Vietnam : waking up to reality
With its oil-export earnings forecast to
decline by 20% this year, Vietnam faces intense
pressure to transform itself into a modern, proactive
economic player. Senior politicians are calling on
exporters to cast off their passive,
follow-the-middleman habits, and go directly for
well-researched business opportunities. That sounds
like a tall order, but never underestimate the fear
inspired by competition from neighbouring China. An
important testing ground is the implementation of the
bilateral trade agreement with the United States.
In theory, sharp reductions in tariffs give Vietnam
unprecedented access to the U.S. market. In reality,
even if the U.S. economy perks up by mid-2002,
Vietnam won't accomplish much unless it rapidly
upgrades the quality of its manufactured goods and
marine products. Competing on price alone won't
work. In garments, for example, China's exports will
surely squeeze Vietnamese rivals. But some analysts
remain bullish on the benefits of the trade
pact--particularly since Vietnam starts from such a low
base. "Half a percentage point increase in market share
of the U.S. apparel and textile market would be a huge
boost for Vietnam's exports," says Steve Parker,
director of a U.S.-funded trade project in Hanoi.
Others caution that feeder industries must be
strengthened. "Don't think only of export figures, but of
the net export value-added," warns Alain Chevalier,
senior technical adviser to Vietrade, an
export-promotion board. Referring to garment and
textile exports, Chevalier underscores the fact that
Vietnam's value-added is only 20% after calculating the
cost of imported inputs in this sector.
Textile exporter Vinatex is among the most aggressive
local firms exploring the U.S. market. It recently set up
a marketing office in New York to boost orders. But
the economic impact of any new orders could be
limited, since local content of Vinatex fabrics hovers at
only 25%. That's one reason why the government has
launched a campaign to dramatically expand cotton
production to feed those factories and reduce
dependence on Chinese cotton. In the footwear
industry, dependence on imported leather and other
materials also undercuts the potential for significant
gains.
For the global marketplace, other exports with high
potential include fruits and vegetables, handicrafts and
wood products. Overall, the World Bank predicts that
Vietnam's GDP will grow by 5% this year, with other
analysts betting on 5.9%. But now isn't a good time to
gloat: Vietnam is still very near the bottom of global
competitiveness charts.
By Margot Cohen - The Far Eastern Economic Review - January 03, 2002.
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