Preparing Vietnam for WTO
The writer is senior research associate at the University of
Duisburg in Germany and a former economic adviser in Hanoi at the
Vietnam Institute for Trade of the Ministry of Trade
According to Vietnam's Deputy Prime Minister Vu Khoan, his
country's accession to the World Trade Organization has become
a "top priority." But what has changed the country's hitherto
cautious approach to economic integration? Although Hanoi submitted
its request for membership in GATT, the precursor to the WTO, in
1994, the accession process drifted for years. The Asian Crisis, as
well as setbacks from the WTO's Seattle meeting, confirmed the
perception of Hanoi's communist leaders that it was enough to just
talk about integration during turbulent times, and they would do no
more than commit the country to small steps towards actual
liberalization.
China's accession to the WTO--after protracted negotiations--was a
wake-up call for Hanoi's political class. It shattered the illusion
that Vietnam's accession would be a simple matter for sometime in
the future. The tight schedule for implementing Beijing's
membership obligations has made it clear that Vietnam must speed up
accession preparations before the core of China's commitments are
met--otherwise foreign direct investment inflows will radically
taper off, WTO preparation being a sign of commitment to reform. In
addition, Vietnam's recently ratified trade agreement with the
United States and the new round of global trade-liberalization
talks put severe pressure on the government to make up for lost
time.
But stepping up the pace of accession won't be easy. Three factors
hinder this. First is political ambivalence. Because comprehensive
market-access commitments will have long-term effects on
Vietnam's "socialist market economy," some prominent political
stakeholders are still acting with cautious restraint. Next is the
still missing "integration roadmap." As was long suspected,
officials admitted recently that even after seven years of
preparations, there is still no integration plan. Finally, there is
the limited institutional capacity to overcome administrative
obstinacy. The problem of a lack of coherence, communication and
coordination within the bureaucracy is not specific to Vietnam, but
there are substantial problems in the country with bureaucratic
intransigence and ignorance that stand in the way of promulgating
laws that conform with WTO provisions.
The prospect of tougher Chinese competition in lucrative export
markets and the fear of falling further behind economically because
of slackening FDI inflows have prompted political stakeholders to
seek quicker preparations for WTO. Indeed, as China's membership
became more and more imminent in the 12 months prior to the Doha
ministerial meeting, Hanoi began to realize it needed to quickly
come up with a long overdue and more reasonable approach to the
important issues in integration. Since modernizing production
methods and overhauling management skills won't be possible without
a real commitment to reform, the country's readiness to accept
international standards and regulations has grown considerably.
Gaining more acceptance in the past two years have been national
leaders whose perception of the West and its economies is not
tinged by war-time memories but by an understanding of the
importance of overseas markets for Vietnamese manufactures.
Since market access is a two-way street, WTO membership will not be
without consequence for Vietnamese institutions. There are
difficult issues here, and they include liberalizing the state-
owned sector. Also, state spending will have to be reined in and
property rights must be more quickly transferred from public to
private hands. Shaping the legal system will require skill and
decisiveness too. And here, the independent status of courts and
judges and the regular public release of legal documents and court
decisions must be improved. But most important is the provision of
a level playing field for the nascent private sector. Allowing for
better access to land and reducing the legal constraints on banks'
ability to lend to entrepreneurs will create a more supportive
climate for private investors--and thus allow them to absorb
redundant workers from the state sector.
China's WTO accession was a watershed for Vietnam. After a decade
and a half of sometimes half-hearted economic reforms, its
neighbour's membership has stirred Hanoi and in the process has
caused it to think reforms anew. The massive growth in world trade
and wealth over the recent past decades have demonstrated that
prosperity is generated, first and foremost, through exploiting the
comparative advantages of nations in a global division of labour.
Vietnam appears to have now realized how to proceed with this.
By Uwe Schmidt - The Far Eastern Economic Review - October 3rd, 2002
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