FOCUS / VIETNAM : VN officially becomes 150th member of WTO

By BEN STOCKING

Hanoi : After years of negotiation and anticipation, Vietnam officially became the 150th member of the World Trade Organisation yesterday, opening the door to a new era of trade and investment in one of Asia's fastest-growing economies. Vietnam will be required to slash tariffs and open previously closed sectors of its economy to foreign investors. While many of the changes will take effect immediately, others will be phased in. Foreign banks, for example, won't be allowed to open their own branches until April 1.

Vietnam, in turn, will have increased access to foreign markets and a neutral arbiter to hear disputes that arise with its bigger, more powerful trading partners.

It will also benefit from the increased demand for goods and services that increased foreign investment brings.

''January 11, 2007, the day Vietnam officially becomes a member of the WTO, is a historic day for the country,'' said Le Dang Doanh, a leading government economist. ''In joining the WTO, Vietnam is accepting increased competition, and competition will make the economy more dynamic.''

At the WTO's Geneva headquarters, a giant blue banner read: ''Welcome, Bienvenue, Bienvenido, Vietnam.''

While many Vietnamese companies see new opportunities, others are bracing themselves.

''We estimate that after Vietnam joins the WTO, we will lose about 20% of our market share to foreign rivals,'' said Nguyen Van Thoai, deputy manager of the Saigon Cosmetic Corp, which sells perfumes and toiletries.

Many high-end cosmetic firms, such as Shiseido Co, L'Oreal SA and Clarins SA, are already operating in Vietnam. But with tariffs on cosmetics being slashed from 40% to 20%, Mr Thoai expects more firms to enter the market.

''With their well-known brandnames and large advertising budgets, they will make the competition even harder for us,'' he said.

The global trade group's members approved Vietnam's application in November, and the agreement was ratified shortly afterward by communist Vietnam's legislative National Assembly.

Under WTO rules, membership becomes official 30 days after Vietnam formally notifies the WTO institution of the vote.

As it negotiated its WTO entrance, Vietnam approved many new laws and regulations intended to bring its business environment in line with international standards.

While large, state-owned firms still dominate the economy, the government has sought to level the playing field for foreign and private domestic firms, which are playing an increasingly significant role.

In response to the new market reforms, foreign firms began increasing their investments in Vietnam ahead of the WTO agreement. Foreign direct investment reached a record US$10 billion last year, when the economy grew a sizzling 8.4%. While foreign investment is expected to keep growing, Vietnam's WTO entry won't change the economic landscape overnight, said Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi.

''Vietnam has been slowly bringing its trade and investment regime in line with international norms, and that's already made this place an attractive destination for some time now,'' he said.

In spite of the market improvements ushered in by Vietnam's WTO reforms, Mr Sitkoff cautioned that investors shouldn't have unrealistic expectations. Obstacles and challenges will remain, as entrenched interests seek to protect their economic turf.

''This is still a 'socialist-oriented' market economy,'' he said. ''That means the government is still preserving a commanding role for many large state-owned companies.'' AP

Related report: Business page

Bangkok Post
Friday January 12, 2007