Vietnam has set itself the goal of integrating its economy into the global economy. WTO membership will be the culmination of efforts begun in 1995 to obtain this goal, said Carl Thayer, Director of the Defence Studies Forum of the New South Wales University, Australia, a specialist on Vietnam, during a talk with VietNamNet about Vietnam’s WTO membership. 

Vietnam will officially become a member of WTO today, November 7, what do you think about this event? 

Vietnam has set itself the goal of integrating its economy with the global economy. WTO membership will be culmination of efforts begun in 1995 to obtain this goal. But WTO membership is only the beginning for Vietnam. Vietnam is entering as a 'non-market economy' and will have this status for twelve years unless it rearranges its economy along market lines earlier.

This will mean that exports of textiles, which are very important for Vietnam, could attract anti-dumping measures by the United States and other countries. Nonetheless, Vietnam has demonstrated that it can successfully conclude complex trade agreements with the world's leading countries and the most important multilateral trade organisation. 

What will Vietnam benefit from WTO membership?  

The biggest advantage is that Vietnam will no longer be subject to discrimination in the export of its goods. Vietnam will be able to enter the markets of 149 other members on an equal basis. Vietnam will also be able to use the WTO dispute resolution mechanism should it become involved in a dispute with another member. Vietnamese exports will now be protected in trade disputes.  

The bottom line is that Vietnam will now have access to the global market for the first time on the best possible basis. Vietnam can join with other developing countries in the WTO to jointly press for assistance and special consideration in the application of WTO rules. This will strengthen Vietnam’s capacity to compete internationally. 

WTO membership will alter how the Vietnamese market is perceived. It will now become more attractive to foreign investors who are familiar with WTO compliant regimes. Foreign investors will introduce more modern technology and better business practices, this will increase production in Vietnam, develop a local market, and create employment opportunities. The development of a local market will provide the Vietnamese consumer a better choice of higher quality goods and services than previously. 

WTO membership will alter the current Vietnamese legal and regulatory framework. This will create an environment for Vietnamese entrepreneurs to use this new framework to enter the competitive local and international markets. 

Vietnam’s adherence to WTO transparency provisions and standards will over time promote the rule of law, greater economic transparency and good governance.  

At the same time, all of Vietnam’s economic sectors will be able to produce and compete on an equal basis and engage in business planning for the long-term. The state sector, for example, will have to end subsidies. This will encourage more foreign investment in Vietnam and the development of its private sector. 

WTO membership will add pressure on Vietnam to step up the equitisation of state-owned enterprises (SOEs). Vietnam will have to divest itself of some state monopolies and end administrative malpractices that resulted from the close association between state and SOE monopolies. 

If Vietnam adjusts to WTO-compliant measures it could develop a competitive regional manufacturing base.  

What challenges that WTO membership will bring to Vietnam?  

There are six major challenges. First, Vietnamese firms are known for poor quality, obsolete technology, high prices, weak distribution networks and deficient knowledge of the legal system. When WTO membership comes into effect, Vietnamese businesses will likely loose market share and enter a period of rapid adjustment.  

Second, many Vietnamese enterprises and businesses will be unfamiliar with the new WTO rules and practices. The existing legal and regulatory regime will be modified even more greatly. During the initial period, these businesses will come under severe competition as local managers and employees embark on a steep learning curve to adjust to the new environment. Vietnamese firms risk losing in legal disputes.  

Third, the changing of the rules in Vietnam will pose a stiff challenge for Vietnam’s service sector which does not have the capital, technology or business experience of its foreign counterparts. Vietnam’s system of distribution for the national market will be severely challenged by foreign companies. 

Fourth, all of Vietnam’s domestic industries will have higher levels of competition. They will have to adjust to produce quality goods and services or go bankrupt. Sectors that have weak competitiveness like services, steel, automobile assembly and agriculture will come under threat. State monopolies like telecommunications and electricity will come under pressure to open up. Vietnamese firms risk being bought up by foreign companies. 

Fifth, bankruptcy will raise problems of unemployment and social unrest.. The flow of foreign capital could, in certain circumstances, produce financial instability. 

Sixth, rapid change in the Vietnamese economy could continue to produce environmental degradation. 

What should Vietnam do to overcome these challenges? 

Vietnam will not be able to overcome all of these challenges because it must enter a period of readjustment. Both the Government and Vietnamese businesses must work out a partnership so that domestic enterprises are able to acquire more capital, adopt better management practices and incorporate new technologies in the production process. The Government can improve the investment climate, fund education and training programs, and invest in research and development. 

Second, the state must step up the pace of carrying out wholesale administrative reforms to become more efficient or risk becoming an obstacle to Vietnam’s economic development.

Third, the government will have to provide funds and other measures to encourage workers to retrain who have lost jobs due to bankruptcy; and the government must improve social welfare for those affected by unemployment. 

Some experts said Vietnam is a rising star in ASEAN, what do you expect ASEAN member countries’ response to Vietnam’s WTO membership? 

All of ASEAN will welcome Vietnam's admission to the WTO. The WTO provides a secure trading environment whose rules are universal. WTO membership provides external discipline to assist ASEAN in adopting reforms and meeting world standards.  

ASEAN needs to develop greater unity as an economic bloc in order to deal with major economic powers. This means that the least development members must catch up. Trade is one very important measure to assist Vietnam in its economic development and to narrow the gap between it and other members of ASEAN.

Source: VietnamNet