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