In order to spread Vietnam’s image and investment environment, the Ministry of Planning and Investment and the Euromoney Conferences have co-organized the “Vietnam Investment Forum: Investment opportunities after WTO entry”. The conference took place from March 15-16 in Hanoi.
Opportunities and Challenges
Successful opportunities brought by investment into Vietnam are the message the Vietnam Investment Forum wants to send to foreign investors. However, there exist challenges alongside opportunities. It is “the two-way road” that Vietnam will have to deal with when the country become full member of WTO, said Deputy Prime Minister Vu Khoan.
First, Vietnam will create a reliable investment environment for foreign investors going on par with the global environment. All hindrances will be removed; investment flows will increase; Vietnamese enterprises will have broader space to develop and join hands with the international trends.
Second, the process of investment into Vietnam after the country’s WTO entry has posed a lot of issues for Vietnam. Some economic sectors will be hurt. The country will have to adjust many policies to make them suitable with international regulations. The state budget will be reduced as the corporate income tax and special consumption tax fall.
Domestic enterprises will find it hard to compete with foreign rivals if the imported tariffs are cut. The open policies will lure different cultures and ways of thinking which may stir some local cultures. Education and the health care system will have to be upgraded synchronously. The training workforce for the post-WTO period will put pressure on Vietnam because foreign investors always require qualified labourers.
Initial successes
Despite many difficulties faced in open-door process, Vietnam has seen some significant achievements. The society and political institutions have been kept stable. “Vietnam’s legislation system has never been as robust as it is now,” Mr Vu Khoan stressed. Vietnam has studied and launched laws on economy, trade, competition, intellectual property, and enterprise. In particular the Common Investment Law to be put into operation from July 1, 2006 indicates that Vietnam has been building fair legal system for both domestic and foreign investors. Vietnam has also launched policies to develop monetary, financial and capital markets.
Mr Vu Hong Phuc, Minister of Planning and Investment said that the achievements gained by Vietnam recently were positive signs, which would create a premise in order to enable Vietnam to become a large investment destination in the Asia-Pacific region. In the 2001-2005 plan, Vietnam has attained average growth rate of 7-7.5 per cent per year, with investment mobilization of $140 billion, accounting for 40 per cent of GDP. Foreign investment capital increases from 18 per cent to 20 per cent per year. For the first time, Vietnam has issued sovereign bonds in the international market in last October and sold $750 million worth of those bonds.
Mr Phuc stressed that in 2001-2005, Vietnam was on the runway. It will take off in 2006. Vietnam expects WTO entry will generate opportunities, investment projects so that foreign investors can take off with the country.”
According to the Ministry of Planning and Investment, the GDP growth in the next five years may be higher than the initial targets, estimated at 8 per cent. Foreign investment will see growth of around 22 per cent. The private economic sector will be further developed following encouragement from the government. This sector is forecast to grow by 20 per cent on average and investment capital will make up 50 per cent of total social investment.
With these increasingly flexible policies as well as strong and prolonged economic growth, Vietnam will, certainly, have development opportunities after joining the WTO.
Comments of foreign economists on the WTO access:
“HSBC invests in Vietnam because of its potential, not ability to join WTO.”
Mr. Michael Smith, general director of Hong Kong and Shanghai Banking Corp.
I can assert that we are investing in Vietnam just because of its potential, but not because it has prospects for WTO entry. In other words, Vietnam will continue to be the most dynamic economy in Asia despite joining the WTO or not.
Looking at the conference programs, you can see that the forum targets the future directions, which will have great importance when Vietnam becomes a WTO member.
First, capital is circulating actively. Investors now have a lot of information about companies and economies. Many experts say that Vietnam is a developing market but ha not been fully tapped. Therefore, investors enter Vietnam for these opportunities. However, Vietnam, as well as other countries, will have to cope with challenges posed by building a sound financial system so that the country can avoid inevitable fluctuation of capital flows.
Second, competition in capital is becoming fierce. To attract capital, countries have to compete with others. I can say that Vietnam has well prepared plans for a reform.
Third, in my opinion, Vietnam has sufficient potential in order to ease worries about challenges in WTO accession. The country has proved its economic prospects, such as ranking second in economic growth in Asia after China, while its income per capita doubled within last decade. Vietnam has higher intellectual standards, a young population, and a dedicated workforce.
“Vietnam needs investment in many items”
Mr. Varun Kapur, managing director of Intel Capital Asia
The Vietnamese government and enterprises are sharing successes with foreign partners when the market is opening. Sectors such as telecoms, information technology, distribution, finance and banking, education and training are developing rapidly. Vietnam needs to investment in diversified sectors such as seaports, high-quality health care, and hospitals, as demands for them are increasing. At present, Vietnam spensd 9-10 per cent of GDP for infrastructure but this sector still needs more investment.
“Vietnam should take initiative in its budget”
Mr. John Shrimpton, co-founder of Dragon Capital Fund Management Co.
To acquire economic growth of 7-8 per cent per annum, Vietnam needs to inject more in developing infrastructure and the country has enough capacity to do this. However, ODA capital plays anh important role, especially in developing the transport sector. When Vietnam improves its living standards, assistance funds from World Bank and ADB will fall. By that time, it will have to manage capital itself by collecting taxes and encouraging people to invest in infrastructure.
“Vietnam has three attractive points”
Mdm. Amanda Tucker, general director of Nike Vietnam Co.
Vietnam has three attractive points. First, the country has cheap labor workforce with quite high qualifications. Second, infrastructure has been improved. Third, the legal system has become more transparent. However, Vietnam needs to further improve these sectors.
Vietnam’s efforts:
“We hope that investors will have proper selections based on Vietnam’s investment directions.”
Mr. Nguyen Bich Dat, Deputy Minister of Planning and Investment
The labour force is a great potential of Vietnam. The country encourages and calls for investors to pay more attention and make more investment into education, professional vocation, particularly for hi-tech labour. Vietnam tends to expand its investment aspects, simplify administrative procedures and facilitate investors. We hope that investors will have proper selections over investment directions of Vietnam. Investors can opt for direct or indirect investment. Additionally, we are promoting privatization for such sectors as electricity, post and telecommunications, banking and others. Moreover, investors can take part in new forms of investing into the stock market.
The breakthroughs for sustainable development in Vietnam in the future are based on three points. Firstly, infrastructure development is required to post a doubling in growth. Secondly, investment is sourced from not only the state budget but also donors in forms of BOT or investment socialisation. Thirdly, investment is required in socio-economic development, reform administrative procedures, customs, seaport systems, urban development and so on. Regarding the telecommunication sector, we expect investors to concentrate in hi-tech, software, hardware, and switchboards and we are ready to open up the market in order that investors conduct more negotiations.
“There will be more issues in order that investors can pay attention to Vietnam”
Mr. Luong Van Tu, Deputy Trade Minister
Over the last 10 years, Vietnam actively participated in WTO membership negotiation sessions including multilateral talks on pledging macro policies and bilateral sessions on opening up goods and services. Concerning multilateral negotiations, the country has engaged in 11 sessions and is currently in the final phase. To date, Vietnam has committed to fulfill all WTO agreements namely agreements on investment, customs, intellectual property, import license, fauna and flora, trade barriers, services, goods origins and so forth when Vietnam enters this global trade body. As for agriculture alone, the country has pledged to remove subsidies for export of farm products. By 2013, the WTO’s member countries will abolish subsidies for export of farm products. If Vietnam joins the WTO this year, the country will naturally remove subsidies for export of farm products sooner than the DOHA route.
Presently, the Vietnamese Government is committed to abolishing the double-pricing policy, non-discriminating foreign or domestic investors in a bid to create a level playing field amongst investors.
Vietnam is one of the countries that will build and revise the legal system conforming to the WTO’s regulations before becoming a full member of the WTO. (This is different from other countries). In 2005, the Vietnamese National Assembly passed 29 revised laws and newly building laws related to domestic and foreign investment. By the end of this month, Vietnam will attend the 12th multilateral negotiation session of the WTO membership board.
When opening up the goods market, that we commit to fix duty rates equaling to those in the eight-digit duty list and 10,000 duty lines has clearly expressed great efforts of the Vietnamese Government. Upon opening up the service market, we welcome 11 sectors with more than 100 sub-sectors whereby presenting our wish to open more widely for investment. With support from the business communities of both sides, we hope that in the coming time, Vietnam will wrap up negotiations with the US, accordingly creating more favorable conditions for businesses in both Vietnam and the US.
Phuong Ly
Vietnamese
