The Hanoitimes - “After nearly 10 years of the World Trade Organization (WTO) accession, Vietnam businesses have been familiar to the global playground; and besides many challenges, Vietnamese businesses have had a lot of opportunities when investing in expanding production, exploiting the market especially with export markets, etc.”
This assessement was made by the former Deputy Minister of Trade Mr. Luong Van Tu, Vietnam’s WTO chief negotiator in an interview conducted by Economy and Urban Newspaper on taking advantage of opportunities and experiences in facing the integration challenges.
Have Vietnam businesses taken advantage of the opportunities after nearly 10 years of the WTO accession or not from your viewpoint as WTO chief negotiator?
- I think Vietnam businesses took advantage of the opportunities. After nearly 10 years of WTO accession, the face of the country has undergone many changes: The attraction of foreign direct investment (FDI) has risen high ever; Economic sectors have been expanding and developing; the life of the people has been increasingly improved; Vietnam's prestige has been increasing in the region and the world.
During two third of the negotiation time, we had to answer more than 3,000 questions on the transparency of economic, trade and investment policy mechanisms, etc. Nowadays, not only the businesses but also the social organizations, even the Government or the budget of the Vietnam National Assembly are also required to be public and transparent.
The public and transparent policy has created a stable and favorable environment for both Vietnam and foreign businesses to invest in the production that is proven by the FDI attraction. Before the WTO accession, Vietnam attracted just US$ 40 billion of FDI, but by the end of 2015, total FDI had amounted to nearly US$ 300 billion and nearly US$ 200 billion of which had been disbursed. It shows that businesses from Japan, Korea (Republic), Singapore and the USA, etc. especially the large corporations have targeted to Vietnam and thanks to the foreign investment, we have acquired technology, management skills and expansion of goods and services for Vietnam. It can confirm that one of the biggest achievements of Vietnam is Vietnam has changed the legal system synchronously for more relevance to the international standards.
The businesses have also changed rapidly. The businesses have considered association as a vital condition and many corporations, big companies, etc. have been established. Specially, the private-owned companies have strongly linked together to diversify their business lines, accelerating exports. For example, in 2015, the total export turnover of Vietnam reached US$ 162.11 billion. However, export turnover of Vietnam for the first 7 months of 2016 also reached US$ 96.99 billion, up by 5.4% from the same period of 2015 despite a lot of difficulties.
Can you specify weaknesses that Vietnam businesses need to overcome in the international economic integration process besides the initial successes?
- The first weakness is a matter of perception. Soon after the WTO accession, the State has promoted the propagation and dissemination of contents on the WTO and related issues. However, there have been two flows of awareness about the agreement, or too optimistic or not be aware of what the WTO has brought to apply it to the production and business. This shows that the perception of many businesses, associations have not changed as expected. Although Vietnam has attracted quite a lot of FDI, the implementation organization has not been as expected. Vietnam businesses need to further promote the implementation of FDI projects, if not the attraction of FDI will decrease in the coming years.
In particular, the reform of state-owned enterprises has been slow. We are now accelerating the equitization program rather than immediately accelerating it after the WTO accession although the equitization had been addressed. In addition, we have not had a lot of macro-management experiences in the financial sector and real estate. Therefore, we have been fallen into a financial crisis, especially banks. Bad debt rose too fast, real estate investment was excessive, resulting in oversupply. Consequently, the real estate bubble has caused the economy to take more time to get rid of it. The workforce is abundant but fails to meet the needs of the economy, particularly in terms of foreign language skills, poor industrial working style and low productivity.
Vietnam’s attraction of a large amount of FDI, according to many economists, is due to a lot of incentives which caused inequality between foreign businesses and domestic ones. What is your viewpoint of this issue?
- It is true that in the first time of the international economic integration, to call for foreign investment, we passed the Law on Foreign Investment, which gives many incentives for FDI enterprises to invest in Vietnam. However, after 10 years of WTO accession, Vietnam businesses have grown, but the incentives remain unchanged. This causes inequality between Vietnam enterprises and FDI ones. It’s time for us to modify the Law on Foreign Investment to suit the reality towards the direction that FDI enterprises and Vietnam ones enjoy the same preferential rates, thereby creating equal competition as well as creating opportunities for the development of domestic enterprises.
A lot of businesses have complained that during the international economic integration, they want to invest in the production expansion but the infrastructure is so poor. What do you think about this idea?
- Infrastructure, especially transport is being strongly invested. The weakness is how to connect the transport system together. Besides, there are still few investment projects in the field with competitiveness such as rail. Rail transportation is cheap but is only upgraded and renovated a little; river transport is dominant but is not paid much attention. The problem is that the connection among roads and railways and sea ports is weak. In addition, that Long Thanh International Airport will be a transit center or not has been still debated. How Vietnam does to surpass Thailand and Singapore is a big problem as these countries have completed the investment and the investment is about to be returned, so they are willing to lower the prices and we have to think of it. The game now is not only for Vietnam but also for the global.
TPP Agreement is gradually coming to an end. What are the prospects for Vietnam after the conclusion of the agreement from your point of view?
- The conclusion of negotiations of the TPP agreement will create more opportunities for the development of Vietnam's economy, but it is important to make it come true as there is still a chance despite the market’s opening. In current society, it is easier to borrow capital; technology level is higher; the market is open, etc. All opportunities are in hands but it is important to take action or not.
To do so, the businesses must have a habit of looking for the integration information, thought of the global playground so that they can catch opportunities for action to achieve success during this integration.
When Trans-Pacific Partnership Agreement takes effect, Vietnam businesses will face a very high competitive pressure while tariff barriers and non-tariff barriers will not be “advantages”. What do Vietnam businesses need to do to overcome the challenges and take full advantage of TPP from your viewpoint, Sir?
- When becoming a member of the WTO as well as the implementation of a series of commitments in the framework of other free trade agreements, Vietnam businesses have gradually prepared psychology and conditions to be able to take full advantage brought by the WTO and FTAs.
However, after the TPP agreement was signed, besides the support of the State, it is required for the businesses to self-adjust their long-term business strategy in the international economic integration. FDI firms are allowed to "freely" invest in Vietnam which will create fierce competition. Although the countries participating in the TPP agreement will have to reduce import tariffs, but to protect their domestic production, they will erect technical barriers.
Therefore, to be developed, the businesses are required to conduct research and survey on the market of each country, thereby suitably changing the production method and marketing of the products. For example, Hoa Sen Group has not only expanded the roofing production line but also invested in the steel production line and this is a right strategy.
For businesses operating in the agricultural sector, they must have measures and plans to develop the strength, focusing on the products that Vietnam has more advantages. After the period of protection is over, the businesses are viable and can effectively compete with the TPP countries.
Thank you very much!
Translated by Anh Dat