Five-year WTO membership review – not as good as expected

Vietnam’s GDP average growth in 2007-2011 was at 6.5 percent, much lower than the recorded figure of 7.8 percent in the previous five-year period.

  • WTO membership will boost global integration

According to recent reports on the assessment of the socio-economic situation five years after joining the World Trade Organisation (WTO) by the Central Institute for Economic Management (CIEM), WTO membership has been a major factor in driving up inflation in Vietnam. This is largely due to price fluctuations in the global markets, complicated balance of international payments and supply-demand imbalances caused by import surplus.

In addition, Vietnam’s maintenance of economic stability and management of fiscal policy are still dependent too much on economic analysis and predictions.

As a result, the financial crunch in three years (2007-2009) led to an economic slowdown in the next two years (2010-2011).

In the face of tough competition from foreign-made products on sale, it seems domestic distribution chains are increasingly at the risk of losing ground.

Once reason, cited by Dr Pham Lan Huong from the CIEM, is Vietnam’s slow progress in opening the market for some services needed by foreign investors in a number of industries.

So, foreign investment remains limited even in potential areas of Vietnam.

Dr Huong says agro-forestry-fishery was the only sector that grew by 3.4 percent annually in the 2007-2011 period.

In the same period, annual domestic industrial growth was 7 percent, much lower than in the 2002-2006 period at 10.2 percent.

Huong puts this down to the failure of domestic businesses to use locally-sourced input materials in production and the underdevelopment of support industries.

Dr Huong proposes improving the business environment and speeding up the restructuring of the national economy into a new pattern.

For the industrial sector, she says, it is crucial to encourage businesses to apply advanced technologies, increase the added values of their products, and take advantage of free trade agreements (FTA) to penetrate foreign markets.

Dr Huong emphasizes the need to cooperate with foreign-invested businesses and encouraged small- and medium-sized enterprises to integrate into regional supply chains.

Commenting on the investment sector, Dr Nguyen Dang Binh from the Ministry of Planning and Investment says that total social investments grew by 8.3 percent on average from 2007-2011, much lower than the 13.4 percent figure recorded in the previous period.

In the same period, only foreign investments showed an increase of 150 percent with total registered capital in projects rising 510 percent and additional capital 330 percent, Binh says.

He proposes that Vietnam push through legal reforms and fully implement its WTO commitments to improve the effective mobilisation and use of capital, the quality of planning and forecasting, as well as cooperation in key projects.

CIEM economist Dinh Thu Hang says that Vietnam will enjoy less preferential official development assistance (ODA) in the near future.

As international integration cuts both ways, she insists on proposing completing a mechanism for import-export activities, increasing the added values of export goods, reducing the export volume of raw materials, strengthening links between producers and exporters, and cooperating with major exporting businesses.

Hang also recommends restructuring the domestic retail market, especially in sectors involving State-owned enterprises.

Another expert from the CIEM, Nguyen Anh Duong, says it is necessary to effectively coordinate monetary and fiscal policies and develop an information database for timely analysis and forecasting.