After 8 years of membership, what has the WTO brought to Vietnam?
After 8 years of membership, what has the WTO brought to Vietnam?
The expected gains from Vietnam’s membership in the WTO (World Trade Organization) remain unclear, while the losses are more noticeable.
Under WTO commitments, Vietnam opened its distribution market fully to foreign investors in January 1, 2009. But in fact, some foreign investors made their presence in Vietnam before that time.
Big C, for example, joined the Vietnamese market in 1998 when setting up a joint venture with a Vietnamese partner, while Metro Cash & Carry got a license to set up a 100 percent foreign owned enterprise in 2002.
The limitations on the kinds of good foreigners can distribute in Vietnam have been applied since January 1, 2007. This means that the foreign distributors who came to Vietnam before that time did not have any limitations.
Vietnam did not set any limitations regarding the sources of the products to be distributed in Vietnam. This means that foreign invested distribution chains can determine what products to be displayed in their chains, even if they are made in Vietnam or sourced from other countries.
The Vietnamese logistics market has also become a playing field for foreign firms. A report from the Vietnam Shipowners’ Association showed there are only 25 operational foreign invested logistics firms in Vietnam, but they control 80 percent of the logistics market.
“Vietnam has joined the WTO, but the economy remains weak,” said Dr. Le Dang Doanh, a renowned independent economist. “This is attributed to the weak inner strength of the national economy.”
“Vietnam has been too slow in carrying out economic reforms,” he noted.
What will happen?
According to Truong Dinh Tuyen, former Minister of Trade, under the ASEAN Free Trade Agreement (FTA), Vietnam bears pressure on goods trade because it had to cut import tariffs. Meanwhile, under the WTO, the major pressure is on the opening of the service market.
Vietnam has committed to open a production-relating service market from January 11, 2015, which analysts say will start a “foreign outsourcing vs domestic outsourcing battle”.
Pham Chi Lan, a renowned economist, commented: “Vietnam, before joining WTO, had advantages in doing footwear and garment outsourcing. After joining WTO, its advantages are still in footwear, garment outsourcing and making some electronic parts.”
However, outsourcing will be no longer be the “privilege” of Vietnamese industrial enterprises, once foreign-invested enterprises can also join the playing field. The enterprises will have advantages in obtaining outsourcing contracts as nominated by multinational conglomerates.
Also from January 11, 2015, foreign investors will have full rights just like Vietnamese in hotel development and food & beverage catering. Analysts warn that if Vietnamese cannot well prepare for this eventuality, they will only get small pieces of the lucrative business field.
