The Saigon Times Weekly interviewed Ms. Pham Chi Lan, vice chairwoman of the Vietnam Chamber of Commerce and Industry, on the effects of China's World Trade Organization (WTO) membership on Vietnam's economy and how Vietnam should respond.
How will China's WTO membership affect Vietnam?
China's WTO membership will pose more challenges than opportunities, not only to Vietnam but also ASEAN and other developing countries.
Chinese goods, which are already competitive, can now gain more advantages and easier access to America, the EU and Japan. Vietnamese export goods such as garments, textiles, footwear and electronics must face great competition from China.
Competition for investment attraction is also a problem. China's investment environment has already been more attractive than ASEAN. In the early 1990s, the ratio of investment in China and ASEAN was 3/7 but it has been reversed to 7/3 in recent years. Investors will increase investment in China to enjoy the perks offered by the WTO.
The penetrability of Chinese goods into ASEAN will also strengthen. Besides the price advantage, Chinese goods are very diverse and able to meet different market segments.
What are the opportunities for Vietnam?
From another angle, China's WTO membership is also good news. Vietnam is a neighbor to this growing economy, which will be a big market for many of our products if we know how to tap it. However, to take advantage of this opportunity, Vietnam must face many challenges in the near future, because WTO members, which have the same export goods as Vietnam, will be able to enter China more easily. In addition, the close proximity of a strong economy requires Vietnam to exert greater efforts to promote business development, improve the business environment and increase its investment attraction.
In the recent summit in Brunei, China and ASEAN pledged to establish a free trade region soon, or in other words, to admit China into the ASEAN Free Trade Area (AFTA). Do you think this move can help Vietnam overcome the disadvantage when it is not yet a WTO member?
I has participated in the East Asia Vision Group to study proposals for development of comprehensive cooperation between ASEAN and three East Asian countries (Japan, South Korea and China).
The group has proposed the initiative to expand AFTA to include these three countries. I think the AFTA expansion that China desires is a progressive idea, and the governments of ASEAN and East Asian countries must have considered carefully their interests in this expanded trade region. However, the region cannot be developed immediately because China is a big economy which has great competition pressure on ASEAN. If China is admitted into AFTA, the pressure will grow. Therefore, ASEAN must have a suitable roadmap, especially for the four new members (Vietnam, Laos, Cambodia and Myanmar), when the free trade region is developed.
Do you think Vietnam and China can grant each other preferences under bilateral agreements?
The two countries have signed a bilateral trade agreement and agreed to increase official trade and minimize border trade under the principle of opening their markets to one another. However, in practice, it is not easy to implement this agreement. In reality, China can hardly grant a separate status for Vietnam because under the WTO rule, this would mean the same treatment for other countries.
On the part of Vietnam, the increase of official trade will help a number of domestic goods steer clear of unhealthy competition; on the other hand, Vietnamese exports will face more challenges. Vietnamese businesses have not yet been able to penetrate the distribution network in China.
What should Vietnamese businesses do in this trend of accelerated integration?
It is improved competitiveness that matters. In the expanded AFTA, Vietnamese goods will be taxed only 0-5% but they must compete with products from China and other ASEAN members which also enjoy the same tariffs. Therefore, Vietnam should decide which goods can compete with China and other ASEAN members and which cannot to adopt a suitable move.
Vietnam's late integration into AFTA compared with other members gives the country more time for preparation but this also restricts its ability to penetrate the ASEAN market. After 2003, old members will grant each other tariff preferences, and Vietnamese exports to ASEAN, which currently make up 18-20% of its annual export turnover, will face more competition. Vietnamese businesses only have three years to prepare. If they do not sharpen competitiveness, they will fail to compete, both at home and regional markets.
But businesses still face many obstructions in their operations. Do you think they will fail to catch up with the integration schedule?
The Government has issued solutions and policies to help businesses accelerate their integration. But for businesses to realize the acceleration, government agencies must also accelerate.
Reported by Luu Phan