No protection for businesses in WTO

The WTO membership brings big advantages to Vietnam, including the exports increases and higher foreign investment. However, for many industries it also means big difficulties.

Big advantages, bigger difficulties

Nguyen Nhu Khue, Director of Lotus Chemical, which specializes in making plastic packages for export said: “the WTO membership brings nearly no advantages to the plastics export”.

“Before we joined WTO, plastics exports were not controlled by quotas. The tariffs applied by main export markets like the EU or the US on Vietnam’s plastics were not high. Therefore, the benefits the WTO membership brings to plastic industry is not clear,” he said.

The same situation can be observed in the wooden furniture and footwear industries. Especially, the footwear industry has been facing large difficulties, since Vietnam now is no longer eligible for the EU’s GSP (Generalised System of Preferences) and Vietnamese leather capped shoes are subject to anti-dumping tax.

Diep Thanh Kiet, Deputy Chairman of the HCM City Knitting, Embroidery and Textile Association, noted that though garment companies are no longer under the quota scheme, they are facing a lot of challenges. Vietnam has to gradually remove the tariff-based local production mechanism, while the Government cannot provide any kind of support to enterprises.

Especially, electronics prove to meet the biggest difficulties since Vietnam joined WTO. Le Van Chinh, Chair of Son Ca Corporation, said that Son Ca had stopped its productionand now focuses on making software products. Other companies in the same fields have shut down their factories and shifted to trade. Some companies have shifted to investing in the real estate sector.

In fact, the WTO membership can bring big opportunities to Vietnam’s electronic industry, but only to multinational groups which have production bases in Vietnam.

Nguyen Van Dao, Deputy General Director of Samsung Vina, said that one year after opening the mobile phone factory in Bac Ninh province, the biggest in the world, Samsung Group has decided to set up a complex of 5-6 big factories in Vietnam, which will not only make mobile phones, but also laptops, printinters and digital cameras.

Businesses require long term vision in the WTO period

Observers believe that the decline of domestic electronic enterprises is the result of a wrong development strategy of the last many years. Instead of encouraging Vietnamese enterprises to join the global value chain, Vietnam encouraged the production of partsby applying a local protection policy. The country offered tax incentives to the enterprises which had high locally made content ratio.

The policy did not help develop the supporting industries, while it encouraged businesses’ short-sightedness. ”. They only invested small sums of money to set up factories with simple assembling lines which allowed them to take full advantage of the preferential tariff. As the result, now when Vietnam joined WTO and the preferences were removed, the enterprises have to import products to sell domestically instead of maintaining their production.

Dao from Samsung Vietnam said that one should think that the biggest advantage that WTO can bring is to help Vietnam join the global value chain.

He said that in the age of globalization, multinational groups always have to think carefully about where they should set up production bases. Therefore, it is understandable why Sony or Toshiba have left Vietnam and chosen Malaysia, Indonesia and Thailand. Meanwhile, other big groups, including Samsung, Canon or Intel have chosen Vietnam

The enterprises in Vietnam have the right to focus on making some products, while they can import others .

“Previously, we produced and exported TVs and computer screens. However, we have decided to focus on making TVs only, “Dao said – Thoi bao Kinh te Saigon