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Press Briefing by National Economic Advisor Gene Sperling (11/19/00)

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                              THE WHITE HOUSE

                       Office of the Press Secretary
                        (Ho Chi Minh City, Vietnam)

For Immediate Release                              November 19, 2000

                             PRESS BRIEFING BY

                              Caravelle Hotel
                                         Ho Chi Minh City, Vietnam

3:25 P.M. (L)

     MR. DIRINGER:  Good afternoon, everyone.  For our final briefing on
the President's trip to Vietnam we have Gene Sperling, who will recap some
of the President's announcements regarding new efforts to strengthen
economic ties between our two countries.

     MR. SPERLING:  The President focused today on economics and in
addition to announcing the $200 million OPIC line of credit for investment
in Vietnam and the creation of a new high-level economic dialogue between
the United States and Vietnam, he also made very clear that he believed
that Vietnam's future and amazing potential will be much determined by the
degree that it embraces a new era of entrepreneurship, innovation and

     Vietnam has certainly -- has many impressive statistics, economic
statistics for a developing country and has made some further progress on
reforms with its enterprise law, which makes it easier for private
enterprises to get started without as much onerous licensing and some
modification of foreign direct investment.  And they do -- have started a,
the very, very beginning of opening a stock market in Vietnam.

     But while the Vietnam people very clearly share the values that those
in the United States do of work ethic, education and entrepreneurship,
there is no question that there is a different vision that still exists on
economics at the highest levels of the government.

     When the President met with Party Secretary General Le Kha Phieu,
there was clearly a noticeable difference in philosophy.  He saw their
return to growth as a reaffirmation of their socialism, even in the face of
the Soviet Union's collapse; and that he described Vietnam as an economy in
which there were several sectors -- a state sector, a cooperative sector, a
private sector -- in which there was no particular preference between which
of those sectors was more likely to lead future growth and job creation.

     As the President said today, however, we clearly believe that while
these choices will ultimately be those of the Vietnamese people, we think
that the degree for them to expand and promote their potential will be very
dependent on the course they take, particularly with regards to encouraging
a vibrant private sector.

     If you look at Vietnam right now, 70 percent of the loans, of the
capital, goes to state-owned enterprises, even though they make up only 6
percent of the jobs and only 30 percent of the GDP.  And the President
addressed that today by simply saying, imagine what could happen here if
that capital was going into the hands of the young people with the ideas,
with the innovation; imagine what the potential job creation could be if
that capital was not being directed by the state sector, but was allowed to
go to those people with the best ideas and the best ability to expand
companies and expand jobs.

     The President also talked about imagining what Vietnam could do with a
more vibrant, more business-friendly environment.  In 1997, there was $2
billion of foreign direct investment in Vietnam.  There was significant
excitement on Vietnam by foreign investors.  But over the last three years,
that has slowed down.  the foreign direct investment in '98, '99, and 2000
combined is less than the $2 billion that was invested in 1997.  Now, that
is just to say that foreign investors had high hopes and are waiting and
looking right now.  I think that most see the bilateral trade agreement
with the United States as perhaps the most promising sign that Vietnam may
be on a course to more significant structural reform, restructuring their
financial sector, and people will be looking very closely at that.

     The business people he will talk to here will no doubt talk about the
difficulties with bureaucracy and being priced at different levels, and
high cost of telephones and air traffic, all things that Vietnam could do
to make its economy even more terrific.

     When you talk about potential, there is very high literacy rates for a
developing country, unquestionably.  Ninety percent of the kids are at
least in primary school.  The rates fall off a bit as you get into the high
school area.  But it is strong.

     One of the places where I think you would see the most significant
difference in philosophy and where I believe the U.S. bilateral trade
agreement could make a difference, and where I think just the realities of
the market will make a difference, is in the telecom and Internet area.
When you listen to the party General Secretary speak, there is a great
understanding that information technology is the future, but there's a
sense that somehow the state can somehow manage that itself, almost as if
the United States were to have decided 10 years ago we really didn't need
Microsoft and Cisco and AOL.

     Clearly, everything that we have learned is that the best way to
foster growth in the telecom and Internet area in a way that benefits
average people is to create an environment of competition that allows for
the new ideas and new competition to just emerge.  Motorola, one of the
best companies in the world, their CEO would tell you that their iridium
project will be the last time any major company will ever try to plan
something in this area five years in advance.  It just -- things move to
fast.  They're now dealing with what to do with the satellites in space.
The notion that a government can predict these things is very suspect.

     What does that mean for the Vietnamese people?  Right now one-tenth of
one percent are on the Internet; by 2005, the projection is still that
there will be less than 1 percent.  Cost will tell you a lot there.
There's a state-controlled telecom industry.  The price of being on the
Internet for an hour is nearly $3.00.  If you consider that the per capita
income for a week is $6.00, if $2.00 on the Internet is your entire per
capita income average, you're not going to have an expansion and you're not
going to be able to fully participate.

     And so, again, I think that the movement in the U.S. bilateral trade
agreement is promising in that that trade agreement is more than just
cutting tariffs.  It lays out essentially a road map for integrating in the
world economy.  It allows for joint ventures by the United States, two
years with Internet, in three years -- I think how open that they are to
that in implementing that, and will say a lot as to whether foreign direct
investment does come back.

     Again, this is a country with just remarkable economic potential -- I
mean, truly remarkable economic potential.  And I think that the President
did not want to leave here, again, without saying that while each of has
our different philosophies, the President said in the meeting with Le Kha
Phieu, he said, each of us has to come up with our own way of balancing the
rights of individuals and the community, the rights of the private sector
and the state.  But clearly, we felt, the President felt, that at least
sharing our experience on the importance of the strong, vibrant private
sector, particularly in the new information technology era, in bringing
benefits that can be spread throughout the society to all the people was an
important message that we wanted to give before leaving here today.

     So, thank you.

     Q    The President has spent a lot of time these last few days trying
to connect to young people and talking about young people.  For a lot of
these young people, as Vietnam develops a more vibrant private sector, the
best opportunities are in sneaker factories and garment factories that are
of such a source of concern in the U.S.  Can you talk about the extent to
which that is a potential source of tension for the U.S., and also what the
administration is doing in discussions now on labor standards with Vietnam?

     MR. SPERLING:  Let me make three points.  Obviously, one of the
reasons the President talks to the young people is that this is a young
country.  One of the most disturbing facts you will see on Vietnam is that
there are only 5 percent over 65 years old.  And that is the kind of
statistic one sees only in a very wartorn country -- only 5 percent over
65.  So one, by necessity, talks to the young people.

     When you talk to, I think, the people -- the top economists here or
World Bank, IMF -- one of the things they will tell you is that it's not
just foreign direct investment that matters, but what is the quality of
that.  Is it foreign direct investment and high value added products that
can be exported or is it just in hotels and consumption here or just in
lower products?  And, again, that goes to the general message that we're
giving today.  You know, when you have 92 percent piracy rates, when the
state pretty much controls telecom, that shuts off a lot of the potential
for there to be investment that could put Vietnamese people -- who, again,
are very educated and skilled -- it cuts off a lot of potential for them to
get a lot of the high value added jobs in the world economy.

     On your next point, one of the things that we were very happy with and
it's worth commending the Vietnamese government for, was that they were
willing to enter into a labor dialogue with us.  In fact, if you remember,
on the first day the President witnessed the signing of the memorandum of
understanding, which Andrew Samet, the Under Secretary of Labor, has done
an excellent job on working on.  That was not a so-called deliverable that
we knew would be here.  In fact, we probably didn't think that that would

     So I think the fact that they were willing as part of this visit, as
part of the overall economic dialogue to have a labor exchange with us, an
ongoing labor dialogue, shows that we have at least opened the door to
discussing with them issues that could go into, clearly, technical
assistance on health and safety, but also can get into the issues of core
labor standards that we think are appropriate when having such an economic

     So within the economic dialogue that set up is a labor dialogue, there
will be a focus on trade -- implementation of the trade agreement, a focus
on the science and technology.

     Q    The President mentioned some flooding.  Is the U.S. going to
provide any direct financial support, like it did in Mozambique or Central

     MR. SPERLING:  You know what, you moved just a slight bit out of my
area, so let me have PJ or Jake get back to you on that.  I just don't
know.  Sorry.

     Q    Gene, realistically, how far is the Vietnamese government from
bringing about the kinds of reforms in the court system and in sort of free
market reform that it will bring in new kinds of investment that will
really make a difference?  I mean, we're years from that, aren't we?

     MR. SPERLING:  Well, this is where I think there is such importance in
things like these bilateral trade agreements which essentially open the
economy.  And it's no secret that this is much of our philosophy, as some
of you have written on, in terms of the President's philosophy on open
markets, which is that in bringing openness you bring to bear larger
forces.  Those forces affect free expression, human rights.  Those forces
also express basic competition.  And by forcing countries into the global
-- or by having countries enter into the global economy they have an
opportunity to seek their comparative advantage.

     Ultimately, as Secretary Summers always says, no other country can
want to perform more than the country, itself, does.  Every country will
make its decisions based on what they see as best for their people.  But to
the extent that you have an outdated ideology holding back the potential of
the people, to the degree that you are subjecting your economy to more
open, competitive sources through trade, through openness, you may have a
greater speeding up of some of those processes.

     If somebody -- I mean, I always feel that we can come and talk about
these things, and we should, but there's nothing as effective as when
private sector companies come here, or come to any country, and say, we'd
love to invest.  A lot of times you go to countries and they say, we'd like
to invest but you just don't have a strong enough work force.  Here you
have a very highly motivated, literate work, but to say there's just not
strong enough intellectual property regime, there's just not a competitive
enough telecom or low enough prices for us to do business here.  So the
question you're asking on the speed could be very much, I think, improved
by the opening of their economy and, hopefully, their decision that they
should speed up these processes -- not because the United States or anybody
thinks it's a good idea, but because they see a chance to leapfrog

     And there's no question   that the Prime Minister, the President, Le
Kha Phieu, all of them talked about the important of information
technology, the degree that this can allow a certain leapfrogging in
development.  Our hope is that as they continue to go further, they'll have
a greater sense that fostering private sector competition is the
irreplaceable means to getting there.

     Q    Would it be fair to infer that you got different impressions from
various members, senior members of the Vietnamese government than the
President spoke to, and that the General Secretary seemed to be more
opposed or more concerned about the consequences of economic reform for the
government than the other two senior leaders he spoke to?

     MR. SPERLING:  I think that there is no question that there was a more
ideological bend from the party General Secretary.  I think many of the
specific goals are the same.  As you know, they are coming forward with
their next 10-year plan, and so there is certainly an understanding.  But
there was a little more -- in one sense a little more of a pragmatism and a
little less ideology in the first two meetings.  There was a very strong
statement about the USSR has failed, but we're still on our feet, socialism
reaffirmed.  There was not that kind of discussion.  I did not hear that in
any of the other meetings.

     Again, I think though there was -- to be fair, and this is a country
that has returned to growth this year that could be over six percent, it's
not at the nine percent level it was prior to the financial crisis.  The
foreign direct investment has not returned.  But, again, you have a new
enterprise law, which is at least a start.  You have a stock market that is
a start.  You have this historic bilateral trade agreement which is a
start.  You have some easing of foreign direct investment.

     So again, I think the important thing is what is done, not so much
what is said.  But I think in one sense, the difference is that one may get
the feeling that if there's a determination that telecom in the Internet is
the most important thing, then, therefore, the government should control
it, where obviously we would believe and have believed and have had the
policy that this was so vibrant and such a potential for productivity
growth that we should be ultra-careful in getting in the way.

     And much of the compliments that we get in the Clinton administration
from some of the CEOs of the major companies, it won't surprise you, is as
much about what we didn't do as we did.  The people appreciate the Telecom
Act; they appreciate the deficit reduction act that lowered interest rates;
but they also appreciate that there was a general view that vigorous
private sector competition would bring down prices for all Americans, and
not that you don't have common sense regulation, but you do so with care
when you have such a vibrant industry.  I think there might be -- one could
here a somewhat different tone at times in the third meeting.

     Q    Just to expand on that -- you said there was a statement the USSR
failed, we're still on our feet.  What was the party General Secretary
trying to say?  That their system worked and central planning worked
because they're still around?  How did you interpret this?

     MR. SPERLING:  I interpreted it as that he was saying that they have a
multilevel economy, and that they do not believe that one has to have a
sole priority per the private sector.  He described a state sector, a
cooperative sector, a private sector, perhaps even a foreign investment
sector, and said all of them could operate on equal terms, all of them
consistent with the law, and that -- he referred to the fact that China had
had to import rice in the '80s, and that they had now -- were up to 20
million in production in the Mekong Delta where they'd been --

     Q    You said China.  Did you mean Vietnam?

     MR. SPERLING:  I'm sorry, what did I say?

     Q    You said China.

     MR. SPERLING:  Vietnam.  That they --

     Q    Wrong communists.

     MR. SPERLING:  Just a little more used to talking about the prior
country.  But he was referring to I think the self-reliance, the autonomy,
and that they have come back in going from being an importer to a major
rice exporter to production of 2 million tons a year in the Mekong Delta to
20 million tons a year, and that they're doing well.  He said the USSR had
gone down, but that they had been -- that they were still on their feet was
the interpretation we were given.  Were still on their feet, and that had
reaffirmed at least their brand of socialism, which he then went on to
describe as having these several sectors that all could operate equally, as
opposed to the United States where there was a clear priority that the
private sector was the engine for economic growth.

     Q    When you talked about the officials talking about the imports of
government control over telecoms and the Internet, was that a message from
all of them, or just from the General Secretary?

     MR. SPERLING:  I think that that -- I think I said there that I think
that was more of a tone type of issue, more of -- that this was extremely
important and that, therefore, the state sector would focus appropriately
on training workers.  And that is -- in the United States, as well -- an
appropriate function for the state sector is the education and private
sector.  But there did not seem to be a reflection of the importance of
opening up the telecom system to vigorous competition or that high prices
were pricing out the overwhelming majority of the Vietnamese population.

     So that was more of an impression and interpretation from the tone and
from just what is happening in the economy right now.  But, again, there is
still, then again, this bilateral trade agreement where there is a fairly
significant commitment, 50 percent equity investment by United States'
companies within three years; two years, I think, in base telephone; four
years in, I think, mobile and cellular -- though I think 49 percent equity.
So, again, there is much one can point to of positive signs, but I think
people are looking at the pace and the commitment and I think the degree
that the bilateral trade agreement is enforced and implemented, that will
be one of the most positive things.

     I should say in all three meetings there was -- all three meetings,
entering the WTO was a top priority; all three meetings, the President, the
Prime Minister and the Party Secretary General all said that they were very
focused on being able to have permanent normal trade relations with the
United States and enter the WTO.  And, again, if that commitment is
serious, too, that takes with it a series of additional reforms that one
would have to go through that would open the economy and I think be
ultimately to their benefit.

     Q    Gene, where specifically is the $200 million line of credit
coming from?  Is it export-import or --

     MR. SPERLING:  I'm sorry, it's OPIC.  It is OPIC, and I believe George
Munos will be here in December to do an announcement.  And it's a line of
credit for both export financing or political risk insurance -- I think
consistent with others we have done.

     Q    What do you say to American companies about the prospects for the
trade agreement?  The phase-ins are pretty long, up to seven years
sometimes.  What do you say -- what might you say or advise American
companies coming here, or thinking about coming here, given the fact that
piracy is so high?  Nike doesn't sell shoes here; Microsoft says it's 99
percent pirated.  What do you say?

     MR. SPERLING:  I think you have an interesting picture here.  I mean,
you do have a very young, extremely hard working populous, and I think
companies talk about the commitment to working hard.  You have a very --
again, as I say, the numbers fall off, but one can't downplay the literacy
rate that they have, the number of skilled people that they have here --
you can walk the streets and see the entrepreneurial spirit in people,

     So I think -- I can remember when Secretary Rubin visited here a few
years ago, he called me about something else while he was here, but he said
he thought this was -- he had really been impressed and that if he were
back in the private sector, this would be a place you'd really be looking
at.  Now, that was 1997 and that was a year in which there was $2 billion
of investment.

     So I think what you saw here was significant excitement because of the
potential; but then there was, you know, a little less optimism about the
pace of structural reform.  There's always symbolic things, there was a big
BP Amoco project here that has sat on the shelf for a while.  Often, things
like that become symbolic.

     So I think -- I guess what I would say is that there is enormous
potential in this country and that there are lots of positive signs,
including the BTA, of moving forward and that this is a place I'd be
watching closely to see what they do and which path they follow.

     The fact that there are complaints about the licensing and the
sub-licensing and bureaucracy, that is true.  In fairness to Vietnam, those
are criticisms one who hear of many, many developing countries.  But, on
the other hand, some have made a commitment to wanting to attract foreign
investment and really working on those things.  So this would be a place I
would be optimistic of, but watching closely.

     Thank you.

     END  3:33 P.M. (L)

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