Experts worry about Vietnam’s fast integration
Experts worry about Vietnam’s fast integration
Experts and scholars at the 2015 Autumn Economic Forum in Thanh Hoa Province on August 27 expressed concerns over Vietnam’s rapid international integration, saying it would give local firms little time to adapt.
Economic expert Vo Dai Luoc said Vietnam could become the number one country in the world in terms of international integration as it has signed and will sign 15 free trade agreements (FTAs).
Former Minister of Trade Truong Dinh Tuyen, who contributed greatly to the nation’s integration process, said the country has got involved in talks over six FTAs with high levels of market liberalization since 2011.
However, Vo Tri Thanh, vice president of the Central Institute for Economic Management (CIEM), had a different view, saying it is necessary for Vietnam to jump on the FTA bandwagon.
“If Vietnam had not integrated into the world economy and clinched the FTAs, the country would have had to cope with integration challenges. If we actively join, we will have more opportunities,” Thanh said.
However, Tuyen has reason to worry about the fast pace of Vietnam’s integration. He said institutional reforms, democratization and integration are the three pillars of Vietnam’s development but integration has moved too fast while the other two elements have not caught up.
This has made Vietnam unable to make the most of the opportunities from integration.
Tuyen said 76% of Vietnamese enterprises are not aware of the ASEAN Economic Community (AEC) and that 65% think the AEC will not affect their business operations.
In addition, though Vietnam has been a full member of ASEAN for 20 years, only 25% of Vietnamese goods exported to the ASEAN market have been granted incentive certificates as local enterprises have not cared about this.
Luoc said Vietnam attracts around US$10 billion in foreign direct investment (FDI) capital a year but there are reasons to worry.
“Provinces have rolled out the red carpet and offered many tax incentives to bring in big companies, including Samsung, but they just import components for local assembly. It is likely that foreign investors will relocate their factories to other countries when those incentives disappear,” Luoc said.
Thanh from CIEM said he did not worry about Vietnamese enterprises going bust due to fierce competition. “…If 100,000 enterprises go bankrupt, 200,000 new businesses will come into existence,” he said.
Regarding State management, CIEM president Nguyen Dinh Cung said the role and the management tool of the State have not changed over the years. Enterprises are mostly subjects of control rather than support.
The organizational structure and management capacity of Government agencies have remained unchanged, undermining local enterprises’ ability to integrate.
Cung said it is not correct to say that enterprises are often passive and indifferent to the country’s integration process because they cannot do better under the current institutions.
Luoc pointed out Vietnam’s competitiveness has not improved and that the pace of reform has not matched that of integration.
“Integration requires reforms but our internal reforms have been slow,” he said.
Take as an example interest rates for loans, Luoc said. With the lending rates up to 10%, Vietnamese firms cannot compete with foreign companies as the latter can take out loans in foreign countries with rates of just 3%.
Tuyen said the State has to change its role, from ruling to creating favorable business conditions for enterprises to perform better.
“If we fail to do this, we will continue lagging behind,” Tuyen said.
