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Improved competitiveness in Asian markets is key to growth
The man who negotiated Vietnam’s entry into the WTO believes opportunities are abundant in nearby markets for bold manufacturers.
Luong Van Tu, now Chairman of the Coffee and Cocoa Association of Vietnam, headed the Vietnamese team that negotiated Vietnam’s accession to the World Trade Organization (WTO) while he was a deputy minister of trade. In this interview, Tu talks with Lao Dong about what Vietnam has gained and lost since it joined the WTO three years ago.
Lao dong: What’s your assessment of Vietnam’s adaptation to the challenge of subjecting its economy to WTO rules?
Luong Van Tu: We’ve been coping with two challenges. First, we have to bear the impact of opening our market to foreigners. We’ve had to amend all our regulations to fit the requirements of WTO.
Second, the global economic crisis has had big impacts on the economy in all three fields of investment, trade and finance.
Despite the big impacts, the economy has still been developing. Last year, Vietnam was one of only 12 nations with a positive growth rate. Of course, if the global crisis had not occured, our economic performance would have been even better; we would have exported more to the world.
As they have tempered themselves in the fire of global competition, Vietnamese enterprises have become steadier, while our markets, including finance and banking, the stock market and real estate have been developing well.
On the other hand, WTO membership has also revealed innate shortcomings of Vietnam’s economy. The Government has recognized these and has been trying to fix them. We’ve been growing fast, but the quality of the growth remains low. Our enterprises have not fully adapted to a situation of international integration.
Lao dong: We hoped for big breakthroughs in export volume when we joined WTO. Why is it that Vietnam’s exports have not been as high as we expected, and that we run a chronic deficit?
Tu: Since we joined the WTO, we have mainly seen increases in investment, while our exports have not been as robust as we expected. At first, right after we joined the WTO in 2007, a lot of products recorded a sharp increase in export revenue. Late in 2008 and into 2009, however, export revenues decreased. Partially because of the global economic crisis, a lot of orders were canceled.
To grow exports rapidly, we still need to do a lot of other things. Trade promotion is essential to expand export markets, but that’s still one of our weaknesses. In fact, in 2009 our nation spent less on trade promotion than in previous years.
There was a time when we spent 400 billion dong a year on trade promotion. Now we spend only 100 billion dong (A bit over $5 million) annually, which is peanuts.
In current conditions, I think Vietnamese enterprises ought to concentrate on exports to the other East and Southeast Asian countries. Our trade deficit mostly comes from regional trade; in 2009 it was nearly $30 billion. In other markets, we always record a trade surplus. Therefore, the key to the question of ‘trade deficit’ is not the competitiveness of WTO members generally, but the competitiveness among the ASEAN countries, China, South Korea and India.
Lao dong: All those countries you just mentioned are very strong at exporting, and many produce the same goods we do. How can Vietnam compete with them, then?
Tu: In ASEAN, only Vietnam, Thailand and Indonesia export similar products, that is, rice and farm produce. Other countries in the bloc, such as the Philippines, Malaysia, Singapore and Brunei, must import rice. For other consumer goods, our neighbors have higher production costs higher than Vietnam’s. Therefore, Vietnamese businesses ought not to hesitate. Opportunities can be seen in every market.
Our businesses have not fully exploited the bilateral trade agreements that Vietnam has signed. They haven’t taken full advantages of opportunities in the markets that we can exploit. By 2020, Asia and Australia are likely to become a single free trade area. Then the opportunities for Vietnamese businesses to export products may shrink if we cannot boost exports right now.
Lao dong: How can Vietnamese businesses gain a foothold in the global value chain if our workforce and infrastructure are inferior to other countries?
Tu: There was a time that no one could imagine that Vietnam’s agriculture would have a position in the world market. It took us ten years to do this. I think that it could take less time to create similar changes in industries. Vietnamese enterprises need to improve their competitiveness and they need to do this themselves; the Government cannot do this for them.
vietnamnet, LD
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