Box: Interview with Vietnam's Prime Minister Phan Van Khai

Recently editors of the Wall Street Journal and the Far Eastern Economic Review in Hanoi interviewed Phan Van Khai, Vietnam’s prime minister, who talked about the country’s prospects for enhanced trade and investment. Excerpts from the interview follow:

We hope to attract a lot of investment in high-tech areas, so that various industries can be more competitive with foreign companies. We will also focus on infrastructure development. In the electricity sector, for example, during the last few years demand has grown annually by about 10 to 15 percent. This year we’ll have to build a number of hydropower plants and thermal power plants, and gas-powered plants as well. Another important area is the cement industry. Also important is oil and gas sector exploration, exploitation, as well as processing activities. And we hope for better cooperation with foreign partners in agricultural production and food processing.

What comes after the Bilateral Trade Agreement [with the United States]?

Vietnam’s next major step will be to prepare for membership in theWTO. Our target is 2005. We submitted our application in January 1995. We have also undergone four rounds of negotiations with the WTO working party. Negotiations on Vietnam’s trade regime have been completed.

What are the biggest problems facing foreign investors in Vietnam?

Number one, our administrative procedures are still cumbersome. You can get approval at the central level, but you still have problems at the local level with issues like land. The government would like to pursue the policy of a one-stop system, with all foreign investment projects only having to work with the Ministry of Planning and Investment. The second major complaint we receive from investors is about unequal services [dual pricing systems]. Telephone tariffs are still high, with discrimination between foreign and domestic firms. Air fares and electricity rates are also different for foreigners. Reductions have been made several times toward a single-price system, but our country has recently emerged from war and a centrally planned economy. Therefore we have to take it step by step. Otherwise, if we go too fast, it would lead to collapse.

Have you been influenced by China’s experiences in joining the WTO and attracting foreign investment?

In the past, the two countries had a similar economic policy. So the experience and lessons from China are useful for Vietnam, including policies to attract foreign investment, tap internal resources better, develop the private sector, and improve the competitiveness and efficiency of state-owned enterprises. But each country has its own historical circumstances. Our lesson is that if we just copy one foreign model, there’s a chance of failure. Therefore our policy is to study and learn from selected cases.

Do you worry that China’s rapid growth might draw potential investment away?

China is a big market for Vietnamese products. Vietnam’s exports to China have recently increased significantly. Two-way trade by value is estimated to reach $5 billion in 2005. Vietnam needs to identify the products where we have the best advantage. Something I always tell Vietnamese enterprises is to aim for high quality and low prices to be competitive.

Unlike in China, private Vietnamese entrepreneurs are not welcome to join the Communist Party, but party members can do business. How do you explain this split policy?

We have different conditions from China. We do something on the basis of our conditions. Party members in Vietnam are still allowed to run their own business, but I don’t think up to the same extent as capitalists. For example, in rural areas our party members still have their own farms, they run their own businesses. The successful party member/entrepreneur will be in a better position to help the poor.