Vietnam readies for competition from WTO

July 17, 2006

After Vietnam enters the World Trade Organization, possibly by year-end, its companies will face fierce international competition, Vo Hong Phuc, Vietnam's minister of planning and investment said. He made the point in a dialogue with Yasuhiro Yamada, former managing director of Japan External Trade Organization's Hanoi office.

Phuc: Although the Vietnamese economy has received high praise for its strong growth, it is still faced with a number of challenges to overcome, such as the competitiveness of domestic companies. That is because Vietnamese enterprises lack experience in international competition, and they will likely find themselves in tougher circumstances after the country's accession to the WTO, which is expected to come within this year.

The Vietnamese government is putting its efforts into the reform and privatization of state-owned enterprises. It projects that the number of private-sector companies will grow to 500,000 by 2010 from the current 220,000. The country targets an average economic growth rate of 8% for the next five years. As we will place weight on the industrial and services sectors, the country will likely need $140 billion in investment if it is to achieve the goal of economic expansion.

Yamada: How will Vietnam develop its automobile industry, whose annual production currently stands at 40,000 units? Do you have any plan to promote a national car project like Malaysia?

Phuc: Vietnam has highly skilled labor, and many Japanese, U.S. and European manufacturers are already operating there. In regard to the automobile industry, Vietnam will seek to attain an annual output of 200,000 vehicles in 2010.

It is improbable that Vietnam will seek production of a national car as a government initiative. But a national car project might emerge in the context of a tie-up between companies or as an industrial move to meet competition in the global market.

Yamada: The need for electricity is growing at an annual rate of well over 10% in Vietnam. Japanese companies are concerned about stable power supplies.

Phuc: Vietnam is going ahead with construction of new power stations. We will sell old power plants to raise funds to build new ones. We welcome foreign capital participation in the power generation businesses, and also have atomic power generation plans.

Yamada: Vietnam is now improving investment-related rules and regulations in anticipation of its entry to the WTO. Japanese companies are paying attention to whether the Vietnamese government will maintain preferential measures for investments from overseas companies.

Phuc: We will keep in place incentives for foreign-owned companies as far as possible. We are now examining future measures through discussions with WTO members and businesspeople. We will revise any current incentives judged to be in violation of WTO rules to make them more reasonable.

(The Nikkei Weekly July 17 Issue)

Titles of speakers, names of companies, etc., were correct as of the time when the forum was held.