June 13, 2015
– Policymakers have enough cogent arguments for the unprecedented economic integration process currently unfolding in Vietnam. However, albeit in full support of such a process, economists have equally sound reasons for worrying about the poor health of local enterprises and the economy.
In a short break during the Spring Economic Forum held in the northern province of Nghe An in April, Deputy Minister of Industry and Trade Tran Quoc Khanh, who serves as Vietnam’s chief negotiator in Trans-Pacific Partnership (TPP) talks, approached economist Pham Chi Lan and asked, “Why do you criticize integration so strongly?” What worried Khanh was that the public may have a negative outlook on integration through the view of experts like Lan. Lan said she is not against integration but she is still greatly concerned.
Optimism
“I’m highly optimistic and confident. If integration does not benefit us, what are negotiations for?” Khanh said when being posed with questions about the TPP at an interview with the Government portal in March. At the Spring Economic Forum, Khanh was invited to talk twice about the TPP before legislators and the specialist circle.
There is no doubt about what Vietnam could benefit from the TPP when it comes to her market structure and, on a larger scale, geopolitics. “By participating in free trade agreements (FTAs), especially the TPP, we have a chance to restructure export and import and avoid depending too much on a single market,” Khanh said during the interview by the Government portal.
That “single market” as referred to discreetly by Khanh is not difficult to identify. Vietnam has run ever-growing trade deficit with China over the past 14 years, said director of the Vietnam Institute of Economics Tran Dinh Thien.
Data of the General Statistics Office show that trade deficit with China amounted to nearly US$29 billion last year, way above the already high mark of nearly US$24 billion a year earlier, and over US$16 billion in 2012. However, this is just the tip of the iceberg, Thien warned.
He cited date of China’s national bureau of statistics which said that China exported US$63.8 billion worth of products to Vietnam last year, nearly US$20 billion higher than the figure of US$43.9 billion Vietnam announced. What’s more, there are engineering-procurement-construction (EPC) contracts in large-scale infrastructure projects and the balance of trade tilts sharply toward China.
Khanh said 70% of Vietnam’s import value was from East Asia and the region accounted for 50% of Vietnam’s export value. “As a result, fluctuations, if any, will have adversely affect Vietnam, so we need to rebalance the market,” he said.
“Many are concerned that we have not prepared well enough for deep integration. I think we should not be worried so much, as every of our petitions and expectations is included in the TPP,” Khanh tried to convince lawmakers in his very rare public appearance.
As briefly explained by Khanh, current concerns such as government procurement, anti-corruption and reforms at State-owned enterprises are all stipulated in the TPP. The agricultural sector will also benefit when import tariffs are lowered to 0%. “Given advantages of climate and soil, I believe we won’t lose in this sector,” Khanh said.
“So should we worry about competition? We think such worries are unnecessary. If enterprises fail to compete, they will go bankrupt, which is the nature of the economy. I don’t worry about this at all,” he added.
Concerns over businesses
“Twenty years after the ASEAN membership, we are still in the CVML group (Cambodia, Vietnam, Myanmar and Laos), the least developing countries in the region, which still beg for extra incentives and assistance. This is unreasonable for a country with development potential like Vietnam. We have yet to be on a par with other ASEAN countries, let alone economic powerhouses such as the U.S. and EU when joining the TPP and the EVFTA?” Pham Chi Lan said after Khanh’s speech.
As a close companion to enterprises, Lan is well aware of the difficulties the Vietnamese business community has been facing. “The most worrisome problem is how to revive domestic enterprises, both private and State-owned ones. With State-owned enterprises, we need to restructure them but haven’t done it well so far. Meanwhile, private enterprises are regarded as the growth engine but still being discriminated,” she said.
According to the Vietnam Chamber of Commerce and Industry (VCCI), private enterprises which are of micro, small and medium sizes make up nearly 98% of the total number of enterprises in Vietnam. The private business sector, reported the Ministry of Planning and Investment, accounts for only one fourth of total outstanding loans of the economy. The difficult situation of private enterprises is also mirrored in many other surveys.
A research conducted by the Central Institute for Economic Management (CIEM) in 2011 shows that up to 95% of the 2,500 enterprises in 10 localities were of micro scale. The rate was practically unchanged last year.
Also concerned about the health of enterprises, CIEM director Nguyen Dinh Cung said, “While the situation of enterprises is that bleak, more competition is about to come. I wonder if integration commitments will open up opportunities for small and medium enterprises or only create chances for foreign investments in Vietnam.”
Regardless of such concerns of experts, Deputy Minister Khanh still maintained his optimism. He said most enterprises are on his side and the Government. Khanh said he hopes TPP talks would be concluded this year. According to VCCI, 66% of Vietnamese enterprises are strongly in favor of the TPP.
(The Sun Daily)