“Added wings” for economic development

The Government is managing to improve the business environment to help enterprises integrate better. Picture: Danh Lam.

Persistence intergration objectives.

30 years of innovation is 30 years that Vietnam had been chasing the path of the international economic integration for the development of the market economy under socialist orientation. The integration progress is marked by the participating in the WTO. And Vietnam continues to negotiate a series of bilateral and multilateral free trade agreements (FTA) with big partners in the world such as the US, the EU, Japan, and South Korea.

The integration not only helps Vietnam to participate deeply in the world economy, it also improves Vietnam’s position and role on the international stage. Accordingly, the average growth rate reached over 6%, GDP per capita increased from $US 289 in 1995 to $US 2,215 in 2016. The integration also creates more opportunities to promote economic restructuring, production structure moving towards the modern, help Vietnam attract investments, especially direct investments in the field of high-quality services.

More exciting, the greatest opportunity for Vietnam is to expand its market thanks to tax reduction and removing trade barriers in order to participate more deeply in the global production and supply chain. If the total export and import turnover of Vietnam was $US 111.3 billion in 2007, it was about 3 times higher in 2016, reached $US 330 billion.

Of course, a problem always has two sides as chances always go with challenges. The integration is not an exception. However, a look back on the limitations, shortcomings and weaknesses are also measures to create a better motivation for the next period.

Not “deniying” the fact, Mr. Tran Quoc Khanh, Deputy Minister of Industry and Trade, Governement’s Chief Negotiator on economic issues and international trade recorgnized, the international economic integration has exposed several limitations to solve because “these limitations have affected the economic – social development in recent years and they can have bad impacts in the long term”. Vietnam has not been proactive and taken advantages and efficiently handled the potential economic relations.

According to him, there were times that we focused on the short term benefits such as tariff reductions but not paid proper attention to the long term goals such as improving competitiveness, quality of growth, environmental and national institution reform, and rapid adaptabilility of the economy to external changes. Vietnam has a lack of economic sectors, spearhead enterprises having ability to dominate the regional and world market, not able take the lead and pull other sectors to develop.

Highly appreciating the development of Vietnam in the integration but speaking at the 5th meeting of the Standing Committee of the National Assembly on December 21st 2016, Deputy Prime Minister Vuong Dinh Hue did not forget to mention: “Many people think that Vietnam’s international economic integration is quite successful but not compatible with local integration. The preparation of the mind is limited so it does not takes full advantage of opportunities, and does not overcome the challenges or losses at home”.

Fight for the battle.

Vietnam will continue to take further integration in the world economy in the next years, as the FTAs enter the stages of deep cut and elimination of tariff barriers for the majority of tariff lines in import duty, eventually, some FTAs have committed to cut 99% taxes.

As answering questions from the National Assembly, Prime Minister Nguyen Xuan Phuc has confirmed clearly, if the US withdraws from the TPP, other partners in the side of the Pacific still are Canada, Mexico, Peru, and Chile with the annual export trade of nearly $US 600 billion, a huge number and big potential. About attracting FDI into Vietnam alone, the highest proportions are Japan and Singapore, the combined proportion of the two countries is 7 times higher than US capital investments.

Continuing to spread the message of integration, Deputy Prime Minister Vuong Dinh Hue also affirmed: “the Government determined, whether having the TPP or not, that Vietnam has been actively reformed and taken further integration because the agreements between Vietnam - EU and other countries have many standards which are similar to the TPP.

It can be said that, the determination for integration will “add wings” for Vietnam’s economy to grow better in the future. However, to achieve that goal, Vietnam must overcome its shortcomings and weaknesses to motivate enterprises and people to take full advantages of integration. In other words, this is preparation for a new journey.

The first step is to innovate institutions and policies, fulfill the legal gaps in the implementation of trade commitments, macroeconomic stability, promote economic structuring with the major issues such as restructuring State owned enterprises, restructuring the banking system, bad debts, ensuring sustainable public debt, restructuring the industry, service and agriculture. This is an important condition for Vietnam’s successful integration. “The Government is reviewing to submit to the National Assembly for completing the legal system within the next 3-5 years”, Deputy Prime Minister Vuong Dinh Hue said.

Along with institutional reform, perfecting the institutions to develop major export items is one of the key tasks to be solved immediately. In fact, many sectors of Vietnam have faced significant challenges, especially challenges from the sectors having not good preparation as the structure of exports mainly using low-tech and labor-intensive, leading to losses for enterprises. And this would repeat easily if we are not prepared carefully.

Also, when the tariff barriers are removed, the technical barriers are not effective, Vietnam will become the consumer markets of low quality products, effecting to the consumers’ health, unable to protect the domestic production. This is a shortcoming of Vietnam’s economy in the domestic market. The fear about Vietnam becoming the “low-lying” area of good consumption of the ASEAN countries is not only the concern of the Government but it is also of many manufacturers, enterprises as well as Vietnam’s consumers, as goods of ASEAN countries are everywhere. Thus, building a “fence” to protect the domestic market in accordance with the international rules and national requirements is very urgent.

A huge avenue is in front of Vietnam, however, the opportunities are still on the paper, while risks and challenges have appeared. The “carriage” of Vietnam’s economy as described by the Deputy Prime Minister Vuong Dinh Hue must have the firm mind to avoid running off the rails.