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Last Updated: Tuesday, 7 November 2006, 16:48 GMT
Vietnam faces up to free trade future
Fruit vendor walks past imported clothes shop in Hanoi
Signs of globalisation are everywhere in Hanoi

After nearly 12 years of negotiations, Vietnam has finally been invited to join the World Trade Organization (WTO).

But what it will actually mean for the country? Our Vietnam reporter, Bill Hayton, investigates.

The leader of Vietnam's Farmers' Union, Vu Ngoc Ky, has published hundreds of poems. On the day I interviewed him, he had just finished another, written in honour of his staff.

In it, he calls on farmers to make the country rich, so it can catch up with the rest of the world.

This is the dominant feeling among Vietnamese officials and business people: that war and economic sanctions held the country back for half a century and now it's time to catch up with the Asian tigers.

[WTO entry] will help the reformers in government to overcome pressures from some small special interest groups
Jonathan Pincus, UNDP

That is why they want to join the WTO.

But unusually for a senior Vietnamese official, Vu Ngoc Ky is candid about the downside.

He says a third of the country's farmers could lose their jobs as a result of modernisation and competition from imports.

"At the moment, we have 32 million rural labourers, and we can say about 10 million of them are underemployed," he says.

"So the most important thing now is to provide training for them so they have better skills, which will satisfy the requirements of the service industries."

Export boost

Some farmers - particularly rice exporters - should gain from WTO membership. But livestock farmers will face tough competition from Europe, the US and Australia - and few are well-prepared.

Nguyen Duc Tu herds cattle a few minutes walk from the international convention centre, which will host the Asia-Pacific summit next week.

"I've heard about the WTO, but I think that it's government business and I'm just a farmer," he says.

Vietnamese farmer Nguyen Duc Tu
Nguyen Duc Tu expects little change to his way of life

"I just do my job. I don't think I'll be affected, but I believe that international integration will bring benefits for farmers."

Vietnam's largest manufacturing export earner is the garment sector, but WTO membership will make little immediate difference to most companies.

That is because they already enjoy easy access to the markets of the United States and European Union, as a result of market access agreements which Vietnam signed with the US in 2000 and the EU in 2004.

Since then, the country's annual exports have rocketed - to about $8bnb (4.2bn) to the US and $7bn to the EU.

It is evidence that the country should be able to capitalise on the opportunities joining the WTO offers, according to Jonathan Pincus, chief economist of the United Nations Development Programme in Vietnam.

"Vietnam has to be a very competitive exporter in a wide range of commodities, including textiles and garments, shoes, also in electronics, but primarily in agricultural commodities," he says.


Joining WTO will not open major new markets for Vietnam, but it will provide protection against those markets being suddenly closed.

And that should give foreign companies more confidence when deciding whether to invest in Vietnam.

But despite the efforts and commitments made to join the WTO, many companies are finding that Vietnam's bureaucracy is stifling investment.

Haberdashery shop in Hanoi's old town
The garment sector is a strong earner for Vietnam

The British government minister Nigel Griffiths recently visited Hanoi and lobbied local officials on the issue.

All of Vietnam's efforts to join the WTO "will count for nothing if they don't make sure it is easy and quick for companies to get a licence and expand in Vietnam", he told BBC News during his visit.

"The companies that I've been speaking to are itching to expand in Vietnam to employ more people and the only thing that's holding them back is the need for that proper legislation and licensing."

Many of those obstructions are simply ways to protect home-grown companies against competition.

For example, a Thai businessman interviewed by the BBC said he was told by a Vietnamese customs official that he could not import his motorbike parts because they were "too cheap", even though they were being sold for the same price as in Thailand.

The businessman said he believed the official was acting to protect a Vietnamese company that did not want to compete with cheaper imports.

Service gap

Jonathan Pincus argues that WTO membership will strengthen the arguments of those politicians who want to take on some of the country's vested interests and have a more transparent economic system.

Jonathan Pincus, UNDP chief economist in Vietnam
Jonathan Pincus sees change afoot in Vietnam

"WTO membership will anchor reforms that have been made or that are now being made," he says.

"It will help the reformers in government to overcome pressures from some small special interest groups, particularly industrial groups in state-owned enterprises that have been enjoying protection."

At the same time, Vietnam's leaders want to build up state-owned companies in strategic sectors which will do the bidding of the Communist Party.

Many such companies already exist, but Vietnam is particularly weak in the service sector, according to Jonathan Pincus.

"Vietnam is not terribly competitive in services and foreign producers of services," he says.

"Financial services, business services, health education and particularly retail will come and change this market very rapidly."


That will mean opportunities for Western businesses and a chance to reduce Vietnam's large trade surplus with the EU and US.

Mai Anh, shopkeeper in Hanoi
Mai Anh fears competition from supermarkets

But it will be a worry to people like Mai Anh, who owns a shop in the old quarter of Hanoi and fears that foreign-owned supermarkets will damage her business.

"I think WTO will affect my business a bit because supermarkets will be cheaper than my shop.

"People will prefer to go there rather than to a small shop like mine," she says.

Vietnam is already changing fast, but WTO membership will speed up the pace.

Much of the progress will be welcomed by a population anxious to have a better life. But for many, particularly in traditional industries, the next few years will be a time of uncertainty.

For the winners, perhaps the words of Dr Ky's latest poem express it best: "Spring comes with many expectations, roses are fresh and we advance on tomorrow."

WTO's director-general on Vietnam's admission

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