According to a recent statement by a group of specialists on the national service export strategy, 90 percent of foreigners think Vietnam’s service sector promises development. However, Vietnamese enterprises have not tagged into all the potentials of this market.
Lack of appropriate attention
In 2006, the service sector occupies 38.08 percent of GDP, but just 15 percent of exports. The rate of service is lower than the world average. Indeed, service exports now make up 60 percent of total export turn-over in developed countries and 15.6 percent in the developing countries.
Pham Chi Lan, former specialist of the Prime Minister’s Research Commission, said policies and regulations for the service sector have not been established as well and openly as for other sectors. Vietnam gives higher priority to industrial and agricultural products than service. Lan added there are still many service trade barriers existing in both the domestic market and in domestic enterprises. Besides, service products and service exporters have not been fully recognised. Organisations and trade promotion programs still focus on tangible exports, instead of intangible ones.
Furthermore, foreigners in Vietnam have not placed full confidence in Vietnamese service, because the high-quality services which they are used to at home are not well-supplied in Vietnam. According to a report by Japan External Trade Organisation in Vietnam (Jetro), three quarters of services, such as finance, consultancy and telecommunication, which are used by Jetro have been supplied by Vietnamese enterprises. However, the weakest point of Vietnamese service is quality, not price.
Right time for go-ahead
In recent statistics, there has been progress in Vietnamese exporting services. According to the Statistics Department, in the first six months of 2007, Vietnam’s service export turn-over reached USUS$ 3 billion, 24 percent higher than the same period last year. Service export earnings are USUS$ 1.71 billion, increasing 10.3 percent.
According to the Ministry of Trade, there has been rapid growth of 22 to 29 percent in insurance, telecommunication, finance and transportation. By 2010, the export of such services is expected to be USUS$ 470 million to USUS$ 550 million per month. Besides, tourism will remain the leading service export, with 10 percent targeted increase in the number of foreign tourists to Vietnam. Trade specialists expected that by 2010, there will be 6 million international tourists coming to Vietnam, which will bring about USUS$ 4.5 billion for tourism. In addition, there will be about USUS$5 billion revenue gained from sea and air transport.
Especially, labour export is seen as a judicious policy of the government, and a key factor for service development in Vietnam. Vietnam has the chance of getting more foreign direct investment, in which there is 14 percent for service with 6 percent of the registered capital. This will help to create USUS$ 3 billion of foreign currency and 7,000 to 8,000 jobs annually, as expected by the Ministry of Labour, Invalids and Social Affairs.
According to Pham Chi Lan, the strength of Vietnamese service suppliers is price competitiveness and business environment adaptability. It is said that many Vietnamese private companies have marked a turning point through their reasonable price, especially prices of architecture, software and law, which are even more competitive than state-owned and foreign enterprises.
In the first half of this year, the service sector sent strong signals after Vietnam became a WTO member. Pham Chi Lan analysed that Vietnam’s open-ended WTO commitments to the open market will create significant change in Vietnamese service. Except for telecommunication, television, culture and entertainment, foreign service suppliers are now allowed to invest in 11 service sectors and over 100 sub-sectors through joint-venture companies, 100 per cent foreign owned companies or business partnership contracts.
Lan also argued that globally, agreements in service are continuously being supplemented in the ASEAN block. Moreover, other factors, such as the establishment of the ASEAN Economic Community, new binding service commitments, and commitments between ASEAN and China, ASEAN and Korea, and Japan and India, will make a great impact on service development in Vietnam.
Being a WTO member provides both chances and challenges for the new players, Vietnamese enterprises, and especially service enterprises. Therefore, Vietnamese enterprises should be prepared for methods of competition apart from the cheap price strategy.
Huong Ly
Vietnamese
