Copyright 2005 The Financial Times Limited
Financial Times (London, England)

July 15, 2005 Friday
London Edition 1

SECTION: ASIA-PACIFIC; Pg. 9

LENGTH: 740 words

HEADLINE: Pressure for jobs puts Vietnam in a hurry to join the WTO FT INTERVIEW VU KHOAN:

BYLINE: By AMY KAZMIN and VICTOR MALLET

DATELINE: HANOI

BODY:


Foreign investors in Vietnam have long complained about the painful slowness with which the Communist-led bureaucracy implements economic reforms. When it comes to joining the World Trade Organisation, however, Vietnam is a nation in a hurry.

Vu Khoan, deputy prime minister and top trade negotiator, said yesterday that Vietnam still aimed to accede to the WTO in Hong Kong in December. Many business people doubt that Hanoi can meet that target, mainly because Vietnam and the US have yet to resolve their differences over the opening of the Vietnamese services sector.

But Mr Khoan, a member of the Vietnamese Communist party's central committee, believes Vietnam has little choice but to join the WTO, given that its total trade is equivalent to more than 100 per cent of its modest Dollars 50bn (Euros 41bn, Pounds 28bn) gross domestic product.

"We can't develop without the world market," he said in an interview with the Financial Times. "The level of (trade) dependence of our economy is even greater than for Singapore or Hong Kong."

Vietnam's economy, although overshadowed by the success of neighbouring China, has grown at about 7 per cent a year for the past five years. As a net exporter of oil, it has not been as badly affected as its south- east Asian neighbours by the surge in world oil prices to Dollars 60 a barrel.

Yet Mr Khoan and his fellow ministers are keenly aware that continued Communist party rule depends on high economic growth to generate jobs for the 1.5m young people joining the workforce each year.

With half the population of 85m under 30 years old, few Vietnamese give much thought to the Communist military triumphs over the French and US armed forces between the 1950s and 1970s. Young Vietnamese aspire to mobile phones, motor cycles and foreign holidays.

The government's response to such pressures includes cautious political reforms: among other signs of a more open political system, National Assembly members are allowed to grill government ministers in televised debates.

Above all, Vietnam wants to strengthen ties with its main trading partners, including China and the US, and secure its place in the international trading system. WTO membership is expected to help Vietnam maintain economic momentum by speeding the introduction of modern laws governing business and finance.

The National Assembly, most of whose members still owe their positions to the Communist party, has begun processing the necessary legislation for WTO entry and is primed to complete the work by the end of the year.

Yet Vietnam, a latecomer to the WTO, faces some demands - to open its state-dominated telecommunications and banking sectors, for example - that go well beyond what is required of existing members, many of them richer than Vietnam.

The country is a competitive exporter of rice, coffee, seafood and textiles, but Vietnamese officials fear that unrestrained foreign competition in industry and services would cause thousands of job losses at inefficient state-owned industries.

Analysts say Vietnam lacks the economic clout of China, which entered the WTO four years ago. "People don't really care about Vietnam but they cared about China," said one foreign businessman in Hanoi. A western diplomat said the Vietnamese were in an unenviable position "because Vietnam needs the WTO more than the WTO needs Vietnam".

Even if membership is delayed until next year, the chances are that Vietnam's desire for access to foreign markets and capital will oblige it to make concessions to secure entry, leaving Mr Khoan and his government colleagues to deal with the political fallout.

Mr Khoan made clear he thought the pain would be worth it. "We are mindful that if Vietnamese enterprises can get through the competition, they will get stronger," he said.

While the priority this year is WTO entry, the government continues the slow business of closing state-owned businesses or preparing them for partial privatisation. Vietcombank, the best-managed of the four big state commercial banks, is planning to sell some of its equity to a foreign partner.

Bolstered by a credit rating upgrade from Moody's a week ago, the government also continues to harbour an ambition to issue a sovereign bond to finance infrastructure. As in many developing countries, Vietnam's problem is not just a shortage of money but an inability to absorb the money it does have - including Dollars 2bn a year in foreign aid - on viable projects.

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