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Three years after: WTO membership not all plusses for Vietnam
CIEM, the Central Institute for Economic Management, has issued a sobering report on the results for Vietnam after three years of membership in the World Trade Organisation (WTO).
The report by the Ministry of Planning and Investment think tank emphasizes that Vietnam has not yet taken advantage of its WTO membership to accelerate export growth, while its competitiveness has lagged. Since it accepted the disciplines of WTO membership in 2007, inflows of foreign capital have been enormous, but often are directed to non-priority areas, the report adds.
Only modest increases in trade
WTO membership has helped Vietnam increase its exports somewhat. In 2007 and 2008, exports increased by 21.3 percent and 29.5 percent, respectively, and in 2009, in the face of the global financial crisis, they fell by only nine percent. (Most of Vietnam’s trade partners experienced a sharper fall in exports last year.)
Import-export turnover in 2008 and 2009 was $150 billion a year, or 160 percent of GDP – in other words, from the outset of Vietnam’s participation in the WTO, its economy has been considerably ‘open’ to two-way trade.
However, the expansion of exports has not been big enough to be considered as ‘breakthrough’ because their rate of growth has only accelerated by about 2.5 percent over the pre-WTO period. By contrast, after China joined the WTO in 2001, the rate of growth of China’s exports accelerated from about ten percent annually (1998-2001) to nearly 29 percent annually (2002-2007).
Analysts foresaw that agricultural exports would benefit most from Vietnam’s WTO membership, but the reality has been quite different. In the last three years, though exports of farm, forest and fisheries products increased, the increases were lower than the overall rate of export growth.
The State’s investment in agriculture remains at only eight percent of agricultural value instead of 10 percent as per WTO commitments. Official development assistance (ODA) capital and foreign direct investment (FDI) to the farm and fisheries sector have also been falling. As such, agriculture and rural areas have been suffering as a result of Vietnam’s WTO membership.
The report points out policy shortcomings. For example, Government agencies cut import tariffs unexpectedly, before any technical barrier was been installed to restrict imports. As the result, meat imports arrived on a massive scale in 2009, with serious negative impacts on domestic production. Only after livestock farms and households suffered heavily from imports, did Government agencies adjust import tariffs to rescue them.
Strong inflows of FDI bring some problems
Over the last three years, foreign companies have committed $114 billion worth of direct investments in Vietnam, four and one-half times higher than the level targeted for the period of 2006-2010. The figure testifies to the good and improved business environment in Vietnam
However, the strong FDI inflows bring problems. For example, cities and provinces have rushed to establish industrial zones and export processing zones to attract FDI. They assume uncritically that FDI will help develop local economies, while they ignore the possible negative impacts on the socio-economic conditions in the localities and on the environment.
Many FDI projects in Vietnam are in the real estate sector, which does not bring high added value, though it generates a trade balance deficit and often has a bad impact on the natural environment and on livelihoods. In particular, there is the phenomenon of people having no means to earn their living after their land is expropriated to serve real estate development projects.
Vietnam slow to boost competitiveness
According to the report, the nation’s competitive capability remains low. At the national level, deficiencies remain evident in the labour force, infrastructure, institutional capability and technology. At the enterprise level, many firms have
not successfully taken advantages of the opportunities brought by WTO membership (Tariff reduction or export market openness) to expand their business and boost exports. In many cases, the report said, it is because enterprises lack information.
vietnamnet, tbktsg
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