VIETNAM: Preparations for WTO Membership
Tran-Nam, Binh, Southeast Asian Affairs
The year 2006 has proven to be another highly successful year for Vietnam's foreign relations. Many events signified Vietnam's growing stature in the international community. Throughout the year, Vietnam hosted visits from top US officials, including the then House Speaker, Dennis Hastert, then secretary of Defense, Donald Rumsfeld, and the secretary of State, Condoleezza Rice. In October, the Asian group of the United Nations nominated Vietnam as the continent's sole candidate for a non-permanent membership of the UN security Council for the 2008-2009 tenure. In November, Hanoi hosted the summit of the Asia-Pacific Economic Cooperation (APEC) forum, only eight years after it had joined the organization. However, the single most significant event that has captured international attention and the Vietnamese imagination was Vietnam's accession to the World Trade Organization (WTO).
Eleven years after Vietnam first applied for admission to the WTO, its General Council approved Vietnam's membership at a special session in Geneva on 7 November 2006. After Vietnam's National Assembly ratified its accession package, the WTO announced that Vietnam would formally become its 150th member on 11 January 2007. Of critical importance to Vietnam's full WTO membership was its long-term trading status with the United States. This issue was also finally resolved in 2006. In the evening of 8 December 2006 the US House of Representatives passed a bill granting permanent normal trade relations (PNTR) to Vietnam and five hours later, the US Senate passed a version of the same bill. This bill was signed by President Bush and became effective on 20 December 2006.
Vietnam's membership in the WTO represents a political and economic milestone in the modern history of Vietnam. Politically speaking, especially to the Vietnamese people, WTO membership confirms the international community's recognition of Vietnam's efforts in becoming a modern, outward-looking nation. This is particularly important in view of the fact that Vietnam was one of the last Asian countries to be admitted to WTO. Further, the granting of PNTR to Vietnam by the US government signals the end of Vietnam's long, often tortuous, path to full normalized relations with its former adversary. These outcomes strengthen Vietnamese public's confidence in the gradual reform approach adopted by the government.
Economically speaking, Vietnam's integration to the global economy via the WTO represents both tremendous opportunities and challenges. The economic benefits from WTO membership are expected to be highly significant. Greater international economic integration will ensure further domestic market building and sustained increases in Vietnam's exports and inflow of foreign direct investment (FDI), which have been crucially important to Vietnam's GDP growth and economic development. At the same time, the short-term adjustment costs of WTO membership may also be substantial. In summary, Vietnam's admission to the WTO in 2006 was a fitting tribute to the 20th anniversary of the country's first official embrace of the market-based renovation policy.
In order to maximize the potential benefits and minimize the potential costs of WTO membership, it is necessary for Vietnam to make careful preparations and planning, both in the short run and long run. This article outlines Vietnam's preparations for WTO membership and the domestic reforms it is undertaking in order to do so, and assesses the impact of this development on the broader Southeast Asian region.
In order to join the WTO, Vietnam has undertaken substantial legal reforms, at least from the legal enactment perspective. As a general WTO rule, a member country's laws relating to trade must be clear, certain, and transparent. In addition, domestic laws relating to agricultural subsidies, financial services, intellectual property rights, trade-related investment measures, tariffs, quotas, technical barriers to trade, and sanitary and phyto-sanitary measures must all conform to WTO conventions. As part of the process of WTO negotiation, Vietnam's National Assembly had to promulgate (mostly in 2005 and 2006) 25 new or amended laws and by-laws relating to Vietnam's multilateral WTO commitment.1 In addition, there are approximately another 75 new or amended laws or decrees aimed at reforming the economy in general and the administration in particular. Thus, Vietnamese officials have claimed that, at the time of WTO accession, no new member country has a legal system that better meets WTO requirements than Vietnam does.2
Even so, there are still domestic laws, which are currently not yet entirely consistent with Vietnam's WTO commitments. As indicated in the appendix of the National Assembly's Decision 71/2006/QH11 on 29 November 2006, these include:
* Enterprise Law No. 60/2005/QH11 (Articles 51, 52, 103, and 104) relating to voting requirements for limited liabilities public companies;
* Law on Lawyers No. 65/2006/QH11 (Article 69 clause 1, Article 72 clause 1, and Article 76);
* Insurance Business Law No. 24/2000/QH10 (Article 9 clause 2);
* Law on Enactment of Legal Normative Documents 1996 (Article 3 clause 2) and the amended Law No. 02/2002/QH11 (Article 10 clause 1 and Article 75);
* Intellectual Property Law No. 50/2005/QH11 (Articles 26 and 33); and
* Cinematography Law No. 62/2006/QH11 (Article 30).
The above domestic laws need to be either amended or clarified in line with Vietnam's WTO commitments.
So far as legal reform is concerned, the enactment of WTO-compatible legislation is necessary but not sufficient. First, further legal reform is still needed. According to an authoritative business forum, recent legal reforms in Vietnam were perceived as having been not as effective as they might have been.3 The forum called for further simplifications of Vietnam's legislative framework. Forum participants also highlighted significant benefits of continued consultation between the government and the private sector, particularly in the drafting of laws. It was argued that early publication of instructions and assistance in the implementation of new legislation can eliminate confusion that may run counter to streamlining business opportunities. secondly, another important aspect of its legal reform is the consistent interpretation and application of its trade-related laws by all of Vietnam's institutions in different parts of the country. Consistency and transparency in drafting, interpreting, and applying the laws continue to be possibly the most challenging task facing the Vietnamese government.
Thirdly, and perhaps most importantly, in order to satisfy its WTO commitments, to maximize trade benefits and to minimize potential trade disputes, Vietnam needs to fully comprehend the meanings and implications of the 25 laws and by-laws promulgated as part of its WTO accession package. Generally speaking, Vietnam needs to quickly and substantially develop its international legal and economic expertise in trade negotiations. More specifically, Vietnam needs to pay particular attention to laws with which it lacks familiarity such as those concerning anti-dumping or intellectual property rights. The anti-dumping law deserves special mention as it may have potential adverse consequences to Vietnam.4
Although the WTO is built on the principle of equal treatment between member countries, Vietnam agreed, as a price of entry, to remain on a list of "non-market economies", alongside with China and several former Soviet republics. This makes it more difficult for Vietnam to defend itself under the charge of dumping until the classification is lifted (currently scheduled to take place on 31 December 2018). Since Vietnam's current competitive advantages lie in agricultural-aqua and light manufacturing products, recent evidence suggests that it will most likely be challenged, especially by the United States and the European Union (EU), via the anti-dumping law5 Thus, Vietnam needs to train and establish a team of highly competent, multidisciplinary experts (covering a wide range of expertise including English language, law, economics, and accounting) to study the anti-dumping law and to prepare for any potential anti-dumping disputes against Vietnam at the WTO.
Information, Education, and Training
Ensuring that information flows freely is one of the WTO's basic regulations and is also closely related to the requirement of a clear and transparent legislative framework. All WTO agreements contain articles requiring member countries to communicate all new policies and measures affecting foreign trade to the WTO, in addition to regular reports for each specific trade area. In order to fulfil this specific responsibility, certain government officials in relevant ministries need to have a good working knowledge of WTO rules and the contents of their country's final commitments. It is ultimately government officials and private businessmen who abide by or violate their government's WTO commitments. This also applies to the other side of the coin. In order to maximize national economic benefits, government officials need to know what concessions their country enjoys from other WTO member countries. Similarly, domestic businessmen also need information about their country's WTO commitments and privileges to strengthen their competitive positions and to further exploit business opportunities. The public at large also has the right to be provided with all relevant information since they ultimately bear the burdens and benefits of their country's WTO membership.
In this respect, business preparation for WTO membership in Vietnam started poorly. Several weeks after the signing of the US-Vietnam bilateral market access agreement in May 2006 (which eventually led to the United States' granting of PNTR to Vietnam), the Ministry of Trade (MOT) had failed to deliver on the Minister's promise to make a public announcement of the details of the agreement. According to a trade official, the details of Vietnam's WTO agreements can only be announced after Vietnam has completed all multilateral negotiations with its WTO partner countries. In the absence of concrete information from the Vietnamese side at that stage, local businesses and organizations had to rely on a list of specific and detailed contents of the agreement published on the web site of the Office of the US Trade Representative (USTR). Naturally, this list is intended for the consumption of US businesses and does not particularly cater to the Vietnamese business sector.
On 7 November 2006, following the approval of Vietnam's membership, the WTO published three documents on its web site, namely: Report of the Working Party on the Accession of Vietnam, Schedule of Vietnam's Commitments on Goods, and Schedule of Vietnam's Commitments on Services. These three documents (in English) were made available on the MOT's web site on the same day. The Vietnamese media, including electronic newspapers, also publicized a detailed summary of Vietnam's WTO commitments in Vietnamese prepared by the MOT.6 Following the Prime Minister's instructions, the MOT and the Ministry of Investment and Planning (MPI) simultaneously published the Vietnamese translation of the three documents on their homepages on 15 November 2006. The translation of these documents was a challenging task in itself. This is because of the regular occurrence of complex technical terms and, in some cases, lack of comparable concepts in Vietnamese. It is apparent that further explanations and authoritative analyses of the implications of Vietnam's WTO commitments still need to be done and made available to the public.
As the newest WTO member country, Vietnam will undoubtedly face many new problems and issues relating to foreign trade and investment. Because of its transition economy status, Vietnam can expect considerable assistance, at least initially, from an array of organizations including, for example, the WTO itself, the World Bank, United Nations International Trade Centre, Agency for International Trade Information and Cooperation, and others. These organizations can assist Vietnam in a variety of issues ranging from trade-related technical assistance and capacity building to trade negotiations and dispute resolution. However, this kind of international assistance is limited to a relatively small number of officials selected by the Vietnamese government for overseas training. In addition, Vietnam should devote its own efforts and resources to developing and implementing a large-scale, systemic trade-related education and training programme aimed at different sectors of the community and at varying levels of sophistication.7
Three particular groups can be identified for such an education and training campaign. They are:
* The government machinery: Government officials are intermediaries between the WTO and the national economy. At all levels, from customs officers to policy-makers, the basic requirements are to understand WTO rules and to be able to apply them correctly and consistently. In addition, technical experts in the various ministries should master WTO documents relevant to their specific areas, not only of WTO but also of Vietnam's main trading partners such as the United States, the European Union, and Japan.
* The business sector: The government should encourage the establishment or expansion of formal business or professional organizations as a means to spread information and knowledge about WTO rules to businesspeople and professional employees. Like in developed nations, these various organizations should ideally possess the capacity to provide WTO-related consultations to their members. Ultimately, the aim of the programme is to promote a modern business environment in which leading businesspeople are not only dynamic in their approach and fluent in foreign languages but also comprehend the rules of WTO as well as the customs of their trading partners.
* The wider community: This group includes both experts and the public at large. The training of a team of experts in economics and trade laws must be a priority. At the base level, those experts should be able to read and comprehend original documents in English. Higher-level experts are also required to understand the rationale and reasoning behind the language, the historical background leading to a basic rule, and its operations in practice. The general public is also entitled to receive relevant information and announcement from the government through popular media such as newspaper, radio, television, and the Internet.
As indicated above, it is important to note that Vietnam's needs for up-to-date, complete and accurate information are of an ongoing nature. Vietnamese officials, businessmen, and experts need to be aware of not only Vietnam's WTO legal commitments and potential benefits, but also its changing economic environment and trends, both worldwide and in Vietnam's major WTO trading partners. Furthermore, information is only beneficial if it is accompanied by the ability to classify, analyse, and make use of it. Within the framework of international economic integration, reliable and systematic analysis of both microeconomic and macroeconomic data are of crucial importance not only to public policy-makers but also to managers, exporters, importers, banks, and even business and professional organizations.8 To achieve this aim, the Vietnamese government needs to adopt a proactive policy that promotes education, training, and research (both theoretical and applied) in economic data analysis at relevant universities, research institutes, and government departments. In the long term, data analysis is only helpful if the results are publicly available (within the limit of national security), independent, and multifaceted. The dissemination of information and knowledge also implies a far more important role played by the Internet in the near future.
Domestic Economic Reform
Vietnam is still facing many domestic economic challenges but nothing is as urgent and serious as the reform of its state-owned enterprises (SOEs). This is primarily because the central government's preferential treatment of SOEs (1) gives rise to a culture of corruption and wasteful behaviour, (2) reduces national economic efficiency, and (3) retards the development of a viable, flexible, and vigorous private sector that plays an indispensable role in the post-WTO economic environment. As far as Vietnam's WTO membership is concerned, the United States has expressed that it wants to see, among other things, limited government ownership in Vietnam. In this context, SOE reform will also help Vietnam to shake off the "non-market economy" classification sooner and thus to maximize the potential benefits of WTO membership to Vietnam. It is therefore useful to examine the status of pre-WTO SOE reform in Vietnam.
Despite the various equitization regulations introduced over the years, Vietnam's SOEs, particularly stated-owned conglomerates, have continued to enjoy favourable access to critical inputs such as land, credit, and FDI, as well as, in many cases, monopoly power. Even with this assistance from the government, about half of all SOEs are still making losses. Out of the 17 conglomerates, which hold a majority of state capital, 12 make losses or break even. The five profit-making conglomerates (namely, Oil and Gas, Post and Telecommunication, Electricity, Rubber, and Shipbuilding) are those that either exploit natural resources or enjoy virtual monopoly power. All SOEs, which produce essential goods such as foodstuff, paper, steel, textile, cement, and sugar tend to be making a loss or breaking even.
In view of the above situation, it is clear that Vietnam has made slow and inadequate progress in SOE reform, despite various laws addressing SOE equitization dating back to 1992. Up to December 2004, the 2,000 equitized SOEs have been only the smallest, accounting for 7 per cent of SOE capital. This has occurred for a number of reasons. At the political level, the conservative faction of the Vietnamese Communist Party (VCP) is more influential and dominant in matters regarding ideology, such as government support of SOEs. Thus, the emphasis in Vietnam's domestic economic policy has, until recently, shifted from "market liberalization" to the achievement of "industrialization" and "modernization" under the leadership of the state, with large SOEs as its flagship. This stance is manifested in the slogan "market-based economy oriented toward socialism", which has often been cited in statements by high-level government officials. Thus, the government has been very reluctant in reforming large SOEs in areas that it considers strategic. On a more practical level, many large SOEs are owned and operated by the army. Reforming those SOEs poses a very sensitive and difficult issue for the central government. Aggregate statistics indicate that the state sector in Vietnam has ironically become larger as a result of economic reform. Although there may be data comparability problems, the state-sector share of Vietnam's GDP has appeared to increase from about 33 per cent in both 1986 and 19919 to 39.2 percent in 2004.10
The total debt of SOEs in Vietnam at the end of 2000 stood at 190,000 billion dông (US$13.1 billion) or about 33 per cent of Vietnam's GDP The gravity of this situation was somewhat lessened in the short term by the IMF's Poverty Reduction and Growth Facility 2001-2003, which was signed by the International Monetary Fund (IMF) and Vietnam in April 2001. This reformassisting programme is intended to settle non-performing loans (NPLs) taken out by the SOEs as well as to recapitalize the state-owned commercial banks (SOCBs). It is funded by an IMF concessional loan of US$68 million and another concessional loan of US$400 million from the World Bank. However, this programme does not appear to be an effective SOE reform in the long run. It is purely a measure, which allows the state budget to absorb the burden of NPLs, which the SOEs are unable to repay to the banks, and to provide additional capital to the SOCBs. There is no specific and long-lasting guarantee of SOE reform or restructuring mentioned in this facility. Although the Vietnamese government agreed to eliminate SOCBs' "policy lending" (that is, lending under instruction of the government) except in limited and special circumstances, this agreement is not legally binding.
In very recent years and in anticipation of Vietnam's forthcoming accession to the WTO, the Vietnamese government has ceased to grant permission to establishing new SOEs and begun a new push for SOE equitization. The new regulations, introduced in December 2004, call for equitization of the majority of subsidiary companies of major state corporations in key areas of collective ownership such as heavy machinery, electricity, telecommunications, aviation, oil, steel, coal, cement, fertilizer, and paper. It has been argued, in principle at least, that so long as the parent corporations remain to be state-owned, the government can exert effective control over those strategic sectors. In practice, it has been suggested, "when these (equitized) subsidiaries have proven to be business efficient, the government (should) then equitize the parent companies".11 Such an outcome, if it eventuates, would be a very appropriate response to Vietnam's WTO accession but would also abolish a fundamental pillar of the VCP's claim to a "socialist orientation", namely, the dominance of a state sector in economic areas perceived to be strategic to the nation.
As mentioned previously, the process of state-sector reform has already been considered slow with small- or medium-sized SOEs in unimportant areas. The stakes are naturally much higher with large-sized SOEs in key areas. Thus, the major SOE reform described above can only be a very slow process, fraught with difficulties and political backlashes. Reforming major SOEs poses the possible threat of large-scale redundancies (which may or may not materialize); thus, it can be expected that much stronger resistance from employees, managers, some sections of the VCP, as well as various state bodies, will occur. In fact, one principal reason for the slow process of SOE equitization identified by the World Bank is that it "is difficult to implement without the consent of the enterprise director and a majority of the workforce".12
At this stage, it is worthwhile to examine the concept of equitization more deeply. First, it is important to note that equitization is not always the same as privatization. Equitization is the process by which some or all of the state capital in the enterprise is sold in the form of shares at a price based on the book value of the assets. Since the purchasers and holders of shares can be individuals or a governmental body, equitization is a broader concept than that of privatization. When some shareholders are private citizens, equitization is the same as privatization (while outright privatization means individuals own 100 per cent of the shares). But when the government is only the only shareholder, equitization means transforming an SOE from a government department into a business status. This means an equitized SOE does not operate with a government-allocated budget and production planning (what to buy and how much to produce). An equitized SOE should record its expenditure and revenue flows properly according to established accounting practices and should, at least in principle, strive to make positive profits.
Secondly, although equitization is not necessarily the same as privatization, equitization should, in principle, lead to increased transparency, better corporate governance and strengthened accounting and reporting oversight systems. It should also help to reduce corruption and misuse or abuse of public resources. However, if the government happens to be the majority shareholder, there may be no fundamental changes in the management (in terms of both personnel and style) of the enterprises after the assets are equitized. More seriously, if the equitized SOEs continue to be controlled by individuals who are well connected to the government, it remains extremely difficult to create a level playing field, which will foster a climate of genuine competition.
A particular SOE reform that deserves special mention is that of the banking sector. Although the Vietnamese domestic banking system has been partly reformed, it remains weak and uncompetitive. The state-owned banks still dominate the banking system, the overdue loan rate is increasing and Vietnamese commercial banks have limited lending capacity. Vietnamese businessmen trying to compete in the world market (for example, the aquaproduct industry) have found that the lack of banking competitiveness and competency are holding them back.13 They are concerned that this situation will become worse when Vietnam's markets are opened up as a result of WTO membership. As part of its WTO accession, the Vietnamese government is committed to implement the Internationally Integrated Programme of the Banking Industry in order to reform the banking sector and facilitate the liberalization of the financial process. Such a programme goes beyond the General Agreement on Trade in Services (GATS) requirements but is necessary to maximize Vietnam's WTO economic benefits.
It is also well known that the "evil" triangle between the state-SOCBs-SOEs has distorted the Vietnamese financial market. After the equitization of major SOCBs such as Vietcombank and the Bank of Investment and Development of Vietnam (BIDV) if the government does not have a controlling majority in those banks then this connection will become weaker. Policy lending will be reduced and this sends a good signal to the economy. Furthermore, if the equitization of those major banks proceeds according to an appropriate direction and the banks become more independent in terms of managerial personnel and policy, then the new management may be able to incorporate the banks' intangible assets (brand names, outlet network, and so forth) into their tangible assets.14 Under this scenario, the newly equitized banks can improve their lending capacities and hopefully satisfy the capital demands for economic development while capital market in Vietnam is still maturing.
Infrastructure facilities have so far not developed at the same pace as economic growth in Vietnam. Lack of adequate investment is threatening the replacement, upgrading, and expansion of infrastructure - particularly in the areas of ports and power. Simplifying and demystifying administrative procedures as well as increased private sector involvement are important in aiding infrastructure development.
Port congestion poses a major concern for Vietnamese foreign trade, particularly because it may hinder export growth, the main benefit Vietnam's recent accession to the WTO is expected to bring. To deal with this problem, it has been suggested that the government sets a timeline to expand deep-water port facilities and improve loading-off-loading practices. Some positive steps, however, have already been taken such as increases in productivity in some Southern Focal Economic Area (SFEA) ports, improvements in handling capacities, the reopening of the Hai Phong Port, and rapid investment in Thi Vai-Cai Mep and Cai Lan Seaports.15
With regard to the problem of power shortage, it is important for the government to create an environment that promotes private sector and foreign investment in power industry. Reforms in the relevant administrative procedures and legislation as well as extending government guarantees would aid in creating such an environment.
Impact on the Region
In terms of foreign trade by destination, whilst all the top importers to Vietnam are Asian nations, only two Asian countries are Vietnam's top five export markets. In 2005 the top five importing countries to Vietnam were China (15.6 per cent of total imports), Singapore (12.4 per cent), Taiwan (11.7 per cent), Japan (11.1 per cent), and South Korea (9.7 per cent).16 Vietnam's principal export markets in 2004 included the United States (19 per cent), Japan (13 per cent), China (10 per cent), Australia (6 per cent), Singapore (5 per cent), Germany (4 per cent), the United Kingdom (4 per cent), Taiwan (3 per cent), South Korea (2 per cent), and the Netherlands (2 per cent).17 In view of the existing trade patterns, Vietnam's WTO membership would have only a small impact on foreign trade between Vietnam and its Southeast Asian neighbours. This is also because Vietnam has already been a member country of the ASEAN Free Trade Area (AFTA) for a number of years and its WTO membership would add little to intra-ASEAN trade, which has been rather patchy over years. However, it seems reasonable to expect that foreign trade between Vietnam and its three leading trading partners (namely, China, Japan, and the United States) would grow relative to the rest of the world. This is not only because of Vietnam's lower tariffs and greater access to these markets but also because Vietnam will become a more attractive production base for re-exporting to other countries.
In terms of FDI, so far foreign investors from 73 different countries and territories have invested in Vietnam, but neighbouring Asian countries account for about two-thirds of total registered capital. As at 25 January 2005, the top five FDI countries (namely, Singapore, Taiwan, Japan, South Korea, and Hong Kong) have invested in 3,283 projects (63.6 per cent of the total licensed projects) with total committed capital of US$28.8 billion (62.5 per cent of the total committed capital).18 The recent rise of FDI inflow to Vietnam has been attributed to (1) Vietnam's new membership in the WTO, (2) domestic socioeconomic stability, and (3) the government's efforts in improving the investment and business environment. In particular, it has been forecasted that Vietnam's FDI inflow from South Korea and Japan will increase, while it is possible that FDI from Singapore will stagnate for some time. Potential substantial increases in FDI from South Korea and Japan to Vietnam warrant some further analysis.
South Korea's FDI to Vietnam in 2006 reached a record level since South Korean firms first invested in Vietnam in 1986. In 2006, South Korea had 207 projects with a total registered capital of US$2.78 billion, representing a more than threefold increase from US$770 million of registered capital in 2005.19 This also made South Korea the biggest foreign-investing country in Vietnam in 2006. As Vietnam officially joined the WTO in January 2007, there have been many signals indicating that there will be a further wave of investment from South Korean enterprises to Vietnam in order to exploit cheap labour and a consumer market of more than 83 million people. In fact, LG Economic Research Institute (LGERI) selected Vietnam's WTO accession as one of ten international events that will influence South Korea's economy in 2007. LGERI emphasized that Vietnam will receive more FDI after joining the WTO as a reward of Vietnam's increasing stability and its efforts to further liberalize the foreign investment environment.
According to the Korea Trade-Investment Promotion Agency, many South Korean conglomerates such as Kumho Asiana, Lotte, Posco, and Samsung regard Vietnam as one of their strategic markets in Asia and have announced that they will increase their investment in Vietnam. Those conglomerates will focus on Vietnam's key industries, including infrastructural projects, industrial parks, and highways. At the same time, small- and medium-sized enterprises in South Korea will increasingly be moving their branches and subsidiaries from China to Vietnam. Finally, South Korean pension funds are expected to increase investment in both the share and property markets in Vietnam.
A very similar situation exists in the case of Japan-Vietnam economic relationship. Japan's total FDI in Vietnam increased sharply to US$7.4 billion by the end of 2006.20 Japanese investors, especially small- and medium-sized enterprises, have long seen Vietnam as a safe investment destination. These firms plan to make a coordinated effort to survey the Vietnamese market and then plan to manufacture products in Vietnam with a view to re-exporting them to Japan. Since Prime Minister Nguyen Tan Dung's visit to Japan in October 2006 and Prime Minister Shinzo Abe's returning visit to Vietnam in November 2006, Vietnam's FDI inflow from Japan, especially from small- and medium-sized enterprises, has increased markedly. In addition, the prospective Japan-Vietnam Investment Promotion and Protection Agreement,21 which should provide a foundation for creating an open environment for investment, will further boost Japanese investment to Vietnam.
A fitting tribute to the 20th anniversary of the official launch of doi moi policy, Vietnam's accession to the WTO represents both exciting opportunities and challenges. To maximize the potential benefits of its WTO membership, Vietnam needs to make comprehensive and systematic preparations. As far as the legal framework is concerned, the emphasis should be a genuine commitment to the proper and consistent application of trade-related legislations, both in letter and in spirit. Particular attention should be given to laws such as anti-dumping or intellectual property rights, which may potentially have adverse consequences to Vietnam in the post-WTO period. In terms of information and education, Vietnam should try to develop and deliver widespread training programmes aimed at government officials, businessmen, and the public at large. Vietnam also needs to expand its internal capability to provide reliable data analysis, both at micro and macro levels.
The internally driven doi moi in 1986 has served Vietnam well in the initial stage of macroeconomic stabilization and basic market building. Vietnam's accession to WTO provides a new impetus for Vietnam to move decisively into the SOE restructuring and reform phase. At the same time, it must be recognized that Vietnam's gradual, pragmatic approach to economic reform has been very successful in many respects, including macroeconomic stabilization, GDP growth, and poverty reduction, despite serious warnings from international agencies from time to time. It does not seem helpful to shift suddenly from the "everything state-owned" doctrine to the "everything private-owned" doctrine without a sufficient transition period.
Finally, Vietnam's WTO membership will have a small impact on its neighbours in Southeast Asia, in terms of intra-regional trade and investment. However, it will make Vietnam a more attractive FDI destination to Northeast Asian economies.
3 Vietnam Business Forum, "Report to the Consultative Group Meeting", Hanoi, 14 December 2006.
4 Under the Bilateral US-Vietnam Trade Agreement, using the arguments of "dumping" and "non-market economy", the United States imposed considerable penalty tariffs on Vietnam's basa (fish fillet) in 2003 and shrimps in 2004.
5 As a non-market economy, Vietnam's domestic production costs may not be recognized at face value by the United States and European Union. Instead, they will use production costs in a third "surrogate" country to calculate the "fair" price of Vietnamese exports. Since the material and labour costs of a surrogate, usually an emerging economy, tend to be higher than in Vietnam, this means that Vietnamese exporters are likely to be deemed as selline below costs.
9 Mallon, R., "Doi Moi and Economic Development in Vietnam: A Rapid Overview of a Decade of Reform", in Doi Moi Ten Years After the 1986 Party Congress, edited by A. Fforde, pp. 9 24. Political and Social Change Monograph 24 (Canberra: Australian National University, 1997).
10 International Monetary Fund (IMF), "Vietnam: Statistical Appendix", IMF Country Report No. 06/52 (Washington, DC: IMF, 2006), p. 5, http://www.informest.it/ documentazione/VN_20061016115106_statistical%20appendix_2006_vietnam_.
11 Vietnam News, 23 March 2005, as cited in M. Karadjis. "New SOE Equitisation Push", Asian Analysis, June 2005, http://www.aseanfocus.com/asiananalysis/article, cfm?articleID=854.
12 World Bank, "Vietnam Delivering on Its Promise Development Report 2003", Report No. 25050 VN, Poverty Reduction and Economic Management Unit, East Asia and Pacific Region, 2002, http://www-wds.worldbank.org/external/default/ WDSContentServer/WDSP/IB/2002/12/14/000094946_021203040108 65/Rendered/ PDF/multi0page.pdf.
13 Phan Van Sam and Vo Thanh Thu, "Preparation by Vietam's Banking Sector for WTO Accession", in Managing the Challenges of WTO Participation, edited by P. Gallagher, P. Low, and A.L. Stoler, pp. 621 33 (Cambridge: Cambridge University Press, 2005), http://www.wto.org/english/res_e/booksp_e/casestudies_e/case45_e.htm.
14 Interview of Dr Vo Thanh Tu Anh by Nhu Hang in "Dung cam chiu 12 nam phi thi truong", Tuoi Tre, 3 June 2006, http://www.tuoitre.com.vn/Tianyon/Index.aspx?Artic leID=141573&ChannelID= 11.
15 See note 3 above.
16 United Nations Development Programme (UNDP) Vietnam, Vietnam at a Glance (Hanoi: UNDP Vietnam, 2007), http://www.undp.org.vn/undpLive/Content/UNDP/ About-Viet-Nam/Viet-Nam-at-a-Glance-fact-page.
17 Central Intelligence Agency (CIA), The World Fact Book Vietnam (Washington, DC: CIA, 2007), https://www.cia.gov/cia/publications/factbook/print/vm.html.
18 US-Vietnam Trade Council, "Foreign Direct Investment to Vietnam by Country", 25 January 2005, http://old.usvtc.org/Trade%20Statistics/foreign_direct_investment_ to_vie.htm.
20 Business Collaboration Services, "Japanese Investment in Vietnam to Surge", 26 February 2007, http://www.bvom.com/news/english/news/index.asp?.sequence=49621&. this=53.
21 This agreement is expected to be signed in 2009. Ibid.
BINH TRAN-NAM is Associate Professor at the Australian School of Taxation, University of New South Wales, Sydney, Australia.…
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: VIETNAM: Preparations for WTO Membership. Contributors: Tran-Nam, Binh - Author. Journal title: Southeast Asian Affairs. Publication date: January 1, 2007. Page number: 398+. © Institute of Southeast Asian Studies 2008. Provided by ProQuest LLC. All Rights Reserved.
This material is protected by copyright and, with the exception of fair use, may not be further copied, distributed or transmitted in any form or by any means.