Taking Stock: Annual Meeting of the American Chamber of Commerce, Hanoi, Vietnam

September 21, 2005

Thank you, Terence, for your kind introduction.  Good evening, ladies and gentlemen.  It is an honor to speak to you this evening, and I thank the AmCham Board of Governors for granting me the opportunity to do so for a second time.  Since I addressed last year’s annual meeting, many new developments have both further strengthened and, in some cases, further complicated the relationship between the United States and Vietnam.  On one hand, we have made significant progress.  President Bush received Prime Minister Phan Văn Khải at the White House in June – the first visit to the United States by a sitting Vietnamese Prime Minister, and a visit that received important support from the AmCham and many of its member companies, including the AmCham contingent that traveled with the Prime Minister.  This year also marked the 30th anniversary of the end of the war, the tenth anniversary of normalized diplomatic relations, and the fifth anniversary of the US-Vietnam Bilateral Trade Agreement.  All in all, the past 12 months have presented numerous opportunities to strengthen our relationship.   

On the other hand, the past year has also presented new challenges – economic, commercial, political and global – for the United States and Vietnam to confront.  It is important to acknowledge that our success in addressing some of those challenges is the result of a continuous commitment from both sides to improving our relationship.  Together, we have forged strong bonds despite a very tragic history, creating a path of reconciliation and cooperation that, I believe, sets a strong example for others to follow. 

This evening, I would like to take stock of our dynamic relationship with Vietnam – what it is today and where it is headed tomorrow.  Earlier this week, as I thought about how to offer this assessment, I could not help but reflect on how surprising it really is.  If someone had shown me a copy of this speech 17 years ago, when I served in the State Department’s office dealing with Vietnam, I probably would have dismissed it as misplaced optimism.  At that time, our relationship with Vietnam was very narrow, focused primarily on POW/MIA accounting.  The exchanges and negotiations on that highly sensitive subject, however, eventually laid the foundation upon which Vietnamese-American relations now stand.  Our military-to-military cooperation has continued to develop since those early days.  Since 1992, our bilateral cooperation on those unaccounted for has brought home more than 600 fallen U.S. service personnel, and with them answers and closure for their families.  In addition, we have helped find answers for more than 1,000 Vietnamese families.  And our joint, humanitarian efforts on this important work are and will continue unabated.  More broadly, military-to-military cooperation has become an increasingly important area of our relationship.  U.S. Navy ships regularly visit Vietnamese ports, improving cross-cultural understanding each time they do so.  The U.S. military also coordinates our assistance for Vietnam’s demining efforts, and engages in other humanitarian activities.  Beginning this year, Vietnamese soldiers will participate in the International Military Education and Training Program, a highly successful venture offering instruction to foreign soldiers on civil-military relations, peacekeeping operations, disaster response and English-language training.

Our security and law enforcement efforts here are equally critical to expanding and solidifying the U.S.-Vietnam partnership.  The United States Embassy works closely with the Ministry of Public Security and other Vietnamese agencies to combat transnational threats of all kinds, including terrorism, transnational crime, drug trafficking, proliferation of weapons of mass destruction and trafficking in persons.  This is an area where our joint interests are closely related to each country’s national interests:  these threats are capable of harming America’s national security directly, just as they can harm Vietnamese security.  When we work together in these areas, people in the United States and Vietnam are more secure and the environment for terrorists, criminals, proliferators and traffickers becomes more hostile. 

Many Americans have noted with some surprise how our ties with Vietnam have expanded into so many areas in such a short period of time.  I think the fundamental reason is the realization – on both sides of the Pacific – of the importance of stable and productive relations and the steady convergence of the strategic objectives of Vietnam and the United States.  We share common goals for the growth and development of Southeast Asia, for the stability and security in the Asia-Pacific region, for success in the struggle against transnational threats and for the continued exchange and partnership between our governments and our peoples. 

While our search for those missing from the IndoChina conflict certainly launched this new bilateral relationship, our economic and business ties have become its cornerstone.  Since the U.S.-Vietnam Bilateral Trade Agreement, or BTA, came into effect in 2001, bilateral two-way trade has tripled.  It exceeded USD 6.4 billion last year.  Vietnam’s exports to the United States doubled in 2002 and again in 2003, and grew another 16 percent in 2004.  The United States is now Vietnam’s largest export market, purchasing one-fifth of all Vietnamese exports.  U.S. exports to Vietnam have increased by 250 percent in the past three years.  Figures for the first half of 2005 show two-way trade continuing to expand strongly, up 30 percent through June.  American exports to Vietnam during the first six months of this year have increased by 76 percent.  If the volatile aircraft trade figures – which often skew the numbers depending upon the delivery schedule in a given year – are excluded, U.S. exports are still up 27 percent this year.  Vietnam’s exports to America have increased by 23 percent during the same period.  By year’s end, we can reasonably expect bilateral trade to total in excess of USD 7.5 billion. 

The investment picture is brightening as well, although the American presence in Vietnam remains well below its potential.  U.S. investment in Vietnam now totals USD 2.6 billion and last year, U.S. firms were the largest foreign investors in terms of implemented capital, amounting to USD 531 million or 19 percent of total investment in Vietnam.  American companies are increasingly interested in investing in Vietnam, in part because, in some sectors, labor costs here are 30 percent less than those in southern China.  Nonetheless, while trade and investment between our two nations have grown dramatically in recent years, there is a great deal of room for further expansion.  Our ongoing negotiations over Vietnam’s accession to the World Trade Organization are setting the foundation for these future increases.  We will continue to tackle any unresolved issues in order to conclude these negotiations as quickly as possible. 

Prime Minister Phan Văn Khải's historic trip to the United States capped the first ten years of U.S.-Vietnam relations and set the stage for our two sides to take the relationship to a higher plane.  The Prime Minister ringing the opening bell on Wall Street on June 26 was a moment that augured well for the future of this relationship and for Vietnam’s market reforms.  These continuing reforms, as well as commitments like the BTA and efforts to join the WTO, are the engines behind Vietnam’s extraordinary growth.

However, Vietnam still lags behind some of its regional competitors in the foreign investment race.  The “đổimới” reform program turns twenty next year, but Vietnam still lacks the allure that is drawing investors to other Asian destinations like China and Malaysia.  Vietnam can do more, much more, to court investment and expand its business opportunities for American and other foreign firms.

To do this, Vietnam faces challenges on two fronts.  It must modernize and standardize the laws and policies that govern its economy while at the same time improving and streamlining the institutions, organizations and regulations that implement those policies. 

This means creating a financial system that expands the flow of capital to those who will manage it effectively, while at the same time reducing the number of non-performing loans.  It also means providing foreign and private domestic firms with access to growing markets and industries, while establishing a predictable, transparent and rules-based legal and regulatory system that is free from corruption.  That system must protect intellectual capital, commonly known as intellectual property rights or IPR, through strong laws and effective enforcement.  Finally, Vietnam must invest in the infrastructure improvements that foreign investors demand, while also protecting this beautiful country’s environment.

The United States and many other nations, international organizations and businesses make these points about the need for further reform quite often.  But I cannot emphasize enough how vital these changes are to Vietnam’s future and the future of our bilateral relationship. 

I would like to take a moment to focus on Vietnam’s financial sector reforms, which I believe need to be among the country’s first priorities in its effort to become a more attractive investment destination.  The Vietnamese Government needs to establish a vibrant capital market featuring profit-motivated banks and dynamic stock and bond markets that can attract and fuel both foreign and domestic investment.

Freeing the financial sector is an important first step because the State-owned banking system is the backbone of the entire State-owned sector.  Once Vietnam weans its economy from public financing, I am confident that we will see the domestic private sector blossom to its full potential.  Other than providing some low-paying jobs, there is little value and no growth potential in having the State own firms, many of which are not financially sound, yet still absorb a great deal of capital from banks.  The same goes for controlling and subsidizing prices, imposing investment caps on foreign and private investors and restricting royalty payments for franchises.  Investors seek opportunities where they can have a voice, if not real control, in the management of their project or firm.  Vietnam hurts itself by keeping foreign firms from entering or trading in the markets for telecom, finance, distribution and energy.  These stifling controls do more to scare off technological innovation, modern management techniques and growth than they do to protect homegrown industries from competition.  The Vietnamese Government needs to act like a referee and not a player in its own economy, even if this means relinquishing a great deal of control to market forces.  If these steps are taken, Vietnam would have a true level playing field and would become a mecca for foreign investment.

We have seen some progress in these problem areas.  The Ministry of Finance’s recent proposal to raise foreign investment caps in listed companies from 30 percent to 49 percent is an excellent step in the right direction.  There are, however, still many places where the Government does not do enough.  One particular area that could use more attention is the protection of intellectual property rights.  Vietnam is just beginning to create the kind of legal and regulatory protections that most companies demand in a potential investment destination.  What is still lacking, however, is enforcement. Piracy and counterfeiting are serious concerns, whether the products in question are movies, music, books, software, pharmaceuticals or brand-name products.  For American movies, books and music, the piracy rate here is effectively 100%.  For pharmaceuticals and some other products, counterfeiting is not only economically destructive but also poses serious health concerns.  As Vietnam’s economy modernizes and expands, the focus of production is shifting from “perspiration” to “inspiration” industries.  A lack of respect for IPR effectively stifles the innovation needed to fully transform to a market economy.  The benefits of IPR protection are really Vietnam’s to lose.  Sectors like medical equipment and software development have huge potential here.  Lack of IPR protection not only deters foreign investment, it puts Vietnam behind its neighbors in crucial areas of competition.  We will continue to emphasize the importance of IPR at every appropriate opportunity, but progress on IPR protection will require the combined voices of the U.S. Government and the business community here, especially the American business community.

Let me stop for a moment and say a few words about the importance of cooperation and dialogue between AmCham and the U.S. Mission.  We want our conversations with the Vietnamese Government to reflect your input and your experiences.  Please do not hesitate to contact me or my staff here or in Ho Chi Minh City on any issue – be it a success story or a problem.  We want to hear from you.  We want our policies and initiatives to be based on the real situation you face each day here on the ground.  Your feedback does make a difference, so I encourage you to keep the lines of communication open. 

Returning to the issue of reform, in addition to basic protections for intellectual property rights, American and other foreign investors also look for a straightforward, predictable and transparent legal framework that guarantees the sanctity of contracts.  When foreign investors or businesses are confronted with bureaucratic hurdles and seemingly arbitrary restrictions, it chips some of the gloss off of Vietnam as a commercial destination.  Vietnam is still considered a relatively more expensive and riskier investment site because unanticipated problems occur more frequently here than elsewhere.  This is changing as Vietnam’s leadership acknowledges the problem and works to develop its legal system.  But despite concrete legal changes, the reality of doing business in Vietnam remains the same.  Land use disputes here drag on for months, even years.  Customs valuation procedures remain unpredictable and arbitrary.  The legal system remains weak and underutilized.

There is a fundamental, common element to all of these concerns, and that is the need for greater commitment to the rule of law.  Economies in transition must be especially scrupulous in guarding against politically motivated and arbitrary legal decisions.  This is one of the areas where the BTA has been particularly successful, but it is also an area where much more needs to be done.  The BTA and efforts to join the WTO are bringing Vietnam into the fold of the international rules-based economic system.  But, Vietnam’s national and provincial leadership needs to promote the rule of law concept at every opportunity. 

The Vietnamese Government proudly and rightly touts its progress in delivering “collective” human rights such as education and poverty reduction.  However, the United States remains concerned that the Government of Vietnam is intolerant of political dissent and limits its people’s enjoyment of the freedoms of religion, speech, press and assembly.  Even as we seek to expand our economic ties with Vietnam, we continue to promote these ideals vigorously and to remind the Vietnamese Government that these are not privileges, but rather principles that should be universally enjoyed.

One area where we have seen heartening progress has been in the Central Highlands, where we have noted the Government’s openness to working with Cambodia and the United Nations High Commissioner for Refugees on the issue of the welfare and well being of ethnic minorities, particularly those individuals who previously migrated to Cambodia and have now been returned.  In light of the troubled history of the Central Highlands, the international community has requested access to the returned migrants to confirm that conditions in the area are stable and that people are not being mistreated.  The Government has granted that access, and we are hopeful that this transparency will continue and will provide the international community with the confidence needed to move forward with plans to assist with the socio-economic development of the Central Highlands.

Another welcoming sign on the human rights front was the release and amnesty of several prisoners of concern on September 2.  In the past year, the Vietnamese have undertaken a historic number of prisoner amnesties as part of their national celebrations, releasing over 26,000 prisoners in three rounds, including a score of high-profile individuals.  These amnesties were important, as were the steps Vietnam took to expand space for religious believers to practice their faith.  But, there is more, much more, that the authorities can and should do to improve the human rights climate in Vietnam.  There still are individuals imprisoned in Vietnam for having exercised their basic human rights, and this is wrong.  Tonight, I call on the Government of Vietnam to release the following prisoners-of-conscience:  Journalist Nguyễn Vũ Bình; Dr. Phạm Hồng Sơn; essayist Nguyễn Khắc Toàn; activist Trần Văn Lương; and former South Vietnamese police officer Phan Văn Bàn.

History has shown that political and religious freedoms go hand in hand with economic prosperity.  The pace and scope of Vietnam’s future success depends on a strong commitment to reform in both of these areas.

The health of a nation also depends in large measure on the health of its citizens.  On that front, Vietnam now faces two significant health issues, which without prudent and timely action, could quickly escalate into crippling crises.  The first of these is avian influenza.  The Vietnamese Government recognizes how serious this disease is and there is an ongoing effort to vaccinate poultry populations here and contain the deadly H5N1 virus.  But that may not be enough to stop the virus from turning into one that can cause a pandemic.  Human cases of H5N1 are still occurring, here in Vietnam and elsewhere.  The H5N1 strain spread to birds in Russia and Kazakhstan in late July.  This is an alarming development and a wake-up call for the world community. 

In response, the U.S. Government is leading an international high-level political initiative to address the problem by launching an International Partnership on Avian and Pandemic Influenza at the United Nations General Assembly last week.  The United States has already reached out to Vietnam, which has accepted the challenge, in principle, to be part of this Partnership.  The United States has also committed USD 25 million in the recent budget supplemental, on top of existing and already planned assistance, to fight against avian influenza, especially to support Southeast Asian nations, including Vietnam, helping to better plan and prepare for a pandemic, improve surveillance, and respond to outbreaks. 

The second issue of concern is HIV/AIDS.  Like avian influenza, HIV is a mounting problem in Vietnam that threatens to bring enormous human and economic losses.  The U.S. Government is committed to a strong partnership with Vietnam to help avert a looming HIV crisis.  Make no mistake; this disease is spreading here.  But there is room for all of us to make a difference in changing that trend.  That is why President Bush named Vietnam one of fifteen priority countries to receive assistance from his Emergency Plan for AIDS Relief.  The President chose Vietnam as the only priority country in Asia because there is a very real chance that the epidemic can be controlled here with prompt action.

In order to do this, however, the Vietnamese Government needs to redouble its efforts.  To effect real change on this issue, the Vietnamese Government must engage every level of Vietnamese society.  Too many people in Vietnam do not understand what HIV/AIDS is and what it is not; too many do not know how to protect themselves and too many do not understand that people living with HIV/AIDS can be productive members of society.  As the Government has now acknowledged, HIV/AIDS is not a “social evil” – it is a disease and those suffering from it deserve our compassion and help.  I applaud Vietnam for making efforts to reduce the stigma associated with HIV, but again more needs to be done by senior leaders and all the rest of us to eliminate discrimination against people living with HIV/AIDS.

Americans are known for their abiding sense of optimism about things to come, and in the case of Vietnam, I think it is warranted.  In fact, optimism is a character trait we have in common with our Vietnamese hosts.  They are equally famous for their resiliency and hopeful outlook on life, which makes them, in my view, good company and good partners.  Above all, I believe this shared optimism is a critical element of the bilateral partnership we are now building because it keeps both nations working towards the even stronger relationship we will have in the future.  

Let me share something with you: on September 8, first thing in the morning, I got a call from the Ministry of Foreign Affairs saying that a senior official wanted to see me urgently.  That’s usually not good news – perhaps some city council or state house had passed another resolution recognizing the old Vietnamese flag or the Government was upset over some action the United States had taken.  But this time it was the Assistant Foreign Minister informing me that the Vietnamese Government had decided to donate USD 100,000 to the American victims of Hurricane Katrina, and was offering to send a medical team to the United States to help those in distress.  The next day, one of my staff members was invited to a launch ceremony for the Vietnamese Red Cross’ campaign to solicit donations for the American victims.  He accepted a check from the Vietnamese Red Cross for USD 20,000 and then shook the hands of over a hundred Vietnamese Red Cross representatives from companies and offices throughout Hanoi as they dropped fat envelopes full of donations into the collection box.  And, this ceremony has been repeated across Vietnam in all 64 provinces and cities.  I was deeply touched by this incredibly generous outpouring of support for the Hurricane Katrina victims coming from a people and country that do not have a lot of extra resources to spare.  None of the special events we have held this year to celebrate the tenth anniversary of diplomatic relations have demonstrated as clearly as this response in our time of need the bond that has developed between our peoples.  And that is why I am so optimistic that we are, indeed, on our way to realizing President Bush and Prime Minister Khải’s shared goal of moving this relationship to a higher plane. 

As many of you may know, President Bush has accepted Prime Minister Khải’s invitation to participate in the 2006 Leaders’ Meeting of the Asia Pacific Economic Cooperation, better known as APEC, that will be held here in Hanoi at the end of next year.  Serving as the 2006 Host Economy for APEC will be a marvelous opportunity and responsibility for Vietnam.  APEC's unique multi-sectoral approach, its close cooperation with business and the private sector and the fact that it includes 21 economies in the Asia Pacific rim that account for over half of world trade make it an extremely important forum, one in which the United States is extremely proud to participate.  The United States is a Pacific nation.  Our APEC trading partners buy two-thirds of U.S. exports and supply the United States with two-thirds of its imports.  Together, the APEC economies can have a tremendous impact on efforts to support trade liberalization, prepare against pandemic disease and natural disaster and take measures to improve the business environment by fighting corruption and protecting intellectual property rights.  The United States will provide any support it can to ensure that all the APEC economies continue to advance toward mutual economic, trade and security goals for the region.

I would like to thank you all for your attention tonight.  I wish you all much success in your future endeavors here in Vietnam.