Talking with the press, United Nations Development Programme senior economist in Vietnam, Jonathan Pincus, mentioned policy tools that can create big changes for Vietnam in subsequent years.

2005 has nearly come to an end and Vietnam’s target to join the World Trade Organisation has failed, should we see it as a missed opportunity?

We still hope that Vietnam will conclude bilateral and multilateral negotiation rounds in 2006, because this will give a strong and positive signal for the outside market.

WTO accession delays may have some impact on the textile-garment and footwear industries, though it is dependent on specific commitments. The most important thing is to maintain a driving force for reforms. If the delay in joining WTO is seen as evidence of a slow reform process, it could cause an adverse impact on attracting foreign investment.

The contents of WTO commitments are more important than time frame. Joining WTO is only the beginning of the process, which is necessary to apply to facilitate the government’s design of long-term development strategies. For example, localizing 65% of the shipbuilding industry is an ambitious goal and WTO accession could make it more complicated to reach. The commitments that Vietnam make to join WTO, will define suitable policy tools for the government to speed up industrialization.

Could you further clarify the influences of those forms of policy tools?

I will take the need for localization in the shipbuilding industry as an example. Those requirements will no longer be compatible in WTO, but in terms of history, it is a significant tool for developing a domestic supporting industry.

Many tools that have been used to help develop domestic companies such as policies on localization, technology transfer, export subsidy, import assistance, and credit assistance will no longer be used.

It also means that almost all successful development models of the past will not be applied as before. The policies that can be used to cleverly and creatively support domestic enterprises will depend on the commitments that Vietnam is negotiating.

In a recent conference you said that the Vietnamese economy needs to turn from rice and T-shirt production to microchips, do you mean that the current development model needs to be changed?

I don’t mean a transfer. I mean Vietnam can’t simply be a producer of rice and T-shirts, but must also develop and diversify high added value products. Rice and T-shirts bring important sources of foreign currencies to import, especially technology. These are important sectors creating jobs, particularly those that don’t require high skills.

The issue here is that Vietnam can’t be a producer of low value added products and light industrial products forever. It doesn’t mean that Vietnam will stop producing these products but it needs to produce high value added products to ensure long-term success.

How will WTO membership bring about immediate influences on the economy?

Big opportunities when entering WTO include expansion of the export market, ease in acquiring outside technology, competitiveness of local companies will be heightened, and productivity increased. However, competition may kill weak companies in some industries that have just begun to be competitive in the international market.

In addition, a latent danger is that Vietnam will be pushed to a position that it will have to depend on its low labour cost as an advantage to compete in the international market. WTO will force domestic companies to compete with international groups of much bigger scale. Such groups will bring out high-quality products of competitive prices. Competition, especially in high value added market parts, will make it difficult for Vietnamese companies to exist and develop.

What are those market parts?

I can name three industries: shipbuilding, chemicals, and steel. These industries are very important because they have multidirectional connection to the economy. For example, a strong and highly competitive chemical industry will have positive influences on agriculture, petrochemistry, pharmaceuticals, plastics, and other production and processing industries.

Source: Thoi bao kinh te Vietnam, 13/12/2005.