Acceding the WTO and Trade-related Problems of Binh Duong province

Transcription

1 Acceding the WTO and Trade-related Problems of Binh Duong province Ladies and Gentlemen, On behalf of Binh Duong Party Commission, People s Committee, and the entire people of Binh Duong province, I would like to send you the best wishes. I wish all of you good health, happiness and success. I hope that your research, discussions and paper presented here will be solutions for our country to successfully participate into the integration process. My paper presented here will deal with the following issues: 1. Overview of Development of Binh Duong Province Binh Duong province was re-established on January 1st, 1997, which was split from the former Song Be province, a key economic region of the South with a total natural land area of 2,695 square kilometers. Binh Duong is adjacent to Binh Phuoc province in the North, Tay Ninh province in the West, Dong Nai province in the East, and Hochiminh city in the South. The province has a population of 767,946 people, with a density of 286 persons/ sq. km. Administratively, the province has 1 town and 6 districts, with 66 villages and 13 wards/ townlets. In spite of difficulties of the country in general and of a newly-established province in particular, the local government and people of Binh Duong province have - by their flexibility, creativity, heredity, and by taking advantages of the economic achievements gained by Song Be province and geographical and land opportunities... - have built Binh Duong to become one of the most attractive provinces for foreign investment inducement, and the most dynamic for economic development. In the period, the total industrial production value of Binh Duong province rose by 39.3%, its agricultural production value - by 8.6%, services value - by 14.3%, export turnover - by 24.5%, budget revenues - by 21.15% and income per capita - by 10.9%. Industry has been selected the key sector for economic development of the province. Rapid and positive changes have been made in its GDP structure in the direction of industrialization. The average industrial growth rate was 39.3% per year. In 2002, its GDP structure was as follows: Industry %; Services %; and Agriculture %. The province also witnessed strong developments of all economic sectors, especially the private and FDI sectors. The technical infrastructure of the province has been developed in a relative uniform. Priorities have been given to the development of industrial zones and clusters of industrial zones. Binh Duong has built and brought into operation 9, out of 13 planned zones, with a total area of 1,600 ha, to have been planned. At present, there are 435 projects in industrial zones (in which, 316 are FDI projects with a total registered capital of 395 million USD, and 119 domestic enterprises with a total capital of 1,641 billion VND). These projects have generated jobs for over 28,000 people. Trade and services sectors also developed with a relatively high growth rate, about 13.1% in the period. Export turnover grew by 21.4% per year and recorded 958,23 million USD in 2002, of which the total industrial products accounted for nearly 72.9%, and rose by 36% per

2 annum. Import turnover grew by 27.9% per year and recorded 1,045.6 million USD in 2002; the majority of imported goods were machines and equipment for production and technological transfer. The province s agriculture and rural areas - which occupy 65% of its total labour and 67.5% of total population - have gradually developed and had positive changes in the structure of cultivated plants and animals in the direction of developing a commodity economy, focussing on the development of long-term and short-term industrial crops, which as a result had remarkable contributions to improving the socio-economic situation of the rural areas. The value of agricultural production grew by 8.6% per year (of which animal breeding rose by 12.7%). The model of farm production has been established and developed with a view to developing a commodity production and applying scientific and technical achievements for having new breeds. Household animal breeding has also developed to a larger extent. The rapid socio-economic developments have had important contributions to improving the living conditions of a larger part of people in Binh Duong province. The rate of hunger and poverty went down from 12.2% in 1997 to 1.8% in 2002, and birthrate went down to 1.48%. All these helped increase the income per-capita, from 6.8 million VND in 1997 to 9,979 million VND in 2002 (that is, an average growth rate of 10.9% per year). The spiritual life of the people has also been improved. In short, the developed socio-economic situation, improved living conditions, high percentage of people using durable and expensive goods, over 75% and 92.3% of the population provided with clean water and electricity, and more attention paid on environment protection... are evidences to strongly prove that these economic developments in the province are results of the correct policies on renovation by the State and Party, the creativity and dynamics of the People's Committee and people of the province, actively contributing to economic restructuring and labour restructuring. Therefore, the living conditions of the people have been gradually improved. 2. Requirements and commitments relating to trade: a/ With respect to AFTA: Since after the establishment of relations between Vietnam and international financial organizations, such as the IMF and the WB, in 1992 Vietnam applied for joining ASEAN. On July 25, 1995, Vietnam became a full member of ASEAN, and since January 1st 1996 it started to participate into ASEAN free trade area (AFTA), an important task of which is to complete tariff reduction by 2006 (from 0% - 5%). By joining AFTA and implementing the process of tariff reduction, Vietnam's products can enjoy tariff preferences when they are exported to other ASEAN member countries, and thus, enterprises engaging in import-export business can increase their income. In addition, this process will create indirect impacts the savings power of the consumers, which in turn can help expand production, especially that of the private sector, and increase tax revenues. So far Vietnam has cut down the tariff rates of 5,500 goods items, accounting for nearly 85% of the total items in the current import-export tariff schedule. This year, Vietnam planned to add other 760 tax lines into the Inclusion List, the tariff rates of which will be reduced, from 40-50% to 15-20%.

3 In addition, according to commitments made by leaders of the 4 new ASEAN member countries, Vietnam, Laos, Cambodia and Myanmar will strive to achieve the target of tariff reduction, to 0-5%, by 2005, that is one year earlier than the schedule. Following these commitments, the process of tariff reduction, concerning items which are subject to tariff reduction by 2002, will be further promoted. This process of tariff reduction has not created direct impacts on Vietnam - ASEAN trade. The most obvious advantage of Vietnam, when participating into CEPT, is that ASEAN has become one of Vietnam's major export markets for such products as crude oil, rice, rubber, tea, maize, cashew nuts, vegetables, aquatic products, steel, wood, coal, leather, fine-art handicrafts..., along with other potential markets (EU, Japan and the US...). Large reductions of tariffs are mainly imposed on processed industrial goods which are highly protected, and have not strongly entered the ASEAN market, for instance, household appliances, garments and textiles, and electronics... BinhDuong's turnover of export to ASEAN countries in 2001 amounted to million USD, while its turnover of import was million USD. In 2002, the respective figures were million USD and million USD. Thus, with the current export structure, the profits that Vietnam can earn from AFTA process are not very significant. If changes in the export structure of Vietnam in general and of Binh Duong in particular can be made in the direction of rapidly increasing the ratio of processed industrial goods, the process of tariff reduction will then become a stimulant for export-oriented enterprises. However, the competitiveness of Binh Duong's products is, in general, still poor in quality and patterns, as compared with ASEAN countries, even when they are highly protected. Only some of Binh Duong's products that have comparative advantages can compete with ASEAN ones. So, it can be concluded that the tariff reduction process will not much help enhance the competitiveness of Vietnam's products in general and Binh Duong's in particular. The only benefit AFTA can create for Vietnam is perhaps a decrease in the production cost, thanks to lower prices of input materials imported by Vietnam from ASEAN countries. b) With respect to Vietnam - US Trade Agreement This is an Agreement negotiated/ made by Vietnam and the US basing on WTO principles, a bilateral Agreement, yet having multilateral characters and impacts that require Vietnam to improve its socio-economic environment for economic integration into the region and the world, enhance the attractiveness of the investment environment and, therefrom, create favorable conditions for Vietnam to access to the WTO. Vietnam's major trade-related commitments made in the Agreement are mainly in four areas: trading of goods, services, investments and intellectual properties. According to the Agreement, Vietnam will reduce, within 3 years, the tariff rates of 250 items, for example, air-conditioners, cosmetics, refrigerators, washing machines, mechanical products, mobile phones, foodstuffs, agricultural products... and will reserve the same tariff rates of 20 other items, such as wheat flour, corn, soybean, engines, and automobiles... Although the number of items Vietnam commited to reduce or not to increase their tariffs accounted for only 4% of the total items

4 in Vietnam's Tariff Schedule, the reduction of tariff rates toward the US products will also be provided to countries that have signed MFN provisions in their trade relations with Vietnam. On non-tariff preferences: On the basis of the WTO principles, Vietnam commited to eliminate all non-tariff barriers within 2 to 10 years, since the coming into effect of the Agreement, regarding import quotas, export quotas, State monopolies in issuing import license, and customs fees... In fact, Vietnam has promoted this implementation process. The Prime Minister of Vietnam has signed a Decision, according to which only 2 groups of items remain to be subject to quota restrictions, i.e. petrol and sugar, since January 1st, Import licenses, which are now imposed on other items, will be either eliminated or shifted to other forms of management that will be more flexible and consistent to world conventions. Also according to these commitments, the US will apply No.2 tariff range toward export products, which will be reduced from 40% to 3%. While the US is applying tariff reduction toward products of WTO member countries, it will also consider applying tariff reduction for Vietnamese goods, though Vietnam has not become a WTO member. The US also provided Vietnam with GSP conditions (with a zero tariff rate for 4284 items). This is in fact a new opportunity for Vietnam's products to enter the US market. However, it does not mean all 4,284 goods items in the Inclusion List will enjoy an import tariff rate of 0%. Textile and garments, and footwear, for example, will not enjoy GSP conditions. Since the coming into effect of the Agreement, the export-import value of Binh Duong to and from the US market has been considerably increasing, which can be seen from the following figures: In 2001, Binh Duong's export value to the US market amounted to million USD, while its import value was million USD. In 2002, the respective figures were million USD and million USD. In terms of investments: By December 31, 2002, 16 US projects were invested in Binh Duong province with a total registered capital of million USD, accounting for 5.44% of total project number and 8.95% of total investment capital in Binh Duong. An advantage of Vietnam in general and Binh Duong in particular is textile and garments, the export of which to the US market is now enjoying MFN conditions, yet will face with the US quota system (which will be negotiated by the two countries in the future). This quota system will become a big obstacle in 2005, when the US removes all quotas imposed on textile and garments for WTO member countries, according to ATC regulations, while Vietnam is still not an official member of the WTO. c. With respect to the WTO: * WTO requirements, concerning trade and tourism industries: - WTO operates on the basis of 5 major principles: non-discrimination, trade liberalization, predictability, creation of a level competitive environment, and preferences provided to developing countries. Like trade activities between Vietnam and the US, WTO regulations on the trading of goods, investments, services and intellectual property and other Agreements are fixed and permanent commitments. WTO agreements are multilateral, including commitments made by countries in order

5 to become WTO members. In order to become a WTO member, Vietnam must open its market for goods and services from WTO member countries to flow in, and commit to obey international trade principles, improve its legal and investment environments Opportunities and challenges of international integration in the framework of the WTO Opportunities: Vietnam will have opportunities to: - Continue to improving its legal system, financial and credit policies in order to create an attractive investment environment. - Develop a healthy and equal economy, with the participation of all economic sectors. - Induce foreign investments in terms of technological capital and management skills. - Create a competition, which requires domestic enterprises to invest to enhance their production capacity, enjoy benefits through fast-track tariff reduction process in labour-intensive products which are advantages of Vietnam. - Satisfy diverse demands of the consumers. - Expand its export markets, thanks to tariff reduction and other preferences provided by the WTO for developing countries. Challenges: - Poor management skills, low competitiveness of products, inconsistent policies on foreign investment, with many overlapped regulations, and poor effectiveness of laws and policies. - Bulky management apparatus, very complicated administrative procedures. - Regulations of the legal forms of foreign investments are not diverse and thus, unable to meet requirements for expanding forms of FDI inducement. - Existence of the dual price system. - Investments for infrastructure and human development, management skills and production capacity of enterprises have not yet kept up with economic growth rates and other social requirements. 4. Integration in the framework of the WTO and strategy of the trade sector a. Reorganization of enterprises - To consider dissolving non-profitable enterprises and semi-state small enterprises. To continue the process of equitization in the direction of enhancing the efficiency of enterprises of all economic sectors and mobilizing to the maximum all the domestic sources for industrialization and modernization. b. To intensify investments to enhance production capacity and competitiveness of export-oriented products

6 To promote marketing and trade promotion activities, such as sales promotion, advertisements, trade fairs and exhibitions with a view to firmly maintaining and gradually expanding markets, internally and externally. To consistently carry out the strategy on export-oriented economic development, establish specialized production zones, and develop industrial zones. To strengthen the application of scientific and technological achievements into production, encourage enterprises to step up their process of fixed assets depreciation. To assist enterprises of all economic sectors to upgrade their technologies, apply advanced systems of quality and environment management, renovate the system of human resource management in order to enhance enterprises' production capacity and competitiveness in the market. c. To promote the process of economic restructuring: Changes must be made in the exportoriented production structure to diversify major products of the province, for example: rubber, cashew nuts, pepper, ceramics, fine-art handicrafts, sculptures, garments, footwear and electronic components... In addition, it is necessary to pay attention to technological investments in order to improve product quality and reduce production costs, maintain export markets, and gradually seize markets with stable and direct demands, such as China, Europe and the USA... d. To take measures for market expansion: Along with export activities, enterprises must strive to seize the domestic market. To this end, Binh Duong has paid attention to improving, building new markets, trade centers and show-rooms in the province, building supermarkets in rural areas to introduce foreign and domestic consumers with the province's products so that they can buy products and/or sign contracts of goods purchasing. To establish and invest in regions that can supply materials and buy agricultural products which are of high insurance value, especially in specialized production regions. e. To continue improving the investment environment: In order to enhance the attractiveness for domestic and foreign investments, especially for export-oriented production, it is necessary to keep regular contacts and dialogues with enterprises in order to timely dismantle, within the provincial framework, all difficulties and barriers faced by enterprises, and submit the Government and Ministries proposals to adjust regulations to meet requirements of an open economy, which must be in accordance with principles of international and regional organizations Vietnam has committed to join with a view to creating favorable legal conditions for the operation of the enterprises. f. Human resource training To strengthen human resource training, including high-tech professional skills. To improve the quality of vocational training so that the trained labour force is capable of accessing and absorbing modern technical means and technologies in order to create a reasonable labour structure for industrialization and modernization. To develop vocational training in connection with economic and residential regions and the labour market in the province.

7 To carry out policies to encourage all economic sectors to participate into vocational training and create favorable training conditions for the working people. To diversity forms of vocational training. 5. Suggestions to the State for improving the legal environment: 1. To reconsider the system of laws in order to adjust regulations which are unsuitable or unclear: The Trade Law should be adjusted to respond to WTO regulations; the Law on Foreign Investment should be added with some provisions to strengthen the principle of national treatment, in such aspects as trade-related investment measures, services. The Law on domestic investment encouragement should have specific regulations on areas of investment encouragement. The two Laws on investment should be merged into one general law - Law on Investment Encouragement. 2. To issue new legal documents in order to adjust/deal with the newly-generated international and national economic relations, for instance, documents on MFN and NT systems, Law on competition and anti-monopoly Law, anti-dumping and anti-subsidy Law, and Law on emergency safeguarding. To adjust or issue other by-law documents so as to flexibly solve problems concerning the businesses that are increasingly important yet do not have a proper legal framework, for instance, services business, cross-border and coastal trade, and temporary import - re-export business. 3. To keep carrying out policies that encourage all economic sectors to engage in importexport business, in which the State sector plays the leading role. To reduce and then eliminate the state of monopoly, expand import-export activities, create conditions and encourage the non-state sector to engage in import-export activities, support small and medium enterprises, provide enterprises with fair conditions to access to input sources (capital, credit, land and labour), to establish economic cooperation relations with enterprises, especially small and medium enterprises. To gradually reduce and forward to eliminate all import restrictions. 4. The State should work out policies that encourage enterprises to renovate their technologies and improve management skills, promote to the maximum their comparative advantages, improve product quality and reduce production costs and services so that they can catch up with rapid changes of the world market, and create key products that can occupy larger market shares in both the domestic and world markets. 5. To work out policies that provide consulting services on international trade laws, and international businesses to enterprises in their process of market infiltration and expansion. 6. The State should intensify the dissemination of knowledge and information on international integration; and enterprises should actively seek to take advantage of opportunities and overcome challenges that are the results of the integration process. Thank you very much for your attention. Great success to our Seminar!