One year after joining the World Trade Organisation (WTO), Vietnam has reached an economic growth rate of between 8-8.5 percent, the highest in the past ten years.
Economic growth hits 10-year record high
Vietnam is right on track to develop its economy, which is demonstrated through the growth of key sectors such as industry, trade and services. Positive results have been achieved in economic restructuring as proportion of GDP of the industry-construction sector increased from 41.31 percent to 41.48 percent and the service sector, from 38.25 percent to 38.44 percent.
Many policies have been reformed without any discriminatory treatment between domestic and foreign businesses and between State-run and private businesses. Notably, subsidies for State-run enterprise have been reduced.
Thanks to significant improvements in investment policies, the business environment and opening up the market under its commitments to the WTO, the FDI registered capital reached US$15 billion by December, 2007, up nearly 40 percent from the same period last year.
Noteworthy is that the private economic sector’s contribution accounts for 35 percent of the country’s common economic growth. This shows that people have felt secure putting money into production and business.
Owing to the looser legal regulations in 2007, capital sources invested abroad by Vietnamese businesses has trebled the 2006 figure, reaching US$350-360 million and is likely to increase sharply in the near future. Vietnamese businesses are investing not only in the underdeveloped economies like Laos and Cambodia, but have also set up joint ventures with major economic groups from other developing countries. Vietnam is accelerating its administrative reforms so that it will be recognised as a full market economy before the deadline in 2008 required by the WTO.
However, the national economy still has some weaknesses after winning the WTO membership legal mechanisms remain poor and need to be revamped while macro economic managers have failed to control the escalating price rises in recent times.
Nguyen Van Long, head of the national committee on international cooperation: trade commitments and five issues of interest.
According to commitments on opening up the market for commodities, Vietnam will
reduce tax rates from 17.4 percent to 13.4 percent within 5-7 years. Tax rates for farm produce fall from 23.5 percent to 20.9 percent while the tax rates of non-agricultural products fell from 16.8 percent to 12.6 percent. Tax rates of industrial goods dropped from 16.8 percent to 12.6 percent. Vietnam has applied a tariff quota on some goods such as sugar, tobacco, and salt. Protecting goods and reducing import tax will promote the restructure of the national economy in an effective manner, increase production on a large scale and comparative advantages in labour, natural resources, to improve competitive edge and boost exports. After joining the World Trade Organisation (WTO), some industrial goods are maintaining a high growth rate and export value including garments and textiles, leather shoes, electronics, and electronics components and wood exports. Farm produce has still maintained high growth rates including coffee, pepper, vegetables, cashew nuts, coal, seafood and rice. Regarding the service sector, under WTO commitments, Vietnam will open 110 sub-sectors belonging to 11 service sectors. However, Vietnam has not yet allowed foreign companies to operate in the country, except to open branches. This will help the national economy escape undue pressure in the immediate future.
Among export items, garments and textiles and leather shoes are directly affected by Vietnam’s WTO commitments. However, thanks to good supervision over garment and textile exports to the US market, US importers still continue to increase the import of garment, textiles and leather shoes.
Regarding its trade commitments, Vietnam should pay attention to the demand for expanding production, diseases in the breeding sector, the decrease in crude oil exports and the rise in the price of all imported items.
Vo Tri Thanh, from the National Economic Management Research Institute: Enterprises’ major weaknesses
During the integration process, Vietnamese enterprises began to reveal their weaknesses, particularly their capacity to compete in a modern and civilized global market. Vietnamese enterprises more often or not set short-term plans rather than long-term strategies. In the past two years, some Vietnamese businesses have made giant profits, but most of them hail from short-term investment and maybe from speculation. In addition, only a few enterprises cooperate with each other amidst a global context of fierce and stiff competition.
A survey conducted by the institute on enterprises exporting garments and textiles, leather footwear and seafood products to the European Union showed that Vietnamese enterprises’ strategies are mostly built based on traditional items which Vietnam has potential.
If enterprises compete mainly bases on prices and resources, they will encounter trade barriers such as dumping price and food hygiene and safety. Therefore, it is time Vietnamese enterprises begun to improve the quality of their products for sustained competition.
Phuong Huu Viet, president of the Vietnam Young Business Association: three issues to be improved
Vietnam has experienced great changes after joining the WTO. First, the country’s
activities have been done in accordance with its WTO commitments and international conventions. Second, businesses and the public have begun to behave in an integrated and global world. However, the enterprises are still inexperienced, lack information and do not have long-term strategies.
There are three things for businesses to do in the coming time: improving the professionalism of business leaders, invest in staff; building the capacity of officials working in State management agencies; and building a uniform legal system with high applicability and practicability.
Lawyer Tran Huu Huynh, head of the legal section under the Vietnam Chamber of Industry and Commerce: Vietnam fulfils its duties as a new WTO member
Though having joined the WTO for just one year, Vietnam has made many strong commitments to a new member’s duties in opening up its domestic market. It has modified hundreds of acts in line with international practices. All state assistance for Vietnamese enterprises must now comply with the state’s commitments.
The Vietnamese State has put into effect the Investment Law and the Enterprise Law and the instructions for implementing them. Enterprises and their association remarked that these new laws have assured investors’ freedom to do business.
Vietnam is also gradually materializing its commitment to opening its service and trade market. Foreign investors have also appreciated the considerable changes in Vietnam’s business climate.
However, the country has much to do in the near future that is to open the financial and distribution markets, and grant licenses to foreign banks to operate in Vietnam. The state should also provide instructive documents for the areas the country hasn’t yet committed to.
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