Interview given by H.E Mr. Phan Van Khai, Prime Minister of S.R.V to Foreign Affairs Magazine
Question: What are your views on your country's niche and its own role in the global economy, especially as she prepares for WTO accession towards the end of this year?
The Vietnamese economy, though at a low level of development, cannot be isolated from the global economy. Since the introduction of reform (Doi Moi), the Vietnamese economy has been increasingly open. In recent years, export value, which has been accounted for more than half of GNDP and import- export turnover growth, grows by 20% on average per annum. Viet Nam is among 50 largest exporting countries in the world and has been recognized as a country with a strong and vibrant foreign trade. Foreign investment accounts for about 40% of the total investment of the country. The share of foreign-invested enterprises (FDI) in GDP is between 13% and 14% and its contribution to industrial output is about 30%.
Vietnam is actively negotiating Active negotiations are underway for WTO accession at the soonest time possible with a view to integratinge more strongly into the global economy and create an enabling environment for Viet Nam to attract foreign investment, boost trade in goods and services and increase access to the world market. However, WTO accession has also posesd enormous challenges to the Vietnamese economy given its low competitiveness.
Question: How successful do you consider the BTA to have been? And what scope exists for strengthening trade between our countries?
The Bilateral Trade Agreement between Viet Nam and the United States was signed on 13 July 2000 and entered into force on 10 December 2001. Since the entry into force of the BTA, much progress has been made in the trade relations between the two countries.
The most notable feature of the BTA implementation over the last three years is the increase of trade from US$1.4 billion in 2001 to US$6.4 billion in 2004, which also helps bring about the benefits to producers and exporters of both countries. Currently, the United States is one of the three largest trading partners of Viet Nam. US FDI inflow to Viet Nam, though increased over the years, remains modest with total registered capital of $1.3 billion, accounting for only 2.8% of total FDI to Viet Nam and leaving the United States at the13th rank among countries and territories investing in Viet Nam. Other capital sources have also been raised such as the credit guarantee fund of US EXIM Bank have also been raised.
Apart from the trade and economic areas, Vietnam - US cooperation has been expanded to education, anti-terrorism and anti-drug fields. The two sides have actively supported each other in finding the remains of soldiers who died during the war. Military officials from the two countries have started their contact. These positive developments enable the two peoples to better understand and come closer to each other. I am delighted to note that more and more Vietnamese people residing in the US and other countries are returning to Vietnam to visit their fatherland, make investment and do business there.
I am deeply moved by the kindness of the American people. More and more American veterans visit Vietnam these days and they all acknowledge the friendly and sincere attitude of the Vietnamese people. They have expressed shown deep understanding and carried out concrete activities to help the war victims in Vietnam. During the last 10 years following the normalization, the spirit of "putting behind the past and looking toward the future" has been well reflected in the relations between our two governments and peoples, which will continue to be highlighted in our friendship and cooperation in the future.
Question: What impact do you believe WTO entry is likely to have upon FDI from the US?
Vietnam filed the application to join the WTO in 1995 and have actively negotiated to become a WTO member in at the earliest time possible. I believe that given WTO commitments and the deepened trade ties between Vietnam and other countries, our investment climate will be more appealing, transparent and stable, which enables us to attract more FDI from outside, including from the US. I hope that US investment inflow to Vietnam will increase in commensurate with the US enormous potentials. Vietnam also looks forward to continued support from the American businesses for our WTO accession, which is now in the decisive stage, as well as our ongoing reforms and economic development process.
Question: What challenges do you envisage over this next period in the economys development as Vietnam becomes more integrated into the global economy?
Over nearly 20 years of Doimoi, remarkable achievements have been recorded, which are strongly supported by the people and international friends. On the path of reform and development, however, great challenges remain, especially when Vietnam is integrating more deeply into the world economy.
The most formidable challenge is to narrow the gap with countries in the region and the world in terms of economic development and technology. Despite Vietnam's relatively high growth rate in recent years, the potentials of the nation are yet to be fully tapped, and the quality of growth and level of sustainability remain low. Therefore, to further narrow the gap with other countries, we are required to achieve more rapid and sustained growth.
International economic integration means tougher competition, while the competitiveness of the Vietnamese economy is still limited. At present, Vietnam is still an agricultural nation with poor technology and infrastructure. The majority of the Vietnamese population lives in the country-side. In order to develop agriculture and the rural areas and, industrialize modernize infrastructure and technology for a better competitiveness and successful economic integration, we need large sources of capital, which also constitutes a big challenge to surmount.
The deeper integration into the world economy presents Vietnam with new opportunities as well as great challenges caused by external impacts. Meanwhile, Vietnam's competitiveness remains weak and the economicy growth is not totally stable.sustained.
We therefore should harmonize economic development, social equity and environment protection and; proactively integrate into the world economy while preserving national cultural identity.
Our way-out is to step up comprehensive renewal process, combine socio-economic and political reforms, and promote great national solidarity and democracy to create new momentum and resources for the rapid and sustainable development of the country.
Question: To what extent does the Chinese market represent either a threat to the future of Vietnam or opportunity to bolster current gains?
China is a huge market of large population and the world's largest manufactory. In many areas all over the world, Chinese products, with better quality and competitive prices, are being consumed in greater quantity.
Vietnam, as many other countries in the region, has to face competition from Chinese goods right in its domestic market, as well as in some markets to which both Vietnam and China export the same products. That is a great motive forcing Vietnamese enterprises to renew technology, reduce production cost, improve products' quality, and diversify their commodities.
On the other hand, China's dynamic development also brings about a great opportunity to the economic development of Viet Nam. At present, China is one of top trading partners of Viet Nam: two-way trade rapidly increased, reaching in US$ 7.2 billion in 2004. In terms of FDI, China now ranks the 15th among countries and territories investing in Viet Nam. Therefore, we attach great importance to enhancing cooperation between the two countries in commensurate with the potential and favourable conditions of the two sides. In the relationship with China, apart from bilateral ties we also strengthen multilateral relations within the framework of ASEAN-China Free Trade Area, which is now being strongly promoted. Vietnam will bring into full play its role as a gateway and bridge for trading activities between ASEAN and China.
Apart from economic field, the friendship and cooperation between Viet Nam and China are also developed at both the governmental and local levels, especially the people-to-people exchanges.
Question: What are your views on accession to the WTO and its impact on trade and competitiveness? What progress has been made towards eliminating subsidies? And how do you qualify the growth premium attached to being a member of the the WTO and having better access to global markets as against the inevitable dying out of uncompetitive industries?
Vietnam's negotiations for WTO's accession started 10 years ago. We have taken active steps to accelerate negotiations, both bilaterally and multilaterally.
Vietnam accepts almost all WTO's multilateral commitments on its accession, for example the commitment to remove agricultural subsidy (except items that developing countries are permitted by WTO), eliminate double-price regime for many products like electricity and, water, etc. Vietnam has concluded bilateral agreements with some partners, including the EU, and is expected to conclude negotiations with other partners at the earliest time. To early conclude negotiations with commitments in accordance with WTOs rules, we hope that other partners will show their good-will and understand the Vietnamese situation as a transitional economy with low development level.
During the past years, Vietnam has always attained a 7-8% economic growth rate, and a 15-20% growth in trade annually. We hope that, with our accession to the WTO, Vietnam's reform and economic development will have new resources and opportunities, so as to increase the pace and quality of socio-economic development. Moreover, we understand that opportunities are always coupled with challenges, especially when facing fierce competition some enterprises cannot survive. This could lead to an increase in the rich-poor gap and unemployment, as well as the migration from rural to urban areas. For this, besides negotiating for WTO's accession, we have adopted active measures to reform and restructure our economy.
While generating favourable conditions and environment for private economic sector and attracting foreign investment, we are also accelerating the process of state-owned enterprises equitization. State-owned enterprises will be subject to equal treatment with other economic sectors. During the reform, state-own enterprises have reduced from 12,000 to 4,000; the equitization programme will be carried out for 2,000 enterprises this year and will be continued in the following years.
Vietnam pays special attention to the review and removal of laws and regulations that are not in conformity with international commitments and is in the process of making new laws to create a level playing field for both domestic and foreign investors and enterprises.
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