Vietnam has made many economic achievements after only one year of joining the World Trade Organisation (WTO) thanks to the strong development of enterprises and the dynamism of provinces in developing their economies.

After one year of joining the WTO, Vietnam has welcomed many high-ranking delegations to discuss a number of cooperative issues. Many foreign investors, enterprises and tourists have come to Vietnam to seek investment opportunities.

As of January 11, 2007, under its WTO commitments in the services sector, Vietnam has had to open up 11 of its industries. Due to these commitments, some sectors have faced fierce competition, including finance, banking, and telecommunications. However, the disadvantages have also brought a lot of benefits as Vietnamese goods will easily penetrate foreign markets, benefiting many local manufacturers. So far, Vietnam has opened almost all areas to foreign investors. The country’s export turnover in 2007 reached US$48 billion, up US$8.2 billion compared to 2006’s figure, surpassing the 3.1 percent target set by the government. Vietnam’s key export items have posted high export turnovers including seafoods, rice, coffee, vegetables, rubber, cashew nuts, and pepper. Other products have also taken advantage of the opportunities from WTO membership, including garments and textiles, electronics, and computer components. General director of the Viet Tien garment and textile company, Nguyen Dinh Truong said WTO membership has created many good conditions for Vietnam. There are more advantages than challenges for the garment and textile sector, as around 150 countries have reduced taxes and there is no limit to export volumes. More and more advanced technologies from foreign countries have also been imported into the country.

As of January 11, 2007, Vietnam is committed to reducing 10,689 tax lines and the export tax rate was reduced by 23 percent on average compared to the current preferential tax rate. The roadmap for implementing the reductions will last for 5-7 years. Many sectors have already reduced their tax rates including garments and textiles, seafoods, equipment and machines, automobiles and components. Besides, under the WTO commitments, the reduction in the import tax has also greatly affected the budget’s revenues. Vice Chairman of the People’s Committee of the northern province of Quang Ninh, Nhu Thi Hong Lien, said that although some tax rates were reduced after joining the WTO, the province’s budget has gone up considerably, reaching up to VND9,300 billion.

By approving the Law on Investment and Enterprise Law, Vietnam is making great efforts to eradicate discrimination between state and private enterprises, especially between foreign and local businesses and remove all hindrances to create an equal investment environment for all economic sectors. The State has shifted from direct to indirect management, set up policies and laid out the criteria for enterprises. This has made great changes in management method, giving an important impetus to make enterprises be more active in the market.

Business environment opens up to foreign investors

Vietnam has become prominent in attracting foreign investment with registered capital of more than US$20 billion, surpassing 53.2 percent of the yearly plan. Indirect capital sources pouring into the country have also increased remarkably, contributing to a rapid increase in the capital volume of the stock market.

According to Vu Bang, Chairman of the State Securities Commission (SSC), said that over the past year the domestic securities market has developed well in both scope and scale. The increasing foreign direct investment (FDI) capital has also played an important role in the market. Many foreign markets have kept a close watch on the local market and looked for an attractive market like Vietnam. Therefore, it is essential to maintain and promote the flow of FDI into the Vietnamese market.

Vietnam will open up its doors allowing the establishment of wholly foreign-owned banks in Vietnam from April 1, 2007. However, these banks are bound by regulations that do not allow them to set up branches and mobilize capital sources in Vietnamese dong within five years since of joining WTO in 2007.

Nevertheless, to sharpen their competitive edge, Vietnamese banks have made thorough preparations, such as increasing financial capacity, developing human resources, upgrading technology, renewing designs and diversifying types of products. Furthermore, local banks have also increased the quality of their banking services and simplified credit procedures.

One year after Vietnam became a WTO member, Vietnamese retailers hold a big share in the local market despite the active participation of foreign rivals in the same playground. They have also developed many different competition strategies to attract more customers and the retail sector has developed well. Deputy Minister of Industry and Trade, Nguyen Cam Tu, said that Vietnamese retailers cannot rest on their laurels. They are striving to make bigger achievements in various fields despite tough competition from foreign businesses.

In 20007 the country recorded a GDP growth rate of nearly 8.5 percent and also reduced the poverty rate to 14.7 percent.

Many challenges remain ahead

Pressure from the open market has posed big challenges for national economy, especially to domestic businesses due to their limited competitiveness and small-scale production. Moreover, there has been ineffective use of foreign capital and the progress of foreign investment disbursement is still slow.

Despite its positive results, Vietnam’s economy still shows some weaknesses and shortcomings. The national economy has not yet grasped many new opportunities or properly dealt with a number of challenges in order to secure rapid and sustainable development.

Hence, to make full use of advantages from Vietnam’s WTO admission and its fast economic growth in 2007, it is necessary to develop a healthy competitive environment and strictly implement commitments to creating good conditions for businesses. Apart from preferential policies, businesses should put themselves in a global integration context and set up cooperative networks to increase competitiveness. Furthermore, the State should create better conditions to boost the nation’s economic development by mobilizing investment capital to improve infrastructure construction and develop human resources, as well as improving the business environment. These are decisive factors in boosting national economic growth and successfully integrating into global economy.