Saturday, February 09, 2008

Vietnam one year after joining the WTO

VietNamNet Bridge - Vietnam’s socio-economic achievements over the past year have been attributed to the country’s reform process, in which its WTO membership plays an important role. Vietnam has made many economic achievements after only one year of World Trade Organisation (WTO) membership thanks to the strong development of enterprises and the dynamism of provinces in developing their economies.

In the year since joining the WTO, Vietnam has welcomed many high-ranking delegations to discuss cooperative issues. Many foreign investors, enterprises and tourists have come to Vietnam to seek investment opportunities. As of January 11, 2007, under its WTO commitments in the services sector, Vietnam had to open up 11 of its industries. Due to these commitments, some sectors are facing fierce competition, including finance, banking, and telecommunications.
However, the competition has also brought a lot of benefits as Vietnamese goods will more easily penetrate foreign markets, benefiting many local manufacturers. So far, Vietnam has opened almost all areas to foreign investors.

The country’s export turnover in 2007 reached US$48 billion, up US$8.2 billion from 2006 and surpassing the 3.1 percent growth target set by the government. Vietnam’s key exports have posted high turnover, including seafood, rice, coffee, vegetables, rubber, cashew nuts and pepper.

Other products have also taken advantage of the opportunities of WTO membership, including garments and textiles, electronics, and computer components. General Director of Viet Tien garment and textile company, Nguyen Dinh Truong, said WTO membership has created many good conditions for Vietnam.

There are more advantages than challenges for the garment and textile sector, as around 150 countries have reduced taxes and there is no limit on export volumes. More and more advanced technologies from foreign countries have also been imported into the country. As of January 11, 2007, Vietnam is committed to reducing 10,689 tax lines and the export tax rate was reduced by 23 percent on average compared to the current preferential tax rate. The roadmap for implementing the reductions will last 5-7 years.

Many sectors have already reduced their tax rates including garments and textiles, seafood, equipment and machines, automobiles and components. Besides, under WTO commitments, the reduction in import tax has also greatly affected budget revenue.

Vice Chairman of the People’s Committee of the northern province of Quang Ninh, Nhu Thi Hong Lien, said that although some tax rates were reduced after joining the WTO, the province’s budget has gone up considerably, reaching VND9,300 billion. By approving the Law on Investment and Enterprise Law, Vietnam is making great efforts to eradicate discrimination between state and private enterprises, especially between foreign and local businesses, and to create an equal investment environment for all economic sectors.

The State has shifted from direct to indirect management, set up policies and laid out criteria for enterprises. This has led to great changes in management methods, providing impetus for enterprises to be more active in the market. Business environment opens up to foreign investors Vietnam has become prominent in attracting foreign investment with registered capital of more than US$20 billion, surpassing 53.2 percent of the yearly plan. Indirect capital sources pouring into the country have also increased remarkably, contributing to a rapid increase in the capital volume of the stock market. According to Vu Bang, Chairman of the State Securities Commission (SSC), over the past year the domestic securities market has developed well in both scope and scale. The increasing foreign direct investment (FDI) capital has also played an important role in the market.

Many foreign markets have kept a close watch on the local market and are always eager to enter an attractive market like Vietnam. Therefore, it is essential to maintain and promote the flow of FDI into the Vietnamese market. Vietnam will open up its doors allowing the establishment of wholly foreign-owned banks in Vietnam from April 1, 2007. However, these banks are bound by regulations not allowing them to set up branches or mobilize capital sources in Vietnamese dong within five years of joining WTO in 2007. Nevertheless, to sharpen their competitive edge, Vietnamese banks have made thorough preparations, such as increasing financial capacity, developing human resources, upgrading technology, renewing designs and diversifying product types.

Furthermore, local banks have also increased the quality of their banking services and simplified credit procedures. One year after Vietnam became a WTO member, Vietnamese retailers still hold a major share in the local market despite the active participation of foreign rivals in the same playground. They have also developed many different competition strategies to attract more customers.

Deputy Minister of Industry and Trade, Nguyen Cam Tu, said that Vietnamese retailers cannot rest on their laurels. They are striving for bigger achievements in various fields despite tough competition from foreign businesses. In 20007 the country recorded GDP growth of nearly 8.5 percent and also reduced the poverty rate to 14.7 percent. Many challenges remain ahead Pressure from the open market has posed big challenges for the national economy, especially to domestic businesses due to their limited competitiveness and small-scale production. Moreover, there has been ineffective use of foreign capital and the progress of foreign investment disbursement is still slow. Despite its overall positive results, Vietnam’s economy still shows some weaknesses and shortcomings. The national economy has not yet grasped many new opportunities or properly dealt with a number of challenges in order to secure rapid and sustainable development. Hence, to make full use of advantages from Vietnam’s WTO admission and its fast economic growth in 2007, it is necessary to develop a healthy competitive environment and strictly implement commitments to create good conditions for businesses.
Apart from preferential policies, businesses should put themselves in a global integration context and set up cooperative networks to increase competitiveness.

Furthermore, the State should create better conditions to boost national economic development by mobilizing investment capital to improve infrastructure construction and develop human resources, as well as improving the business environment.
These are decisive factors in boosting national economic growth and successfully integrating into the global economy.

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