VNBusinessNews – Former Minister of Industry and Trade Truong Dinh Tuyen believes Vietnam must continue to make every effort to fully benefit from being a WTO member.

Has Vietnam made the most of its opportunities in the two years since it joined the WTO?

I was very much involved in the process of joining the WTO. In the statement submitted to the Politburo we clearly identified five opportunities and five challenges for Vietnam once membership was secured.

As regards the opportunities, we would have an environment to attract investment capital from enterprises both domestically and internationally. This is the greatest benefit as we would have a legal system ensuring transparency, clarity and equity. Moreover, we would be treated the same as other countries and therefore benefit in terms of exports. Foreign enterprises looking to invest in Vietnam would see our strong point as not only being a populous market but also having a broad export market. We could work with other countries to put together fair trade policies. We could also implement our party’s policies. Last but not least, we could strengthen our relationships with major countries in the region and the world, like the EU, the US and Japan.

But in addition to the benefits were some challenges. Most notable was competitiveness in product, enterprise and government. Second was the gap between the rich and the poor caused by integration, and that many enterprises used to being subsidised could not restructure and would go bankrupt, with many workers losing their jobs. Rural areas were vulnerable. These factors challenge growth being in parallel with social advancement. Changes in world markets will have a quicker and stronger affect on our domestic market and if we do not respond correctly then the domestic market will be in trouble. Fourthly is investment. If we do not consider investment carefully, we may accept it at any cost and become a technology dumping ground for other countries and our environment will be heavily polluted. And, finally, is the matter of culture and national security.

What we have seen from WTO membership is that opportunities do not automatically become benefits. The opportunities are tangible but if we want the benefits then we must have specific activities by the government and enterprises. As for the challenges, the level of pressure they exert depends on our response. If we can make the most of the opportunities then we can address the challenges and have even more opportunities. If we do not respond to the challenges then they will become long lasting difficulties and overcoming them will be complicated.

What has happened in the two years of membership is what we forecast would happen. Membership is no miracle cure to help us grow faster, nor is it a trap to make us become poorer. There are clear opportunities and challenges. Opportunities include stronger FDI inflows, higher exports (in 2007 they increased by 22% and 2008 by nearly 30%) and so on. But the challenges include low FDI disbursement and an inability to sustain higher export volumes if we do not change or restructure.

Have there been any major problems?

It is clear that changes in world markets have major impacts on our market, like rising and falling oil prices or capital flows coming in or leaving when there are changes in the financial market. Our ability to forecast world changes remains weak.

Look at inflation. We succeeded in curbing high inflation but in the early months of 2008 fiscal and monetary polices were out of synch and the burden of inflation fell on the financial market, creating a less liquid banking sector. Our response was not so fast.

In 2008 total social investment was 43% of GDP, while the GDP growth was 6.23%. Our ICOR was 7, meaning that for every 1 dong of profit we had to outlay nearly seven dong, which is way too high.

Is this because we did not have enough time to prepare for joining the WTO?

I don’t think so! We had ten years to prepare but didn’t really prepare at all. Look to the retail market for a comparison. Media focus in recent days has been on us opening up our retail market on January 1. But it’s old news. January 1 was the deadline for the opening. But we did almost nothing about it, as the Vietnamese way is simply let the grass grow under our feet. If we had more time to prepare for WTO entry then we would still have done next to nothing.

The biggest lesson from 2008 is that from the difficulties we can identify weaknesses in our economy that have been hidden by high growth rates and external praise. Now we have the chance to see our weak points and limitations and correct them.

What should be improved immediately?

There are two important tasks.

Firstly, we have to conduct reform of mechanisms according to the principles of a market economy. We have reformed for some 20 years and when we compiled the economic development strategy for 2001-2010 in 2001, the requirement to introduce comprehensive measures was raised, but 2010 is approaching and we still haven’t done it. The reason is that we almost always apply a step-by-step method. This may have been a good way in the past, but 20 years can go by and we still do things the same way! As such measures were not comprehensive from the outset, all subsequent measures were unsuitable or constrained what followed. What we need is a synchronous set of measures that support and complement each other. We need to look at this problem.

Secondly, we have to change our growth model. One thing to be considered is that governance must run smoothly with and not be separated from the adopted mechanisms. Mechanisms create a good basis for governance. Governance must flexibly solve problems that the mechanisms cannot, as there is no perfect mechanism that fully caters for every occurrence in an economy. With some problems many may blame the government, this is not totally correct. We need to perfect our management mechanism to have effective governance, especially in the context of change taking place. (CPV)