|
Two years of membership in the WTO: pros and cons
2008 is considered a special year for Vietnam’s economy as the country has belonged to the World Trade Organisation (WTO) for two years, facing both opportunities and challenges on the common economic playing field.
Currently, Vietnam is not yet familiar with the international rules of play, due to its weak management capacity, human resources and industrial skills. The country has suffered high inflation and coped with the global economic slowdown. Furthermore, natural disasters have also hit the country, making it hard to maintain sustainable economic growth.
Despite many disadvantages the national economy stood firm thanks to its high export turnover. The consumer price index fell remarkably, while import surplus also decreased in the last month of the year. State-owned corporations and economic groups played a key role in implementing the Government’s urgent measures to curb inflation and balance supply and demand, thus maintaining economic growth and stabilising the domestic market. Tightening monetary policy is considered an effective measure to combat inflation and manage the macro economy, thus removing obstacles for the national economy.
Vietnam attracted 1,171 new foreign direct investment (FDI) projects with a total registered capital of more than US$60.2 billion in 2008, tripling last year’s figure, according to the Foreign Investment Agency under the Ministry of Planning and Investment. This has demonstrated that Vietnam was still an attractive destination for foreign investors.
However, there were some shortcomings in monitoring the macro economy, especially in terms of forecasting work. Vietnam has not yet fully abolished the habits of a State-subsidy economy. This has caused slow progress in implementing investment projects and production activities. Vietnam was overly hasty in building a modern industrial country and did not pay proper attention to agriculture development – a major field in the country’s economy.
In addition, Vietnam did not thoroughly consider investment projects before granting business licenses, resulting in the ineffective performance of a number of projects. The country also did not have long-term plans on building economic and industrial zones, causing problems relating to environment pollution, social welfare and farm land. Moreover, the country found it difficult to build a market economy while it was still focusing on developing the State-owned sector. More than 50 percent of the State budget was allocated for State-owned enterprises, which proved an ineffective model for business operations, earning less than 15 percent of profit. Also, small- and medium-sized enterprises faced many difficulties in accessing loans, particularly when the Government was intensifying measures to curb inflation. This unequal investment allocation in economic sectors reduced the whole economy’s combined strength.
In the process of developing and running the economy, the country has not attached importance to overall planning. Therefore, in 2008, there has been a chaotic situation in economic development at localities and agencies.
In addition to these shortcomings, there remain some limitations in Vietnam’s economy this year such as corruption, quality control and allocation of human resources. The World Bank’s report on December 10, 2008 stated that Vietnam’s economy will recover in 2009. However, if the coutnry does not devise solutions to these shortcomings, they will refrain from investing in Vietnam as forecasted by the World Bank.
Opportunities and Challenges when joining the WTO: Nguyen Cam Tu - Deputy Minister of Industry and Trade
Joining the World Trade Organisation opened up both opportunities and challenges. Vietnamese businesses have had to face fierce competition from foreign rivals.
In the field of distribution, local retailers will find it difficult to compete with the world’s big distribution centres when they are permitted to enter Vietnam. When Vietnam integrates into the world’s economy, the country is more vulnerable to fluctuations from the international economy. However, WTO has also brought opportunities for Vietnamese enterprises. Simplified procedures have created easy access to financial resources and helped improve competitiveness for small enterprises. Penetrating the US market has boosted the growth in exports while FDI sources have also brought numerous opportunities. Reducing taxation for some products will create favorable conditions for consumers and local enterprises to access many commodities at reasonable prices.
Five weaknesses of Vietnamese businesses: Pham Chi Lan- a senior economic expert
Vietnamese enterprises unveiled their weaknesses after two years as part of the WTO. First, most of Vietnamese enterprises are small-and-medium-sized while the world economy requires large-scale enterprises. Second, most of these enterprises lack money, high quality human resources, modern technology, input materials and management and marketing skills. Third, low labour productivity also leads to weak competitiveness. Fourth, the effectiveness of business activities remain slow while business costs are high, leading to a limited profit rate. The most worrying thing is that the profit rate has tended to decrease, which will not provide fresh impetus for enterprises to further develop. Fifth, development strategy and cooperation among businesses remain weak.
Vietnam’s lessons: Dr Vo Tri Thanh from the Central Institute for Economic Management (CIEM)
Since its entry to the WTO, Vietnam has learned how to focus on what it needs to do. Firstly, we need to seriously look at our ability to transform ourselves. Over the past two years, Vietnam has become an attractive destination as the world has begun to see Vietnam as a country which dares to renovate for development. Secondly, we need to clearly know who we are. There remain many shortcomings in terms of policy, human resources, and infrastructure. We have to cope with new laws and opportunities. We encountered difficulties in anti-dumping lawsuits as well as other technical hindrances. Finally, we must realize the importance of stabilizing the marco-economy.
Perhaps, the biggest lesson is the need to improve our relationship with the press. It is necessary to make information transparent.
VOV
|
