Vietnam, a new tiger in Asia, officially becomes the 150th WTO Thursday, closing a thorny and 12-year long path to get the WTO ticket and laying a firm foundation of promise for booming trade and a foreign investment influx helping it achieve GDP growth rate of 8.5 per cent.
WTO membership will give a strong boost to the ASEAN country’s economic growth fuelled by ever-expanding trade with the outside world and growing foreign investment inflow based on political stability. Vietnam is now hailed as the promising land, a shining star in Asia for foreign investors to do business. The Southeast Asian nation is now seen as a tough rival for China, India or Thailand in FDI attraction.
In response to new market reforms, foreign firms began increasing their investments in Vietnam ahead of the WTO agreement. Foreign direct investment reached a record $10 billion last year.
Hoping to take advantage of a literate labor force cheaper than in India or China, American, Japanese, Taiwanese and South Korean investors have been rushing into Vietnam, and with the guarantee of stability that WTO membership provides others are following suit.
Vietnam’s communist government has set a goal of at least $11 billion in foreign investment this year and GDP growth of 8.5 per cent, seeking to position itself as a low-wage alternative to more populous China and India, said Phan Huu Thang, head of the country’s Foreign Investment Department.
However, Adam Sitkoff, executive director the American Chamber of Commerce in Hanoi said that while foreign investment is expected to keep growing, Vietnam’s WTO entry won’t change the economic landscape overnight, noting that Vietnam has been slowly bringing its trade and investment regime in line with international norms and that has made it an attractive investment destination for some time now.
Sitkoff also cautioned that investors shouldn’t have unrealistic expectations, because obstacles and challenges will remain as entrenched interests seek to protect their economic turf, despite the market improvements ushered in by Vietnam’s WTO reforms.
Jonathan Pincus, chief economist for the United Nations Development Program in Vietnam said WTO membership is likely to have political effects, which will give those within the party who want to further liberalize the economy support in overcoming special interest groups in the state-owned sector.
Le Dang Doanh, a leading government economist said today [January 11, 2007] is a historic day for Vietnam, “In joining the WTO, Vietnam is accepting increased competition, and competition will make the economy more dynamic.”
Meanwhile, Masyauki Karasawa, Chief Representative of the Japan Bank for International Cooperation (JBIC) in Vietnam said the country’s WTO accession will be a great chance for internationally competitive industries on the occasion that Vietnam officially joins WTO.
“In the immediate future, the competitive industries could be characterized with relatively high labor incentive, advanced localization and high standard of efficiency and quality,” he told Vietnam News Agency.
Masyauki Karasawa also warned that WTO accession is a challenge for internationally less competitive industries. They might be characterized with relatively low capital incentive, no supporting industry and low efficiency and quality standards.
While many Vietnamese companies see new opportunities, others are bracing themselves.
While clothing manufacturers, seafood producers and other big exporters are hoping to cash in, others, from livestock farmers to insurance companies, are getting ready for a wave of tough new foreign competition.
“We estimate that after Vietnam joins the WTO, we will lose about 20 per cent of our market share to foreign rivals,” said Nguyen Van Thoai, deputy manager of the Saigion Cosmetic Corp, which sells perfumes, toiletries and other products.
On the longer term, Thoai added, the state of competitiveness could be changed as a result of various exogenous factors such as progress of structural reform and a growing domestic market. Politicians will face calls for further, far-reaching reforms.
Vu Ngoc Ky, head of the Vietnamese farmers’ union and a senior party member, admitting that there were going to be hard times ahead for many of his members, one third of members - around ten million laborers - are underemployed and may have to leave farming.
To minimize the negative impacts of joining WTO, the JIBC chief suggested the Vietnamese government take two kinds of measures, adequate structural reform and physical investment, regarding financial sector reform as the center which will contribute to both external and domestic capital mobilization for competitive industries. (Local news sources, business.timesonline.co.uk, AP, DPA)
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