VIETNAM-ASEAN: TRADE OVERRIDES POLITICAL CONSIDERATIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01058R000201520001-6
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 8
• Document Creation Date: December 22, 2016
• Document Release Date: April 26, 2010
• Sequence Number: 1
• Publication Date: June 7, 1985
• Content Type: REPORT

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T
Washington. D C 20505
DIRECTORATE OF INTELLIGENCE
/SL
7 June 1985
Vietnam-ASEAN: Trade Overrides Political Considerations
Summary
Despite its unified opposition to Vietnam's
occupation of Cambodia, neither ASEAN as an
organization nor its individual member countries
have imposed an across the board trade embargo on
Vietnam. Trade has continued--and in the case of
Singapore expanded--since 1979 in all ASEAN
countries except Brunei. Hanoi's recorded trade
with ASEAN now totals about $100 million annually--
an inconsequential amount in terms of ASEAN, but
equal to about a quarter of Hanoi's hard currency
trade. We estimate that unrecorded exchanges are of
approximately equal magnitude. From Hanoi's point
of view, moreover, trade with Singapore and Thailand
has provided essential fuel and rice in times of
shortage.
Hanoi's economic strategy for the remainder of
the decade calls for sharply expanding trade with
ASEAN, but we
believe these plans are unlikely soon to amount to
much. Hanoi's ability to import from ASEAN
countries will be limited primarily by lack of
foreign exchange and access to credit. Expansion of
Vietnamese exports to ASEAN will be hindered by poor
quality, limited availability, lack of marketing
knowhow, and the competition with commodity exports
of other Southeast Asian nations.
This memorandum was prepared byl (Southeast Asia
Division, Office of East Asian Analysis. Information available
as of 6 June 1985. was used in its preparation. Comments and
questions are welcome and should be addressed to Chief, Southeast
Asia Division, OEA,
EA M 85-10110
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Vietnam's Trade with ASEAN
Vietnam's annual foreign trade of roughly $2.2 billion is
oriented strongly toward the Soviet Union and Eastern Europe;
these countries account for about 80 percent of Vietnam's total
trade. Published data indicate that trade with ASEAN averages
about $100 million annually, thus accounting for about 5 percent
of Hanoi's combined imports and exports and about a quarter of
its hard currency trade. (See Table 1) This trade is of
negligible value to the ASEAN countries, comprising less than 1
percent of the value of trade in all cases. Nevertheless, we
believe there is some merit to Hanoi's claim that its trade with
ASEAN is far greater than official statistics show. 25X1
a substantial amount of trade goes unrecorded, so 25X1
that the data in Table 1 probably understate the flow of trade
between Hanoi and ASEAN by about 50 percent. 25X1
Singapore. Official Singapore statistics show total trade
with Vietnam approached $80 million in 1983. Both imports and
exports rose sharply in the first half of 1984. Although it has
no embassy there, Hanoi maintains an official trade
representative in Singapore. Much of Vietnam's trade with
Indonesia, Thailand, and Malaysia is generated by this office and
is reflected in Singapore statistics.
Hanoi's major export to Singapore is frozen seafood, largely
through the joint Singapore-Soviet seafood company Marrisco.
Hanoi also exports tropical commodities and foodstuffs, which are
largely reexported, and some exotic products favored by
Singapore's Chinese community.
Singaporean companies sell a variety of consumer goods and
commodities to Vietnam. Refined petroleum products--largely
marine diesel fuel--and goods and services for the Soviet oil
exploration effort in the South China Sea make up a large portion
of this trade. Most Singapore companies long ago gave up
granting Hanoi letters of credit to pay for imports unless these
are cosigned by the Mosco w Narodnv Bank of Sin apore, according
to the financial press. 25X1
In addition to trade by official Vietnamese companies,
reporting from press details a 25X1
large volume of trade conducted by ethnic Chinese businessmen--
often relatives--in both countries. This trade may fall off,
1 Data used in this paper come from ASEAN and Vietnamese trade
statistics, IMF analyses, and CIA estimates. Japan and Hong Kong
together account for almost 40 percent of Hanoi's relatively
small hard currency trade of $500 million.
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however, if Hanoi is successful in its efforts to centralize
control of the largely, ethnic Chinese foreign trading companies
in Ho Chi Minh City.
Thailand. Although Bangkok bans the export or transit
through its territory of "strategic goods" to Vietnam, it is
Hanoi's second largest ASEAN trading partner. Official Thai
exports increased from about $400,000 in 1983 to nearly $10
million last year, largely because of a sharp rise in Hanoi's
rice purchases. Even so, we believe Thailand's official
statistics substantially understate trade with Vietnam.
rice exports to Vietnam may have
topped 350,000 metric tons last year, compared with the 51,000
tons in official statistics. The US agricultural attache in
Bangkok believes most rice exports from Thailand to Vietnam list
the Malagasy Republic as final destination. The purchases are
largely handled by Japanese and Soviet trading companies,
according to the US Embassy in Bangkok. Hanoi apparently pays
hard currency or barters tropical commodities for the rice. _
Much unrecorded trade--especially of textiles and consumer
goods--goes by land across Cambodia and by sea across the Gulf of
Thailand to ports in southwestern Vietnam, according to the US
Embassy in Bangkok. A few private Thai companies are pressing
for Bangkok to regularize this trade and expand into other
products. They are sending representatives to Hanoi in search of
new business, and one Thai company signed an agreement last year
to provide timber equipment to Hanoi in return for timber and a
letter of credit, according to the Thai press.
Indonesia. Hanoi's trade with Indonesia is small in
contrast to that with Singapore and Thailand. The value of
direct bilateral trade fluctuates between $2-4 million
annually. Although we cannot estimate precisely the value of
indirect trade through Singapore, we believe it is substantial.
Both Jakarta and Hanoi are looking for ways to expand direct
trade, mainly by cutting out some middlemen in Singapore. The
two governments last month signed a memorandum of understanding
calling for expanded bilateral trade--the first such agreement
between Hanoi and an ASEAN country since 1979. The MOU included
an agreement for Vietnam to buy 600,000 yards of Indonesian
textiles, worth about $350,000. If carried out, this contract
would roughly double Vietnamese imports from Indonesia. The MOU
also states that Indonesia will consider supplying Vietnam with
fertilizer and fuel oil on credit.
Malaysia. Hanoi's direct trade with Malaysia amounts to
only a few hundred thousand dollars annually. A substantially
larger. amount is traded indirectly through Singapore--perhaps as
much as $5 million a-year. In 1983, according to press reports,
Guthrie--a Malaysian-based multinational--sold $375,000 of rubber
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processing equipment to Vietnam. Small Vietnamese ships trade
directly with the Chinese community in Penang.
The Philippines. Trade with Vietnam has steadily dropped
since 1980, when Manila exported goods worth roughly $10
million. Official exports in 1983 were less than $2 million--
largely high yield rice seed.2 Vietnamese sales to the
Philippines are negligible, according to Philippine statistics.
Longstanding plans by Marcos crony Enrique Martel to develop
joint ventures in oil, glass, and textiles have yet to
materialize.
Brunei. The staunchly anti-Communist government of ASEAN's
newest member has refused to establish diplomatic relations with
Hanoi and bans trade with all Communist regimes.
The Future of ASEAN-Vietnam Trade
The View From Hanoi. Hanoi's severe foreign exchange
shortage and lack of access to both commercial and longer term
foreign borrowing have forced the leadership to consider opening
the economy more to non-Communist trade and investment.3
Increased trade with ASEAN countries plays a major role in these
plans, according to diplomatic reporting. Hanoi's goals are to
increase exports of seafood and rubber and other tropical
products through Singapore to pay for increased imports of
fertilizer, petroleum, industrial raw materials, and consumer
goods such as textiles. We believe that Hanoi has also targetted
Indonesia and Malaysia for increased direct trade.
The View From ASEAN ASEAN governments hold differing views
on commercial relations with Vietnam. Despite the extended
-political confrontation with Hanoi, however, neither ASEAN as an
organization nor its individual members have embargoed trade with
Vietnam. The "hardline states" of Singapore and Thailand in fact
conduct the bulk of ASEAN's trade with Vietnam. On the other
hand, ASEAN leaders remain opposed to granting economic or
development aid.
o Thailand bans export of or transit through its territory
of "strategic goods" such as petroleum and steel destined
for Vietnam and discourages but does not restrict
imports. A distinct minority position--put forth by
2 Vietnamese agricultural technicians regularly attend training
sessions at the International Rice Research Institute in the
Philippines.
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former Prime Minister Kriangsak and Deputy Prime Minister
P.hichai--advocates ex,pa,nd,ed, trade as one means of. cre,at,ing
a better atmosphere for talks with Hanoi over Cambodia, a
position the Prem government has so far rejected. Thai
officials do not publicly acknowledge the extensive,
unofficial trade across Cambodia and maintain that
Singapore's much larger trade with Hanoi undermines ASEAN
solidarity on Cambodia.
o Singapore officials maintain that they run an open economy
whose private businesses can deal with all countries
except those subject to a UN trade embargo, which Vietnam
is not.
o Indonesia believes it has a special relationship with
Vietnam, based on a shared anti-colonial heritage, and
promotes the view that Vietnam is an integral part of the
Southeast Asian community. There is a general feeling in
Jakarta that Indonesian-Vietnamese trade should be larger,
if only to attempt to draw Hanoi more into that community
and away from near total reliance on Moscow. Jakarta also
seems willing to consider expanded economic relations with
Vietnam and has offered to provide oil drilling assistance
to Hanoi once the delineation of their joint maritime
boundary is resolved. Indonesia is also pursuing the
possibility of marketing its surplus textiles in Vietnam.
o Malaysia in principle strongly opposes trade with Hanoi.
More importantly, increasingly sophisticated Malaysian
businessmen find little to tempt them in Hanoi's wares.
Malaysian academics who recently visited Vietnam came away
saying they did not understand their government's rigid
objection to bilateral trade, given Singapore's nearly
open door trade policy.
o The Philippines and Vietnam signed a trade agreement in
1978, but Manila has since issued strict instructions that
while "regular commercial practices" could be maintained,
In Dractice-
no longerterm projects could be initiated.
Manila does not monitor trade with Vietnam.
Trade Prospects
Over the next two years Hanoi will probably attempt to
promote increased official trade with ASEAN, using the Indonesian
agreement as a starting point. We believe Hanoi is also likely
to attempt to set up some joint ventures with businesses from
ASEAN countries. It would especially use help in natural rubber
production and processing, in which Malaysia has a special
expertise.
Despite these efforts, we believe Vietnamese-ASEAN trade is
likely to stagnate near its current level without a major
revision of economic policy by Hanoi. Vietnam's ability to pay
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for hard currency imports has shrunk markedly over the past year
and, is unlikel to improve without an IMF-sponsored debt
rescheduling.
Hanoi will also have a tough time expanding exports to ASEAN
unless it can acquire the technology to improve product
quality. In addition, it will have problems increasing the
supply of goods for export unless it can divert some of the goods
now going to the Soviet Bloc into ASEAN trade.
Because the ASEAN economies, especially Singapore and
Thailand, are dominated by dynamic, freewheeling private sectors
with relative freedom of foreign currency transfers, it is
unlikely that their governments could substantially curtail the
trade that exists even if they wanted to. By the same token,
these companies will expand trade with Hanoi only if it is
profitable.
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Vietnam's Trade with ASEAN, 1983a
$US million
Brunei Indonesia Malaysia Philippines Singaporeb,c,d, Thailandb
SRV Exports to: -- 1.8 .1 .1 33.4 1.0
Typical products coal soybeans coal frozen seafood, timber
corn spices spices, peanuts,
vegetables seafood rubber, tea,
coffee, coal
SRV Imports from: -- .4 .2 1.5 45.0 10.0
Typical products textiles rubber rice, high petroleum rice
cooking oil processing yield rice products, machinery
equipment seed, chemicals, textiles
cement textiles, medicine
milled wheat,
steel,
consumer goods
a Data come from the ASEAN countries trade statistics, supplemented by CIA estimates. Unrecorded
trade is probably of roughly the same magnitude.
b1984.
cIMF figures for Singapore (obtained from Vietnamese side) are substantially higher.
dFigures for Singapore exports to the SRV include substantial reexports from other countries. A
large percentage originates in Indonesia.
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SUBJECT: Vietnam-ASEAN: Trade Overrides Political
Considerations
Distribution:
Original - OEA/SEA/ITM
1 - Richard Childress, NSC
1 - Byron Jackson, Commerce
1 - Alan Kitchens, INR/State
1 - Dottie Avery, INR/State
1 - Bill Newcomb, INR/State
1 - Lyall Breckon,EAP/VLK/State
1 - Paula Causey, INR/State
1 - Cora Foley, INR/State
1 - Joseph Winder,EAP/IMBS/State
1 - John Maisto, EAP/PHL/State
1 - Frazier Meade, EAP/TB/State
1 - Larry Greenwood, EB/OMA/State
1 - Doug Mulholland, Treasury
1 - Barry Newman, Treasury
1 - Richard Rice, Dept. of Defense
1 - John Finney, Dept. of Defense
1 - William Wise, Dept. of Defense
1 - Robert Emery, Federal Reserve Board
1 - Greg Moulton, STR
1 - Executive Director
1 - DDI
1 - NIO/EA
C/DDO/PPS
CPAS/ILS
- CPAS/IMC/CB
1 - DDI/OCR/EA/A-
1 - C/DDO/EA~
1 - DDI/OCR/ISG
1 - C/DDI/PES
1 - PDB Staff
1 - C/NIC
1 - OGI/ECD/IF
1 - D/OEA
1 - OEA/Research Director
1 - Ch/NEA/OEA
1 - Ch CH OEA
1 INIC/Analaytical Group
1 - E SE IB
1 - Ch/SEAD/OEA
1 - DCh/SEAD/OEA
1 - DDI Rep CINCPAC
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