Socialist Republic of Vietnam

The Honorable Donald L. Evans
Secretary of Commerce
U.S. Department of Commerce
14th Constitution Ave, N.W.
Washington, D.C., 20230


Washington, D.C., August 01, 2002


Dear Mr. Secretary,

In the letter sent to you on July 12, 2002, the Minister of Trade of Vietnam expressed his concerns over the ungrounded dumping petition filed by Catfish Farmers of America (CFA) against certain frozen fish fillets from Vietnam, regarding it as an indication of unfair competition in a market economy.

At the recent hearing by the ITC on July 19, 2002 in Washington, D.C., the representative from the Vietnam’s Ministry of Trade clearly demonstrated that the tra and basa’s industry in Vietnam functions according to market principles, and the price of tra and basa exports into the US has been set purely by the market. Hence, there is no reason whatsoever to think about tra and basa being dumped into the US market.

We are disappointed to learn, however, that on July 24, 2002, the Department of Commerce (DOC) issued a notice on the official initiation of antidumping duty investigation on this case. I am writing this letter to you with a hope to provide a more comprehensive picture of the real situation and today’s economic environment in Vietnam for your consideration.

As well known to the world community, since 1986, Vietnam has been vigorously carrying out its Doi Moi (renewal) policy, transforming its economy from central planning to market. All the spirit and letters of the Vietnam – US Bilateral Trade Agreement that has entered into effect also reflect the assessment that Vietnam is fundamentally a market economy. No doubt, all economic sectors in Vietnam have been functioning in this environment. The unfair antidumping petition by CFA, therefore, cannot stand reality test by the actual situation in Vietnam. Here, I would like to touch on just a number of points as follows:

First, over the past decades, the government ownership and control of the major means of production have undergone substantial changes. Vietnam is now a multi-sector market economy that embraces different forms of ownership. All enterprises from different economic sectors under various forms of ownership are equal before the law. Article 16 of the 1992 Constitution (amended) confirms equal legal position and wide autonomy for the enterprises under all six forms of ownership: state-owned, collective, individual, small-sized private, private proprietorship, state capitalist including 100% foreign direct investment, that is today’s socio-economic reality of Vietnam.

All State-owned Enterprises (SOEs) function as equal economic units among other enterprises from different economic sectors. At present, there are 5,600 SOEs, accounting for 39 per cent of GDP and 11 per cent of the total labor force of the country. During the past years of Doi Moi, as a result of bold SOEs reforms, a growing number of SOEs have been restructured through equitization, selling, or leasing with an aim to strengthening their efficiency and effectiveness. Most of the privileges and special treatments regarding financing, pricing, trading rights, etc., previously accorded to SOEs have been removed.

At present, there are more than 82,000 non-state enterprises in the forms of limited liability companies, joint-stock companies, and partnerships, making up approximately 40 per cent of GDP and 34 per cent of total labor force. During only two years 2000-2001 since the Enterprise Law entered into force, about 40,000 new non-state enterprises have been formed. Article 4 of the Law confirms, that “The State recognizes the long-term existence and development of all forms of enterprises stipulated by this Law and ensures their equal status before the law, as well as legitimate profits earned by business activities. The State also recognizes the ownership rights of property, invested capital, incomes, other rights and legitimate interests of enterprises and business owners.”

There are also more than 5,500 cooperatives. Paragraph 3, Article 7 of the Law on Cooperatives provides that “Cooperatives are responsible themselves for their production and business performance, and for the allocation of income ensuring mutual benefit between the cooperative and its members”.

It is clear that the State, by law and in practice, does not interfere into the functioning and the management of enterprises of all economic sectors.

Second, in the Vietnamese economy, prices of most principal production factors and inputs as well as goods and services are determined by the interaction between supply and demand. Enterprises have broad freedom in price setting.

Specifically, Decision No. 137/HDBT, by the Council of Ministers (now the Government) of 27 April 1992, on price management, stipulates that:

- The Government determines only three prices, namely the price of electricity, postal service, and telephone service.

- The Government sets ceiling prices for certain kinds of gasoline (gasoline, diesel oil, and kerosene).

- Prices of all other products and services are set by the market without any intervention by State institutions.

Article 7 of the 1999 Enterprise Law states that enterprise has complete autonomy in doing business. That means an enterprise can decide by itself the prices for its products and services.

Further, the 2002 Ordinance on Prices clearly stipulates the autonomy in price setting by enterprise and the scope of state price management, in particular:

- Article 2 reads: “The State respects the right to set prices and to compete in price by organizations and individuals engaged in business and production according to the law.”

- Article 9 reads: “The Government decides only the price of assets that are of special importance for the social development of the country.”

- Article 27 reads: “Organizations or individuals engaged in production and business set their prices according to this Decree and other related legal documents.”

- Section 4 on the Control of Monopoly Prices of this Ordinance aims at stopping the establishment of monopoly prices. It promulgates that the Government has the responsibility to control monopoly prices, and has the right to abolishing monopoly prices set by organizations or individuals using monopolist linkages, and imposing fines according to the law.

- Section 5 of this Ordinance deals with antidumping measures and regulations on complaints, accusations, investigations and the handling of dumping acts.

Third, with regard to the price of labor, wages at Vietnamese enterprises are determined on the basis of agreement between workers and their employers. The Vietnam’s Labor Code, effective since January 1, 1995, is applicable for all workers and employers, for all organizations and individuals from every economic sector. Paragraph 1, Article 7, Chapter I of the Code stipulates that: “Workers are paid on the basis of agreement between them and their employers but not less than the minimum wages specified by the State and in accordance with productivity, quality, and efficiency of the work performed.” The Code also provides that workers have the right to free movement and enrolment in different businesses. Enterprises from different economic sectors under various forms of ownership can participate freely in the labor market.

It is necessary to note that the overall working environment and conditions at working place in Vietnam have been continuously improved and in certain aspects are better than in some of its neighboring countries.

Fourth, another important point is that Vietnam is moving on the way toward a convertible currency. As the Vietnamese economy is integrating itself to the economy of the region and the world, domestic prices as well as the exchange rate also reflect the situation in the world market. At present, for enterprises, the Vietnamese dong* is convertible in current account transactions and in a number of capital account transactions.

Article 8 of Government Decree No 63/1998/ND-CP provides that: “non-residents who earn legitimate income in Vietnamese dong are permitted to buy foreign currency and transfer it abroad.”

Article 2, Decision 61/2001/QD-TTg of the Prime Minister provides that:

(i) Residents - namely Vietnamese economic organizations, credit organizations in Vietnam, subsidiaries of foreign companies, foreign contractors, contractors with foreign partnerships, government agencies, units of arm forces, political organizations, socio-political organizations, social organizations, socio-professional organizations, social funds, charity funds, when in need of foreign currency for current account, capital account, and other permitted transactions - have the right to buy foreign currency at licensed banks upon submission of appropriate documents.

(ii) Residents - namely FDI enterprises, foreign parties to Business Cooperation Contract, when in need of foreign currency to meet their current account, capital account, and other permitted transactions - have the right to buy foreign currency at licensed banks upon submission of appropriate documents.

The exchange rate of the Vietnamese dong is largely determined by supply and demand in the foreign exchange markets and its fluctuations can be easily observed in the daily mass media means. The State Bank (Central Bank) of Vietnam plays the same role as the central bank in other market economies.

Fifth, it is necessary to stress that, besides price setting, enterprises of all forms and from all sectors enjoy the same autonomy and freedom in making production and trade decisions. Article 7 of the Enterprise Law stipulates that limited liability companies, partnerships, and privately-owned companies have full freedom in making decisions concerning all issues in their production and trade activities, including the acquisition and usage of assets; the choice of industries, locations, forms of investment, including joint-venture or joint-stock companies, capital mobilization methods, markets and customers; and business expansion decisions. The law also prescribes that they have complete autonomy in deciding their output volume. Thus, the Vietnamese Government shall not interfere in any way into the decision making of enterprises regarding their scales of production and business.

As for SOEs, Article 7 of the Enterprise Law also gives them the right to decide by themselves the industries to enter and the scale of production and business according to their capability and market conditions. SOEs by themselves can choose the markets and set the prices for their products and services. SOEs, just like companies from other sectors, have the right to decide by themselves all issues concerning investment, joint venture or stock market participation, employment, and wages. Paragraph 4 of Article 7 clearly states that SOEs also can “decide by themselves to expand their business according to the enterprise’s ability and market conditions.”

With regard to FDI enterprises, Article 31 of the Law on Foreign Investment of Vietnam states that “enterprises with FDI and parties to business cooperation contracts (BCC) have the autonomy in doing business according to the scope of business activities stipulated in the investment license.”

Furthermore, the Vietnam’s stock exchange has been expanded continuously with growing participation of enterprises from all sectors and industries, both Vietnamese and foreign entities, including the aquatic industry, thus providing another source of financing for all enterprises.

Sixth, with regard to the degree of openness of the economy to foreign investment, Vietnam has recorded remarkable achievements. Foreign investors are encouraged to not only establish joint ventures but also carry out other types of investment in Vietnam. The Law on Foreign Investment in Vietnam promulgated on December 29, 1987 and numerous amendments thereafter have created a comprehensive legal framework for foreign investment in Vietnam. At the same time, Vietnam has signed and acceded to a number of bilateral or multilateral agreements on investment, including bilateral agreements on foreign investment encouragement and protection with 41 countries and territories, double taxation avoidance agreements with 38 countries and territories, the ASEAN Framework Agreement on Investment Area (AIA), and the New York Convention, to name a few. The Vietnam – US BTA also has a comprehensive chapter on investment.

The enterprises with foreign owned capital enjoy the right to choosing their investment forms and industries. Article 3 of the 1996 Law on Foreign Investment in Vietnam provides that “foreign investors may invest in Vietnam in all fields of the national economy,” with just a few exceptions. The Government Decree 24/2000/ND-CP dated July 7, 2000 providing detailed regulations on the implementation of the Law on Foreign Investment in Vietnam clearly states that ”investors may on their own initiative select projects, partners, forms of investment, business location, project duration, markets for the products, and the ratio of legal capital contribution in accordance with the provisions of the Law on Foreign Investment and this Decree.”

As of May 2002, there are about 3,300 FDI enterprises with a total invested capital of more than 38 billions US$. Foreign capital inflows account for nearly 1/3 of annual investment in the national economy. FDI enterprises have become an integral part of the national economy. The FDI enterprises functioning in Vietnam enjoy the same business conditions as Vietnamese counterparts do without any discrimination in term of prices for goods and services provided, environment, labor, and working safety measure requirements, etc. FDI enterprises indeed enjoy great freedom in doing business in Vietnam, including the right to direct distribution of their products, that American corporations and companies such as Cargills, Coca Cola, Nike, Pepsi, P&G, etc., are enjoying. The United States has had so far 122 investment projects in Vietnam, of which more than 70 enterprises are businesses with 100% foreign owned capital.

Last, but not least, Vietnam has been for a long time proactively integrating itself into the regional and global economies with firm commitments to upholding international norms and practice of free and fair trade, thus ensuring a level playing field for all enterprises, Vietnamese businesses and their foreign partners alike. Vietnam has been a full member of ASEAN since 1995, ASEM since 1996, APEC since 1998, and began its WTO accession negotiations in 1995. Recently, Vietnam has entered the phase of market access negotiations and is making every effort to join the WTO as soon as possible.

In brief, effective Vietnam’s laws and regulations concerning business and trade activities as well as the actual functioning of the economy itself clearly show that after years of successful Doi Moi, Vietnam is already a market economy with most of the market economy institutions in place. The price setting mechanism that follows market value creation process is a clear demonstration. All players in the economy are equal before the law and have broad autonomy in making business decisions. Foreign companies doing business with Vietnam are the best witness of the fast and profound changes in the business environment in the country over the past years.

It is important to note also that as the market economy develops, there is a growing need to deal with the broadening gap in development levels between different regions of a country and in income among various groups of the society. It is therefore our policy that economic growth must go hand in hand with poverty alleviation. Vietnam’s remarkable achievements in the field have been highly appreciated by the world community and are regarded by the UN and UNDP in particular as a model for developing countries. The country’s 10-year socio-economic development strategy guided with the above directions and announced at the recent donors’ Consultative Group meeting in Hanoi has been highly praised and widely supported by the donor community.

Vietnam’s Government also understands the need to ensure a sound, healthy, and transparent business environment as a part of our continued renewal policy. Hence, one of our priorities is to fight against corruption and ensure good macroeconomic management, thus providing a favorable environment for all enterprises to do business.

All above-mentioned facts lead to a logical conclusion that the fishery industry in Vietnam, including those farmers engaged in raising and exporting tra and basa fish to the US, has no interest in dumping its products into the US market and is not capable to do so either. Therefore, the petition against certain frozen fish fillets from Vietnam is no doubt not in conformity with reality and must be regarded as an attempt to abuse the antidumping measures for unfair competition.

In the interest of mutually beneficial cooperation between the two countries, we once again call for the termination of the case.

I am looking forward to receiving your positive and constructive response.

Please accept, Mr. Secretary, my best wishes and the assurances of my highest consideration.

Yours sincerely,
Nguyen Tam Chien
__________

(Unofficial translation of letter of Trade Minister Vu Khoan to Secretary of Commerce Donald Evans)

The Honorable Donald L. Evans
Secretary of Commerce
Washington D.C. 20230

Hanoi, July 12, 2002



Dear Mr. Secretary,

I am very concerned to learn that the Catfish Farmers of America ( CFA ) has filed, with unfounded reasons, a case against the selling of basa and tra fish by Vietnamese enterprises into the U.S. market in the wake of the passage of the legislation H..R. 2646.

I would like to affirm to you that Vietnamese enterprises are always observant of the principles of international trade, conducting fair trade in keeping with market mechanism. The allegation of their dumping sale is just an attempt of unhealthy competition, undermining US-Vietnam economic and trade relations and the relationship’s momentum gained since the ratification of the Bilateral Trade Agreement.

I would like to request you, Mr. Secretary, in your capacity and in the interest of development of equal and mutually beneficial trade and economic co-operation between our two countries, do everything possible to forestall these attempts of taking advantage of anti-dumping pretexts to undermine Vietnam-US relations.

Please accept, Mr. Secretary, the assurances of my highest consideration. I look forward to having your constructive cooperation.

Yours sincerely,

Vu Khoan

Minister of Trade of Vietnam