Enhancing Competitiveness for Better Integration

8:23:38 PM | 5/23/2011

In order to make clear what WTO entry commitments Vietnam has to undertake in 2011, advantages and difficulties in implementing those commitments, and discuss solutions to address integration challenges, the Ho Chi Minh City Branch of the Vietnam Chamber of Commerce and Industry (VCCI - HCM) organised a seminar on “WTO commitments that Vietnam has to undertake in 2011: Advantages and disadvantages for enterprises, policies and measures.”
Mixed blessing
The biggest benefit that Vietnam gains from the international integration is a more favourable access to export markets. Technical and trade barriers against Vietnamese goods in importing nations reduce; import quotas are lifted; and more importantly, Vietnamese exports are granted MFN (most favoured nation) tax and non-discrimination treatment. Accordingly, Vietnam’s products fairly compete with other competitors; exports are on the continuous rise, and domestic production is stimulated. As regards the reception of investment capital and technology, joining ASEAN, ASEM, APEC and WTO and signing bilateral agreements with many countries, especially developed nations like the United States, Japan and EU member countries have created a fresh attractiveness of foreign investment attraction in Vietnam. In addition to becoming a partner of leading financial institutions like IMF, WB and ADB, Vietnam becomes one of most attractive destinations to foreign investors; production and export capacity has been upgraded because the country receives modern and advanced technologies from foreign partners. Goods and service markets are expanded on a more equitable basis. Indeed, when Vietnam integrates into the world economy, Vietnamese enterprises are treated equally in all markets they make presence, especially WTO member countries. They enjoy most favoured nations (MFN) tariff on many goods and thus improve the competitiveness of their products and strengthen global market penetration. On the other hand, Vietnam can use WTO dispute settlement mechanisms to defend fair competition with large trade partners, especially when the Vietnamese economy is treated different from “general rules.”
Vietnam’s benefits from the WTO accession are quite clear. Vietnam cannot self-protect from other countries when it is not a WTO member. However, aside good opportunities, Vietnam encountered numerous challenges in all commercial and social aspects. The first challenge is public administration reform and economic governance improvement although Vietnam has made endeavour to make a facelift but administrative procedures - particularly customs, land and construction permit procedures - are still troublesome. This paperwork has put a brake on investment and export activities of Vietnamese companies. Besides, the shortage of skilled workers is a persistent challenge that Vietnam has spent years to address.
Besides, Vietnam has, in return, granted the MFN status and national treatment principle to WTO member countries. The country has to reduce tariffs and lift nontariff barriers at a specific time. Especially, it opened up the distribution market for foreign companies from January 1, 2009, leading a fierce competition on the domestic market. However, Vietnamese companies are at an advantage in competition with foreign rivals because they are mainly small and medium companies, lack capital and high-level personnel, employ backward technologies, and use low corporate governance level. Their labour productivity and business performance are low, and the rate of returns is incommensurate with their big investment costs. The quality of Vietnamese exported goods is unstable; models are simple, etc.
Cooperation of stakeholders
Doctor of Law Pham Van Chat - Senior Lecturer and speaker of WTO at the Ministry of Industry and Trade, and arbitrator at the International Arbitration Centre, said, 2011 will be a challenging year for Vietnamese businesses in particular and worldwide companies in general as global economies are forecast to be volatile. To overcome obstacles this year, companies must understand the tax cut roadmap, effective from January 1, 2012. Vietnam will cut 60 percent of tax lines as committed to the WTO. At that time, foreign products will flood into Vietnam while Vietnamese companies are clearly far behind foreign rivals. Actually, they have seven months to improve their capabilities to dominate the domestic market when they face directly with foreign rivals on the home market.
After four years Vietnam entered the WTO, its enterprises still fall short of many things: capital, material, governance, marketing skills, etc. Vietnamese companies are facing a threat of losing their market shares to foreign competitors. Many Vietnamese exports are confronting sophisticated trade barriers in other countries.
To boost the competitiveness of Vietnamese companies and comply with WTO commitments, Vietnam needs joint forces from all stakeholders (State, businessman, scientist and farmers) to boost export of agricultural products. Their close cooperation will help strengthen the competitiveness of Vietnamese companies in both domestic and foreign markets. Besides, Vietnamese companies need to invest in innovative technologies to reduce production costs, enhance the quality and differentiate models for consumers. Last but not least, they need to intensify trade promotion in the Vietnamese and foreign markets.