News Room - Business/Economics

Posted on 14 Dec 2007

Vietnam after one year of entering the WTO

Vietnam has achieved a high and steady economic growth since it joined the World Trade Organisation a year ago. However, entry requires the country to have a technical infrastructure that can ensure sustainable development.

Achievements

The national economy has continued to develop vigorously in 2007 with the growth rate reaching a 10-year record high of 8.5 percent. For the first time Vietnam has completed all its socio-economic development tasks, with the services sector growing by 8.54 percent, a figure higher than the national average growth. This means that the economic structure has shifted towards an industrial and service development.

The latest statistics show that the agro-forestry and fisheries sector currently makes up 20.06 percent of the total GDP, the industry and construction sector 41.67 percent and the services sector 38.27 percent. The corresponding figures last year were 20.45, 41.31 and 38.25 percent.

This, coupled with a high economic growth, has seen foreign investment capital increase sharply in 2007. Between January-October 2007, Vietnam attracted more than US$11 billion from newly licensed or expanded projects, up 36.4 percent from a year ago. Notably, 1,144 more projects were licensed in the review period capitalized at US$9.75 billion, a year-on-year increase of 33.6 percent in the number of projects and 59 percent in capital value.

Vietnam’s World Trade Organisation membership prompted a significant surge in exports, refuting earlier predictions that technical barriers would hamper export activities. Most hard currency earners saw high growth rates, including garments (31.6 percent), footwear (13.1 percent) and rice (14.9 percent).

More importantly, the image of a dynamic Vietnamese Government has been acknowledged by the international community. The Prime Minister has frequently attended international forums, met with the leaders of big economic groups, and promoted the image of Vietnam through a number of overseas visits. He has held talks with local residents and the business community to deal with any shortcomings in policy making and management. He has also instructed ministries and sectors to hold online discussions with the people to solve issues of concern.

In addition, administrative reform has been accelerated. Many provinces exerted a bigger effort in 2007 to secure a high provincial competitiveness index (PCI) compared to 2006, including Ha Tay, Hanoi and Lao Cai.

It is worth mentioning that the Government has shown a high resolve to streamline its apparatus to make it more healthy and effective. The PM asked State agencies to make administrative procedures public to facilitate business and people activities.

Weaknesses

However, WTO membership requires Vietnam to have an appropriate technical infrastructure to ensure sustainable development.

A survey recently conducted by the Vietnam Chamber of Commerce and Industry (VCCI) shows that 65.96 percent of businesses and people are satisfied with the quality of the transport system, 82.41 percent with the quality of the telephone system, 61.62 percent with local infrastructure development, and 52.73 percent with the development of industrial parks for small- and medium-sized enterprises. Meanwhile, investors complain about the planning and development as well as operational capacity of seaports, the transport system in urban areas, and water and power supplies.

According to the Government, Vietnam has not made full use of its investment sources, including foreign direct investment and official development assistance (ODA), while the disbursement of ODA capital remains slow.

Despite efforts to reform, the administration has exposed shortcomings which hamper production and business activities, particularly in the tax and customs sectors, land management and market integration.

The VCCI survey reveals that it took investors 22.7 days on average to get business certificates in 2006, and procedures relating to investment, construction, land and environment remained overlapping.

High economic and investment growth also require a skilled workforce to meet the requirements of market development.

Vietnam has been in dire need of skilled workers since big foreign investors decided to pour mammoth amounts of investment into the country. The US group Intel, the world’s leading chip maker, who announced their US$1 billion investment plan in Vietnam early this year, is expected to recruit 3,000 employees, including 1,000 engineers majoring in electronics, informatics and automation. Foxconn group, the leading Taiwanese high-tech group, announced a plan to pour US$5 billion into Vietnam over the next five years and recruit more than 50,000 employees.

All investors express concerns that they will have to recruit overseas workers to run their businesses due to a lack of skilled workers in Vietnam. Their worries are not groundless. Another VCCI survey shows that only 56 percent of businesses are satisfied with vocational training services, and just 52.3 percent are happy about recruitment support and brokerage services. The percentage of the businesses that are satisfied with the quality of education and employees’ professional skills is even lower than those figures.