Vietnam One Year After Entry into WTOSteve Parker, Chief Economic Advisor, STAR-Vietnam January 11, 2008: Vietnam One Year After Entry into WTO Steve Parker, Chief Economic Advisor, STAR-Vietnam January 11, 2008


What is STAR-Vietnam: What is STAR-Vietnam TA for Implementation of U.S.-Vietnam Bilateral Trade Agreement and WTO + + since 2001 First major USAID-funded program in Vietnam Designed to respond to needs of counterparts in implementing BTA/WTO (Demand Driven) Supervised by a Government Steering Committee and USAID Assigned to work with 47 counterparts Support not only liberalization of trade and investment, but also systematic advances in the rule-of-law, transparency, governance and protection of property rights


WTO Implications: WTO Implications Faster liberalization and more level playing field Faster transition to a market, rule-based economy Predictability and transparency Better socio-economic development through more trade, investment, jobs and less poverty


Highlights of Economic Performance in 2007: Highlights of Economic Performance in 2007 GDP Growth: 8.44% (US$833/person) Exports: US$48.4 Bil. (22% YoY Growth) Imports: US$60.6 Bil. (35% YoY growth) FDI registered: US$20.3 Bil. (70% growth) Poor household: 14.87% Inflation (12.6%) Infrastructure Gap Implementation Gap Competitiveness Sustainability and Quality of Growth


SHARES OF KEY EXPORTS: SHARES OF KEY EXPORTS Emergence of manufactures and decline of primary products


Slide8: Equipment and materials dominates. Some comsumer goods are on the rise (cars, clothing etc.)


Slide10: Overall exports to U.S. grew at about 20% in 2007. Exports of primary products declined by 4% largely due to a 33% decline in petroleum exports. Clothing exports posted a 28% growth – 10% increase from 2006’s.


Exports of Non-clothing manufacturing exports (US$ Million): Exports of Non-clothing manufacturing exports (US$ Million) Emergence of electronics which posted a 40% increase over 2006. Footwear export growth decelerated to 9% from 33% growth in 2006. Furniture had a strong growth of 37%.


Growth of U.S. Exports to Vietnam (%): Growth of U.S. Exports to Vietnam (%)


Slide13: Strong Interest of foreign investors after WTO


Increase of private investment after WTO: Investment composition by ownership (%) Increase of private investment after WTO


Challenges and Risk: Challenges and Risk Infrastructure gap: Quantity and quality Quality and equality in growth (who gets what – winners and losers, growth & environment etc.) Implementation gap: WTO maters both in law and practice Massive legal reforms (100+ new laws and regs) Strong commitment with concrete action plans New and different institutions needed to bring WTO related reforms to benefit investors and people Role of the Government: Regulator? Owner? Player? Low cost and low risk regulatory regime for businesses and people More exposure to external risks (e.g., oil shock, subprime mortgage etc.)


Managing Challenges and Risk: Managing Challenges and Risk WTO as floor not ceiling to handicap growth and liberalization New culture and incentive for more effective government/regulators (from control to service) Administrative and regulatory reform (Korea) Judicial reforms (Singapore) Free access to information to reduce risk – information remain a scarcity here (Law on Laws, Law on Access to information) Independence/separation of regulatorship, ownership and playership of the Government New tools and more information needed to manage more open economy with much more international interaction Development of human capital