Bridging Development Gap: Vietnam's Doimoi Journey & East Asia Cooperation

1. Closing the East Asia-Vietnam Economic Development Gap: Strategic Issues and Prospect(Fourth East Asia Congress3-5 December 2006, Kuala Lumpur) Assoc. Prof. Nguyen Dinh Tai CENTRAL INSTITUTE FOR ECONOMIC MANAGEMENT, vietnam

2. Structure of the presentation • Vietnam: 20 years of Doimoi • 1. East Asia-ASEAN Cooperation • 2. East Asia competition • 3. Affairs between Vietnam and East Asia • 4. Closing the East Asia – Vietnam Development Gap: a Futuristic Outlook

3. Vietnam: 20 years of Doimoi • 1986, Vietnam initiated "Doi moi" (Economic Reform) for the economy: • Shift central planning economy to market-oriented • Eliminate the price subsidy system and free interest rate, exchange rate and goods prices • Open the economy to the world - Develop multi-sector economy

4. Vietnam: 20 years of Doimoi • 12/1987, Law on foreign investment in Vietnam: institutionalized the open door policy; set up a legal corridor for foreign investors • 12/1990, Law on private enterprises and Law on companies: set up a legal corridor for Vietnamese private investors • 7/1992, New Constitution: declared building up a state of rules and the right of business freedom.

5. Vietnam: 20 years of Doimoi • 6/1999, Enterprise Law institutionalizing the right of business freedom • 12/2003, Vietnam-Japan Joint Initiative to Improve Business Environment with a view to strengthen Vietnam’s Competitiveness • 11/2005, (unified) Enterprise Law replacing Enterprise Law of 1999. The new Law is applied to private firms, SOEs and FDI enterprises.

6. Vietnam: 20 years of Doimoi • 11/2005, (common) Investment Law replacing Foreign Investment Law (1996,2000) and Domestic Investment Encouragement Law (1998). The new Law is to set up one “common and equal playing rule” for all investors • 11/2006, VN became 150th.member of WTO

7. 1. East Asia-ASEAN Cooperation • VN joining ASEAN: @1996-2000: Growth of VN's export to ASEAN 20,8% on average @1991-2005: Growth of VN's export to ASEAN on average 15,8% @FDI of ASEAN countries into VN 30%/total FDI

8. 1. East Asia-ASEAN Cooperation • 11/2002, China and ASEAN signed "Frame Agreement on Comprehensive cooperation" (customs duties reduction; early havest; removing non-tarrif barriers; ACFTA; ...) • ASEAN-China Free Trade Area (ACFTA): ACFTA (2010), the largest free-trade area in the world, is thought to keep the highest economic growth in the next 10 years. ASEAN-Japan (AJFTA): AJFTA (2012) not only limited to "traditional" reduction of customs duties, but extended to improving the business environment, investment protection, technology transfer, property ownership, environment protection, and so on • ASEAN-Korea Free-trade area (AKFTA,2009): ASEAN and Korea are mutual 5th largest trading partners, as for the FDI flows to ASEAN Korea is the third largest investor • East Asia Free Trade Area (EAFTA, 2020)

9. 2. East Asia competition • With stable economic growth, low political risk, better management alongside with new initiatives to attract FDI make Southeast Asia a specially attractive “arrival point” for foreign investors. • Indonesia, Malaysia, Philippines, Singapore, Thailand and Viet Nam are all destinations for a new wave of capital investment from the U.S. The industries of great interests are information technology, biotechnology, and financial services sectors.

10. 3. Affairs between Vietnam and East Asia • 3.1. Vietnam and Great Mekong Sub-region (CLMV) · Cooperation in reinforcing infrastructure for development · Cooperation in strengthening social and environmental infrastructure

11. 3. Affairs between Vietnam and East Asia • 3.2. Vietnam and Thailand towards 2010s • Viet Nam and Thailand have so far signed almost 30 agreements making the framework for the relations between the two countries • Both countries cooperate in fishing, measuring, biotechnology, electronics and PC technology sectors and have in plan to build a scientific and remote sensing park.

12. 3. Affairs between Vietnam and East Asia • 3.3. Vietnam and North-East Asia • Vietnam’s and China’s economic integration to the world: both countries unanimously consent to raise the target of the bilateral trade in 2010 to a level of USD 15 billion and more; building two economic corridors: Con Minh – Lao Cai – Ha Noi – Hai Phong and Nam Ninh – Lang Son – Ha Noi – Hai Phong and an economic belt in Gulf of Tonkin consisting of Northeast Vietnamese provinces and the Hong Kọng

13. 3. Affairs between Vietnam and East Asia • Prospect of forming an East Asian free-trade area # The investment to high value added industries in East Asia # The role of Japan: The economic linkage between Japan and ASEAN will increase the GDP of ASEAN and export from ASEAN countries to Japan - Difficulties of forming EAFTA: large differences in political system, economic development level, culture; big income gaps (Japan, Singapore, Brunei and S.Korea >USD10,000 per capita; Malaysia, Thailand, Philippines and China USD1,000-10,000; Indonesia and VN USD 500-1000; Myanma, Cambodia and Lao <usd 500)

14. 4. Closing the East Asia – Vietnam Development Gap: a Futuristic Outlook10 most significant issues4. Closing the East Asia – Vietnam Development Gap: a Futuristic Outlook10 most significant issues4. Closing the East Asia – Vietnam Development Gap: a Futuristic Outlook • Opportunities for VN from Eat Asian linkage: * Increase trade transactions * Access the mechanism in treating regional trade problems * Reinforce the trust of investors in country's economic reform Chalenges: # Increased competition # Pression on rapid trade liberalization, openness

15. 4. Closing the East Asia – Vietnam Development Gap: a Futuristic Outlook • The 10 most significant issues (1)- Human security (2)- Banking and financial reform (3)- Deeper integration (4)- Market reform (5)- Infrastructure development

16. 4. Closing the East Asia – Vietnam Development Gap: a Futuristic Outlook (6)- Ageing population and mismatch (7)- Oil price and energy security (8)- Corporate governance (9)- Production networks (10)- Rapid reserves accumulation

17. thank you