HOCHIMINH CITY: AWARENESS OF AND PREPARATIONS FOR ACCESSION TO THE WORLD TRADE ORGANIZATION

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1 HOCHIMINH CITY: AWARENESS OF AND PREPARATIONS FOR ACCESSION TO THE WORLD TRADE ORGANIZATION Prof., Dr. Nguyen Thien Nhan First Vice Chairman People s Committee Ho Chi Minh City May 31 st, 2003 I. AWARENESS OF THE PREPARATIONS FOR ACCESSION TO THE WORLD TRADE ORGANIZATION (WTO): In late May 2003, HCMC conducted a survey on public s awareness of Vietnam s preparations for accession to WTO. The survey of the leadership of city-level departments and district-level people s committees, professors at the university of economics and a group of selected journalists revealed the followings about the awareness of HCMC inhabitants on the preparations for WTO accession: 1. Know the full name of WTO: 100% 2. Know the founding year of WTO: 71% Know the predecessor of WTO: 86% 3. Why Vietnam should join WTO: a. To expand exports: 91% b. More attractive to foreign investors, better living standards: 57% c. To be fairly treated: 54% d. In a better position for dispute settlement: 34% 4. Disadvantages of joining WTO: a. Increased competition in the domestic market, risk of Vietnamese business going bankruptcy: 86% b. Reduced import tax revenue, negative impacts on the national budget: 31% 5. Is there any link between BTA implementation and the preparations for WTO accession: Yes: 100% No: 0% Why?: 50% give explanations a. BTA s contents are based on WTO s principles: 54% b. BTA implementation is the exercise for Vietnam prior to WTO accession: 37% 6. What has the Vietnamese government done to prepare for WTO accession: a. Improvement of the legal framework: 60% b. Restructuring of SOEs: 43% 7. What has the HCMC people s committee done to prepare for businesses and citizens in HCMC at the threshold of joining WTO: a. Dissemination of information on international economic integration: 42% b. Public administration reforms, management skills enhancement: 34% c. Dispatching trade & investment promotion missions abroad: 31% d. Periodic government-business dialogues: 28% e. Human resource development: 29% 1

2 8. What should the city-level departments and district-level people s committees do in preparation for WTO accession: a. Creation of a good legal framework to make entrepreneurs confident in their operation: 43% b. Human resources development for enterprises: 37% c. Dissemination of information on WTO: 26% 9. What should businesses do to prepare for WTO accession: a. Increase investment, modernize production chains: 51% b. Accessing international information: 29% 10. What should the Vietnamese government and HCMC people s committee do in preparation for WTO accession? a. Amend Vietnam s laws to be in line with WTO rules: 57% b. Human resource development for the implementation of WTO: 34% c. Disseminate information on WTO accession: 26% d. Develop the national roadmap for integration: 23% 11. What is dumping? a. Sold below production cost: 74% b. Sold below the selling price in the producing country: 17% 12. If Vietnam were a WTO member, would the catfish case against Vietnam still be filed by U.S. CFA? Yes: 59% No: 41% 13. Three greatest opportunities for Vietnamese businesses when Vietnam joins WTO: a. Expand export market: 83% b. Access to new technologies, increase competitiveness: 63% c. Better legal protection and equal treatment: 29% 14. Three biggest difficulties for Vietnamese businesses when Vietnam joins WTO: a. Increased competition in the domestic market, risk of Vietnamese business going bankruptcy: 100% b. Incompetent human resource, inadequate technical infrastructure: 40% c. Lack of information about international laws: 40% General observations: - Knowledge of WTO (questions 1, 2, 5, 11, 12): relatively good but not in-depth (question 12) - Understanding of the advantages of WTO membership (questions 3, 13): correct but not comprehensive and deep enough. - Understanding of the disadvantages of WTO membership (questions 4, 14): correct but not comprehensive and deep enough. - Understanding of the government s preparations (question 6): limited (40% not reply) - Understanding of HCMC administration s preparations (question 7): limited (51% not reply) - Understanding of what the central government and the HCMC administration need to do (question 10): limited (43% not reply) - Understanding of what city-level departments and district authorities need to do: limited (57% not reply) - Understanding of what enterprises need to do (question 9): limited (49% not reply) 2

3 Bilateral agreements VN-U.S. BTA WTO membership WTO Vietnam AFTA membership AFTA Non-WTO member Bilateral agreements Diagram 1: Vietnam s economic relations of and roadmap for international economic integration II. MAIN ORIENTATIONS FOR THE PREPARATIONS OF HO CHI MINH CITY IN WTO ACCESSION In preparation for WTO accession, it is critical: a. To change the mentality of the leadership, inhabitants and enterprises of current business principles; b. To amend existing laws to be in compliance with WTO s regulations; c. To change the government s way of monitoring and regulating economic activities (antitrust, anti-collusion, anti-dumping, non-subsidy to enterprises; healthy competition, etc.); d. To establish institutions strong enough to enforce intellectual property protection and assist local enterprises in dispute settlement abroad; e. To enforce income tax obligations by each individual and enterprise and closely supervise their operation; f. To encourage enterprises in preparing products for export and domestic completion under new conditions, etc. These changes are both to meet WTO s regulations and to facilitate the receiving of new benefits as well as the remedy of the negative impacts of WTO accession (diagram 2). In fact, many of these changes have been made at various levels since Vietnam joined AFTA and signed the bilateral trade agreement (BTA) with the united states. It would be certainly useful for Vietnam to refer to the china experience in both prior and post-wto accession periods. 3

4 Diagram 2: factors influencing Vietnam s preparations for WTO accession Acceptance by WTO members WTO regulations Vietnam before WTO accession Vietnam as a WTO member New benefits for Vietnam Awareness change Legal reforms Change in State s supervision Establishment of new institutions Restructuring of State, private, and foreign-invested enterprises Adverse impacts for Vietnam AFTA VN-U.S. BTA China experience in preparations for WTO Potential new benefits for Vietnam as a WTO member 1. Significant tariff cuts for Vietnamese products by importing countries (expansion of foreign markets). 2. Reduction of quantitative restrictions on Vietnamese exports (expansion of foreign markets). 3. Equal national treatment, less risky in doing business, more favorable in dispute settlement. 4. Easier capital inflow into Vietnam and more conducive foreign investment climate. 5. New and better choices for consumers thanks to foreign goods and services in Vietnam. 6. Involvement in deciding WTO operation principles, more suitable with the situation of lessdeveloped countries. 7. Use of anti-dumping regulations for legitimate protection of the economy in case of being attacked by dumping. The aforementioned new seven benefits are opportunities of Vietnam as a WTO member. However, the question whether these opportunities could be realized or not depends on the oriented active preparation of the Vietnamese government and enterprises. If the Vietnamese products were low quality and expensive, our enterprises could not enlarge their markets despite import tariff cuts on the Vietnamese exports. Adverse impacts on Vietnam as a WTO member 1. The domestic competition would be more severe owing to import tariff cuts. Some disadvantaged sectors would be significantly curtailed or face bankruptcy. In these sectors, unemployment would increase. 2. Competition pressure in service sector would raise because foreign service providers would penetrate into Vietnam s market. Some Vietnamese enterprises would loss part of their market share or face bankruptcy. 4

5 3. Import tariff cuts would reduce national budget income and increase burden for national budget balance. 4. The implementation of law on intellectual property protection requires the executive machine be larger and more efficient. 5. The dispute settlement under the international law would be more costly for the Vietnamese enterprises because they have to hire foreign attorneys and dispute settlement would take place outside Vietnam s territory. 6. Subsidy by the government to some priority industries and products would face obstacles owing to regulations and close supervision of WTO. The aforementioned adverse consequences of Vietnam are potential; their practical impact depends on the active preparation of the Vietnamese government and enterprises. Particularly, the shortage of budget income from import tariff cuts must be filled while a wasted large income source from individual and enterprise income tax must be collected thoroughly. Facing the domestic increasing competition pressure, we should strictly reassess the competition advantages of each product group, reduce or remove less-advantaged products, and shift to investment in advantaged sectors for domestic consumption and export. Against the backdrop of Vietnam and with a view to effective exploitation of the seven potential opportunities and restriction of the six adverse consequences resulting from WTO accession as mentioned above, we could think of 5 necessary solution groups in preparation for WTO accession as follows: 1. Solutions on improvement of the enterprises and inhabitants awareness about integration, WTO, reforms, and Vietnam s role: 1.1. To defuse profoundly the indispensability of economic integration and WTO role To raise correct awareness among administrative authority at all levels, enterprises, and inhabitants about benefits and risks coming from WTO accession To establish a website on integration and WTO; to execute the dialogue system on the website and to hold regular dialogues between enterprises and municipal authorities To formulate a series of information tools (such as documents and compact disc); to hold meetings between local authorities and foreign business associations in HCMC; to organize trade fairs, forums, and trade and investment promotion missions going abroad with the aim to introduce the renovation drive of Vietnam including HCMC and its role as a reliable and potential economic partner To refer to experiences from china s preparation for WTO accession and Vietnam s lessons in preparation for AFTA implementation in order to work out a suitable action plan. 2. Solutions on the improvement of the legal framework: 2.1. To set out a reasonable roadmap for adjustment of laws and administrative regulations at locality To establish new organizations for assistance in trade and investment promotion and intellectual property protection To encourage formulation and development of consulting organizations in legal and business fields To refer to experiences from china in legal adjustment in accordance with WTO requirements. 5

6 3. Solutions on strengthening human resources development and trade and investment promotion Deployment of supplementary training and re-training programs for enterprise managers to make them well-prepared and proactive in global economic integration, complying with WTO regulations. A premium is place on their good command of a foreign language Organization of country- and commodity-specific training courses on exports and investment issues Formulation of a mechanism and a market of technical and highly skilled labors, responding quickly to the demand of foreign investors. This should be a competitive edge of Ho Chi Minh City Creation of a partnership and support program for enterprises in their trade and investment promotion campaigns at home and abroad, establishing a positive image of Vietnam as a reliable partner with great potential. (dispatching outbound missions, opening of overseas representative offices of local enterprises, cooperating with Vietnamese diplomatic missions overseas) Learning from china and other countries with respect to trade and investment promotion. 4. Solutions on economic restructuring and enhancement of enterprise s competitiveness 4.1. Announcement of the roadmap for tariff reduction and easing of the investment climate in Vietnam. Quantitative assessment of the impact of WTO accession on different sectors, major provinces and the whole country Formulation and deployment of target programs in developing spearhead economic industries of Ho Chi Minh City s advantage, coupled with the strength of Ho Chi Minh City being a center of scientific and technological excellence Creation of a tripartite partnership: governance-science-production to develop key products of Ho Chi Minh City Local and foreign-invested enterprises shall review their business strategies, making adjustments so as to fit in with the new business environment when Vietnam joins WTO Capitalizing on the role of trade associations for mutual assistance and joint export Periodic assessment of the attractiveness of the business and investment climate in Ho Chi Minh City. Taking measures to create the comparative advantage of five readiness for foreign investors: information-ready, land-ready, technical labor-ready, internetready, and assistance-ready Proactively implementation of the relocation of polluting manufacturing establishments. Protection of the environment and technical infrastructure development for the city. 5. Solutions on the implementation 5.1. Ho Chi Minh City shall set up a working group whose mandate is to draft a program on economic integration and preparation for WTO accession, which will then be approved by the city authorities. The city administration shall work with the central government, ministries and localities in the region to make preparations for economic integration and WTO accession Intensive tools should be prepared for the implementation of the above-mentioned four groups of solution such as: training manuals, websites on integration, regular dialogs, human resources development programs run by the city administration, public information about WTO, etc Integration with the implementation of the Vietnam-U.S. bilateral trade agreement (star project) and cooperation with the world bank on deploying selective solutions. 6

7 III. OUTCOMES OF THE IMPLEMENTATION OF SOLUTIONS ON ECONOMIC INTEGRATION AND PREPARATIONS FOR WTO ACCESSION 1. Develop the awareness of HCMC leaders and citizens of economic integration and the WTO, develop the awareness of foreign businesses and foreigners of the reform cause and the role of Vietnam: - Inform all HCMC senior officials of the Resolution n o 07-NQ/TW by the Politburo dated November 27 th 2001, clearly identify opportunities and challenges of economic integration and of Vietnam s accession to the WTO. - Seminars on HCMC s economic integration and preparation for accession to the WTO have been held by the central and municipal TV stations. Many integration-related articles such as anti-dumping, trademark registration, e-commerce have been published on newspapers. - Symposia on export and import, training courses for more than 6000 businesspersons, annual meetings between representatives of the HCMC departments and foreign business associations (organizers: ITPC, the Department of Trade, the Department of Planning and Investment, the Department of Science, Technology and Environment) have helped to enhance the awareness of and the capacity to exploit opportunities of economic integration, the awareness to actively respond to challenges. - Over the past 3 years, more than 5,000 CDs have been released, more than 10,000 documents have been printed in foreign languages, HCMC Website were established in May 2002 (with 200,000 visitors /day on average). HCMC have hold and participated in more than 10 international forums to introduce the city and its economic, scientific and cultural potential. - HCMC have established contacts with STAR project, reached agreements with STAR on the plans to co-organize BTA training courses, on the assessment of BTA impacts on the city economy, on the establishment of HCMC Website on economic integration and BTA. - The above-mentioned activities have encouraged a part of businesses to actively prepare for economic integration, senior officials and businesspersons to develop correct understanding of the advantages of economic integration and the role of the WTO. - ITPC and the website of HCMC are reliable contact points for businesspersons and foreigners to find opportunities of doing business with HCMC Limitations The understanding of senior officials and businesspersons about the WTO is correct but not wide and deep enough. There has not been any particular training course on WTO integration for senior officials and businesspersons. A relatively large part of businesspersons, administrative agencies of many levels have not formulated preparation programs for economic integration and WTO accession. HCMC has not exploited China s experience in preparation for WTO accession. A relatively large part of foreign businesspersons and foreigners (in Europe and Americas) still consider Vietnam as a war-torn country, not a country of renovation and opening; therefore, do not pay much attention to cooperation with Vietnam and HCMC in investment, trade and tourism. 2. Improve the Vietnamese and HCMC legal framework: - More than 30 periodical administration - business dialogues with more than 1000 participant visits have helped HCMC to remove limitations and weakness in state administration, and to suggest that the government and ministries improve legal regulations that do not compatible with the facts (regulations on taxation, customs, intellectual properties, business registration ) - Directions on FDI and domestic investment management reforms have been issued, Online Administration Business Dialogue launched since May 2003 has received due support and attention from business persons. 7

8 - Investment and Trade Promotion Center (established on November 2001) has served as a clue to receive proposals of business persons on improving State management on investment and trade. Limitations: The national route on legal changes in preparation for WTO accession has not yet been issued; therefore, HCMC Red-tape and corruption in Vietnam, including HCMC are two of the greatest hindrances to investment and trading activities of foreign investors. 3. Develop human resource training and intensify trade and investment promotion - The HCMC People s Committee has designed and implemented the Program of Human Resource Development, which consists of 8 parts: develop basic education; develop vocational training and worker training; develop university education; train business persons; develop human resource to serve the political system; train 300 MA PhDs; discover and further train young talents, discover and train gifted athletes (under the program of training 1,000 business managers, 10 courses have been run with more than 600 participants, which received positive comments from the trainees; 1 years after the Program of training 300 MA and PhD was established, 36 persons have been selected to be trained abroad ) - Over the past 3 years, ITPC have run nearly 100 training courses, seminars on economic integration and on foreign trade skills with more than 5,000 business participants. - ITPC has established the database of market information on 16 countries (us, Germany, France, U.K., Japan, South Korea, China, Russia, Taiwan, South Africa ). Providing 1,500 Saigon economic times copies (the English version) at no charge on a weekly basis for flights via Ho Chi Minh City, giving an introduction of the city s investment environment and potentials. Designing an investment website hosted by dpi in several languages, namely English, French, Japanese and Chinese. - In 2002, the city sent ten trade and investment missions abroad, five of which were led by the municipal leaders. Providing over 200 businesses with support in the organization of 20 overseas export promotion missions. - Preparation work is under way to open representative offices for HCMC businesses in the United States and Germany. Limitations: The human resources development program is still in its early stages, thus failing to create an edge in terms of human capital for the city. Despite advances in investment and trade promotion, no improvement has been made in the profiles of Vietnam and HCMC in major countries. Readiness in land, human capital and telecommunications leaves much to be desired. 4. Economic restructuring and enhancement of corporate competitiveness: - The 14 development targets in the city s major economic sectors have been mapped out and are now being implemented: financial and banking services, tourism, trade, estate market, software technology, food processing, marine products, wood processing, textile and garment, leather and footwear, chemical engineering, plastics, electronics, and construction; the program for development and application of science and technology and program for development of the city s key industrial products. Each program mirrors efforts made by local businesses and scientific researchers in respective sectors and by the municipal authorities with a view to speeding up the corporate modernization pace, heightening competitiveness and intensifying exports. 8

9 - This shall be the main instrument that HCMC uses to restructure its economy in the direction of creating products of high competitiveness. With the programs of human resource development, trade & investment promotion, telecommunications infrastructure development (in conjunction with the City Post & Telecom and other telecom companies), and public administration, HCMC is establishing new position and forces for economic development against the backdrop of global integration and competition. - The development of the software industry, the fast-growing fisheries industry and the positive transformation of the banking sector are shining examples of economic restructuring in HCMC. - HCMC has developed an online technology market with more than 900 equipment and technologies made by local manufacturers with good quality and low price. 12 technological market sessions have been organized in the past 3 years. The college Council has been established with the participation of rectors of 33 universities and colleges in HCMC. Partnership programs with scientific research institutes have been launched to apply and transfer new technologies and equipment. Limitations: Slow deployment of specific investment projects identified by target programs. Generally speaking, the competitiveness of industries/sectors has not been improved. The real economic structure has not changed remarkably. 5. Implementation of the integration program and preparation for entry into WTO: - The socio-economic development program in the period asserts that the human resources development program and 14 development targets in major economic sectors should be devised within 5 years and carried out annually. In addition, the city annually develops the program for trade, investment and tourism promotion. - Since early 2002, a working group on international economic integration has been established. The group is headed by the first vice chairman of HCMC People s Committee and participated by the Institute of Economic Research (standing member), Department of Planning and Investment, Department of Commerce, and the Investment and Trade Promotion Center. The working group has looked into requirements for integration and entry into WTO, set them against various planned socio-economic development programs in and determined additional measures: producing source material for AFTA integration, BTA and WTO to be distributed to businesses and government bodies; setting up integration websites that serve as another channel of communication to address comments and queries among local people and businesses; carrying out quantitative researches into the impact of the BTA implementation on the city s economic climate. The above three things have so far been executed, together with the technical support program on the BTA implementation (STAR). But still, no new product has come out yet. Limitations: There exists a cooperation gap between media coverage and government regulation to disseminate information and guidelines on integration and implementation of AFTA, BTA and on preparations for entry into WTO. Senior staff among government agencies and businesses needs an intensive course on integration and implementation of AFTA and BTA and on preparations for accession to WTO. In so doing, pro-activeness and innovativeness in each regulatory level and business would be aroused with increased competitiveness, city-wide and corporate. No systematic and profound study into what china and other countries did to join WTO is in place. 9

10 IV. MEASURES TO BOOST INTEGRATION AND PREPARE FOR ACCESSION TO WTO According to five groups of approaches to integration and preparation for entry into WTO and to past performance, it is required to steadfastly continue to implement specified and on-going measures and to concurrently carry out additional following ones: 1. Designing an intensive curriculum on economic integration and preparation for entry into WTO aimed at senior staff at district and city levels, in media agencies, business associations, businesses involved in the city s development programs in key economic sectors, which starts in the 3 rd quarter of 2003 (The Institute of Economic Research is the contact agency in compiling teaching materials). 2. In cooperation with the mass media, HCMC People s Committee shall develop the program of propaganda and dialog on integration into AFTA, VN-U.S. BTA, and WTO, which begins in the 3 rd quarter of 2003 (key executing agencies: Institute of Economic Research, Department of Culture & Information). 3. Economic integration website should be created under the auspices of the World Bank and the STAR project. It comes into operation in the 3 rd quarter of 2003 (key executing agency: ITPC). 4. Deployment of the program to promote the image of Vietnam and HCMC in other countries, which are the city s important counterparts (at best with the support of the World Bank). It is designed in the second quarter of 2003 and implemented in the 4 th quarter of 2003 (key executing agencies: ITPC, DPI) 5. In conjunction with the STAR project and the World Bank, conduct a quantitative forecast of on the impact of the implementation of the VN-U.S, BTA and WTO accession on the HCMC economy (deployed since 3 rd quarter of 2003, key executing agency: Institute of Economic Research). 10