Vietnam improved its reputation internationally by successfully hosting the APEC 14, joining the WTO and boosting relations with other nations during visits by the country’s leaders. Is this the outcome of our reform policy?

We meet just before the anniversary of the August 1945 Revolution and National Day on September 2, so we should take a historical look at ongoing events. Our success is not accidental or temporary. In 1945 when the country regained its independence, President Ho Chi Minh’s ideas on diversifying international relations were clear. The consistent spirit he showed through interviews, newspaper articles and diplomatic letters indicated his willingness to cooperate with every nation in the world.

However, due to the historical context, that outlook was interrupted under the impact of warfare, confrontation, besiegement and isolation until the breakthrough of the reform process revived it. One of the features of this process, one that few noted, took place at the sixth Congress of the Vietnam Communist Party in 1986. For the first time after many years, the Party tabled two judgments that are now taking effect. For the first time, in Party documents appeared the concept of ‘internationalisation’, a recognition that a world economy was taking shape. This reform created a push for the issuance of the Foreign Investment Law in 1987. I think all we’ve done is simply a continuation of a policy that was created 62 years ago.

As one of the architects of this law, did you face many difficulties?

In reality we had no knowledge and experience, so when compiling this law we consulted with a lot of experts from the outside world. However, the law is one thing and reality is another. Firstly, it was a truly difficult path to transform from a centrally-planned, subsidy economy that was isolated and strongly bureaucratic into an open economy that integrates with the world.

Secondly, international foreign investment had changed a lot over the past 20 years and it was this very change that helped us make adjustments. From practice working with foreign investment circles, we learned what was necessary regarding foreign investment. This is a difficult road because the world is never stationary. It will continue to change rapidly and pose new issues in investment.

What is your biggest concern regarding foreign investment?

Each period has its own requirements. Currently, we are paying close attention to the volume of foreign investment, but it is time to think more about its quality. It is firstly related to the economic structure. How does foreign investment help us restructure the economy towards industrialisation? What matters second is efficiency. Efficiency is reflected through employment, technological and management expertise. Thirdly, it is important to allocate investment resources by region to solve not only economic, but also social issues. Fourthly, efficiency should be compared to that of regional countries attractive to foreign investors. China and India are two examples. It is time we take into account both the quantity and quality of investment. We also need to select investment using three criteria, our demand, competition in the world and the global rules of the game.

It has been predicted that foreign capital will soon flood Vietnam, yet it has been said the country does not have adequate conditions to use it efficiently. Would you say this is true?

Yes. It is true that the current capital inflows are quite significant, but to some extent I feel that we have not ‘digested’ it in an effective way because we are still weak in three areas. Firstly, the development of roads, bridges, airports and particularly power generation networks. Secondly, we lack experienced manpower, including manual labour, professional workers and management mechanisms. Thirdly, administrative reforms are weak. If these three factors cannot be addressed, it will remain difficult to attract and keep foreign investment.

Who should be responsible for these changes and what should be tackled first?

We can’t do everything at once. Where is the money? We have to choose our priorities, which bottlenecks we need to break. In my opinion we need to mobilise every resource, including the state budget, treasury bonds, project and corporate bonds, the stock market, BOT (build-operate-transfer) projects at home and abroad, as well as ODA.

The second priority is manpower, an area where we have a lot of work to do. We need to focus on training skilled workers. At present, the labour structure is very distorted. The rate is one university degree holder to 1.13 college degree holders and only 0.95 worker.

Thirdly, the government has decentralised power to grant investment licences to provinces and cities, but lower-level officials are overwhelmed and it has created a number of obstacles. If we can’t tackle this problem resolutely, we can’t attract investment. The fourth issue is there have been a lot of administrative reforms, but efficiency is still low. All of these matters should be solved together.

Vietnam has been a formal member of the WTO for eight months. What benefits has the country seen?

With that major a move, it is difficult to see benefits overnight. However, some obvious outcomes are that exports are continuing to rise strongly. Of course, that is not only thanks to WTO accession, but also other factors. In addition, foreign investment has begun increasingly rapidly. I imagine that if we had not joined the WTO and carried out diplomatic manoeuvres, there would be less foreign investment than what we are seeing. As well, the prestige of Vietnam has risen. I believe in these three points deeply. Other benefits will take time, but I believe they will come.

Given the present advantages, are the country’s development goals attainable?

Personally speaking, that the country will lift itself from its ‘developing nation’ status and see average incomes per capita of more than $1,000 is in no doubt. It is sure by 2010 this will be realised. However, right now we need to think deeply about that goal. Who can say what a modernised Vietnam will look like? We have said this sentence so often as a motto, but I have asked many people, even those in charge of policy making and still no one can explain clearly how it will be done.

What is more difficult is “in the direction of modernisation”. What is modern? It is a dynamic concept. It maybe right today, but backwards tomorrow. As a result, in 2020 no one can tell what the modernity of the world will be and our place in it. This is a really big issue that needs the right approach. If we do not think, study and approach issues in a methodical way, we can’t define the goal we strive for.

But, the goals to 2020 are continuing the socialism process, perfecting market mechanisms, integrating fully into the world’s economy and moving from the agricultural society to an industrialised one?

It is true that all of these processes have been implemented simultaneously, but they are linked together, intermingled and partially contradictory. This [Vietnam’s] is a new and strange model. The goal that Vietnam will become an industrialised country by 2020 means that we will change the tradition of thousands years as an agricultural country. This is a big issue. Moreover, industry must keep pace with the modernity of the world economy. As a result, right now we need to lay the groundwork to change the economic structure to match the modern development of the world.

In my opinion, we have to move upward in order to master global thinking, considering every issue concerning the country’s development under the framework of worldwide trends. We cannot stand alone.

Source: VIR.