Vietnam Investment Review, May 13

Mostly good news for WTO campaign

 THE year 2001 ended with two major economic development affecting Vietnam.  One was good news, the other not so good.

 Both underline the opportunities and challenges faced by Hanoi as Vietnam gears up to join the WTO, which should happen in the next three years if accession negotiations go according to plan.

 The good news came on October 16, when president Bust signed legislation establishing normal trade relation between Vietnam and the U.S. Prior to that, Vietnamese goods faced tariffs up to 40% in the U.S. market, a major disincentive to foreign investment.

 U.S companies responded quickly to Vietnam s new status. Sportswear firm Nike, for instance, announced plans to increase production by up to 25% per year.  Nike already produces one tenth of its 240 million sports shoes made every year in Vietnam.

 The majority of these currently go to the European market.  The opening of the U.S. to Vietnamese goods in the run up to WTO accession will be a boost.

 The lesser news came shortly afterwards, with China s accession to the WTO. Many countries across Asia are already wrestling with the consequences of China’s economic liberalization. Vietnam, in particular, competes with its giant neighbor as a low cost manufacturing base for foreign investors. WTO accession tilts the balance further in China’s direction.

 “It will put us in a more difficult position to lure foreign direct investment, while our exporters will have to compete with Chinese products from an unfavourable position,” said Vietnamese Chamber of Commerce and Industry Vice chairman Pham Van Chi, shortly after China joined trade the WTO.

 Despite this, bilateral between Vietnam and China grew from $32 million to $2 billion between 1991 and 2001. Like China, Vietnam wants to develop a socialist market economy using market mechanisms within the old socialist framework.

 Vietnam has also made the most particular economic position in Asia. Its manufacturers have succeeded in developing niche products and cultivating alternative markets. In agribusiness, the country is now a major coffee producer and world s largest exporter in rice. In 2000, Vietnam posted GDP growth of 7%, bettered across the region only by China.

 And according to World Bank chief economist Kazi Martin: Vietnam medium-term prospects for growth remain good despite the short-term uncertainly that shrouds the global economy.

 One sector that looks set for rapid growth over the next few years is oil and gas.  Vietnam has proven reserves of 600 million barrels of oil and 6.8 trillion cubic feet of natural gas which have already attracted major investment from a number of companies, including British Petroleum. Oil is already one of Vietnam’s major foreign currency earners and contributes $3.2 billion in taxes to the central government.

 In December 2001, WTO chair Mike Moore’s visit to Vietnam effectively fired the starting gun for the country’s race to membership. Since then, work has begun on the market opening measures and bilateral treaties which are necessary before accession can take place

 It seems that Vietnam’s accession to the WTO will have a lead sponsor in the form of the European Union. In January, France announced support to Vietnam’s fast track accession to the WTO and promised to increase foreign aid by 30%

 Every month which passes sees a greater accumulation of WTO regulations, all of which must be absorbed by any new entry.

 “If it depended on me, I’d joint the WTO tomorrow,” Vietnam Trade Minister Vu Khoan told reporters in December.