Vietnam Warned of Downside Risks in WTO Entry

3:26:29 PM | 7/8/2005

If Vietnam does not calculate carefully impacts of liberalisation, many economic sectors of this country may lose their competitive capacity when facing up to giant multinational businesses that set up operations in Vietnam, a seminar was told.

The high-level seminar was held in Hanoi January 12 to review Vietnam's experiences and achievements during the past 20 years of the renewal process.

A survey of consulting company AT Kearney shows that 1,000 foreign managers said that in the near future, Vietnam will face the en masse entry of cheap imported goods from China and neighboring countries and a probable wide trade imbalance. Fledgling industry sectors will have to suffer serious consequences because of quickly lifting protective tariff barriers especially difficulties concerning technology transfers.

Tran Xuan Gia, chief of the research board serving Prime Minister Phan Van Khai assessed that owing to slow preparations for post-WTO, Vietnam will likely suffer many distressful circumstances.

Regarding law issues, although China had prepared for its post-WTO steps very thoroughly, even for 15 years, it still had to amend and supplement thousands of laws. Meanwhile, Vietnam is only in the preparatory phase of the trade liberalisation, and is suffering many learning curves due to its unclear policies, he said.

"For instance, in the case of Vietnam's failure in the lawsuit to pay a fine of nearly US$200,000 to the French coach (Christian Letard) fired by the Vietnam Football Federation, this proves that Vietnam still lacks experience in dealing with integration situations," said Gia.

Leading economist Le Dang Doanh said that he was really worried about the existence and growth of 2.2 million household businesses and six million farm families in the face of the tough competition by multinational economic groups. "They are will be the ones who have to directly and indirectly suffer the biggest losses," predicted Doanh.

According to senior experts, in a bid to prepare for international economic integration well, Vietnam should focus on certain industries that have growth potential locally and internationally such as food processing, computer software, tourism and mining.

Meanwhile, for the development of the electronics industry, for example, due to strong manpower resources, Vietnam should chiefly focus on 'software solutions' instead of 'hard drive' solutions that always require big investment capital sources, said John Kurtz, a specialist from AT Kearney.

Vietnam was also urged to actively mobilise sources of FDI capital for the field of exporting goods and limit FDI projects that are dependent on import goods or materials. This could result in Vietnam being merely a point of goods processing and assembly, not proper manufacturing, according to Jonathan Pincus, senior country economist of the United Nations Development Program (UNDP).

In addition, Vietnam should improve factors that affect its competitive capacity, he said.