- The Washington Times - Monday, July 17, 2000

BANGKOK Although officials have cautiously welcomed last week's landmark Vietnam-U.S. trade deal, some analysts remain skeptical that the agreement will succeed in jolting Vietnam's moribund economy back to life.

"Vietnam ultimately only signed the U.S. trade agreement because it feared it would languish behind longtime enemy China, since China got permanent normal trading relations," said one Hanoi analyst.

The pact, completed Thursday after five years of wrangling, cuts tariffs between the countries by as much as 80 percent and is designed to foster competition in Vietnam's domestic markets while improving its protection for intellectual property.

Leaders on both sides predicted the pact would spark Vietnam's economy and reshape its business culture. "Hundreds of U.S. businesses will open representative offices or set up joint ventures in Vietnam," the state news agency in Hanoi predicted optimistically.

A Hanoi-based analyst said that in turn might force the government "to make the financial and industrial sectors much more open, encouraging a more entrepreneurial Vietnamese business culture." Analysts say exports of textiles and shoes to the United States could increase by as much as 50 percent by the end of this year.

Several major U.S. companies, including Nike, which was one of the first to open factories in Vietnam after Washington restored diplomatic ties in 1995, reportedly will expand its Vietnam operations by January, infusing capital into the country.

But many financial analysts question whether the opaque, hard-line Hanoi government is truly committed to liberalization.

"There are still few signs that the Hanoi leadership has a serious commitment to reforming the business climate, and to cutting down on the red tape that weakens the financial infrastructure and hinders doing business in Vietnam," said a Hanoi business adviser.

Despite a late-1980s policy of "doi moi," or economic opening, that was supposed to foster dynamic development, the country has never achieved sustained high-growth rates, as foreign investors have passed over Vietnam for other Asian markets.

Because of corruption, red tape and a lack of responsiveness to investors, Vietnam remains a higher-cost investment venue than many other East Asian states, Dennis de Tray, representative of the International Monetary Fund in Hanoi, said at a recent meeting of Vietnam's aid donors.

"Not that many foreign companies will soon enter Hanoi or Ho Chi Minh City, because Vietnam is more expensive than the region, and many businesses that might have gone there have already set up in China, hoping to take advantage of China's [U.S. trade] deal," said Southeast Asia politics specialist Sunai Phasuk.

The World Bank has predicted that Vietnam's economy will expand 3.5 percent this year, a far slower rate of growth than many other emerging Asian states. Foreign investment peaked in 1996 and has spiraled downward since, falling 67 percent last year.

The trade deal also may do little to help Vietnamese entrepreneurs.

Vietnamese businessmen complain that the inefficient state sector, which still accounts for roughly 50 percent of gross domestic product, dominates industry and commerce and prevents private entrepreneurs from mobilizing capital.

"It is extremely unclear whether Hanoi plans to downsize the state sector, even in light of the trade deal," said one Vietnamese businessman.

The Hanoi government's unwillingness to allow domestic entrepreneurs open, instant access to information also hinders local private enterprise.

On Friday, a day after the U.S.-Vietnam signing ceremony in Washington, Vietnamese state radio carried no news of the trade deal, leaving Vietnamese who do not have Internet access more than 99 percent of the population in the dark about the agreement.

State radio in Vietnam began to release limited information about the deal more than 15 hours after the signing.

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