oil production and is interested in concluding the following agreements with SA: avoidance of double taxation agreement, investment protection agreement, a scientific and economic co-operation agreement and the creation of a permanent mechanism of exchange between the two ministries to manage bilateral relations.

Mr Binh also met Minister Dlamini Zuma and conveyed an invitation from the Vietnamese Foreign Minister to Minister Dlamini Zuma to pay an official visit to Vietnam. Minister Dlamini Zuma responded that a visit would be scheduled for 2002.

Mr Pahad stated that, during his visit to Vietnam in September 2000, discussions were held with the Ministry of Defence. Mr Pahad also expressed the wish that the expansion of ties between the two countries should focus on agriculture, science & technology, trade & industry, tourism and foreign affairs co-operation.

The Permanent Deputy Minister of Health, Prof. Pham Manh Hung, visited South Africa from 6 - 15 October 2001. Vice Foreign Minister Binh also visited SA to participate in the NAM Ministerial meeting during May 2002.

Deputy Prime Minister Pham Gia Khiem headed Vietnam’s delegation to the WSSD in August 2002.

The Embassy was established in October 2002. It is expected that the first South African Ambassador will be appointed during late 2003.

A trade delegation from Vietnam visited SA during beginning November 2002 while representatives from DTI came on a technical visit to Vietnam during 3 – 6 November 2002. The Deputy Defence Minister visited SA 15 - 17 July 2003 at the invitation of Deputy Defence Minister Mdladla-Routledge.

President Luong extended an invitation to President Mbeki for a state visit during 2003 and a similar invitation was extended to Minister Dlamini Zuma by her counterpart.

The Vietnam News Agency has opened an office in Pretoria during April 2003.

SA/Vietnam Trade Relations

1999 25,713,000 101,511,000 127,224,000

2000 31,266,000 168,775,000 200,041,000

2001 101,310,000 174,696,000 276,006,000

2002 370,709,000 221,914,000 592,623,000

2003* 257,803,000 96,648,000 354,451,000

(*2003 : January – May)

Vietnam's exports to South Africa are mainly footwear and artificial flowers, vegetable products, mineral products, textiles and textile products, machinery and mechanical appliances.

South Africa's exports to Vietnam include iron & metal, machinery and mechanical appliances, prepared foodstuffs, vegetable products, base metals and articles of base metals, plastics and articles thereof, and products of chemical and allied industries.

There are long-term trade and investment opportunities for SA companies in Vietnam, some of which will be enhanced by the implementation of the US-Vietnam Bilateral trade agreement. However, companies must assess the country's long-term commercial attractions against the short-term difficulties they will face in entering this market. Opportunities are mainly in the transport and mining sector, including road and infrastructure projects. Good potential exists for exports of SA steel, machinery and chemicals, once the country's industrial sector is more firmly established.

Bilateral Agreements

On 22 December 1993 South Africa and the Socialist Republic of Vietnam established diplomatic relations (signed in New York) and Vietnam was assigned to the area of responsibility of the South African Embassy in Bangkok. In addition, a bilateral trade agreement was signed between the two countries in April 2000.

Bilateral agreements under consideration are one on the avoidance of double taxation and fiscal evasion with regard to taxes on income and another on investment promotion and protection.

Visas are required for South Africans passport holders who wish to visit Vietnam and can be applied for at the Embassy of the Socialist Republic of Vietnam in Pretoria.

It is suggested that visitors take their own medicines along. There is a risk of malaria in non-urban areas. Hepatitis A and B immunisations are recommended (Dengue fever or DHF remains a problem in non-urban areas. There is no immunisation against DHF. Japanese B Encephalitis is also prevalent and appropriate precautions (vaccinations) should be taken.