On Jan. 11 Vietnam officially became the 150th member of the World Trade Organization (WTO), marking a new era in terms of trade and investment for one of the fastest-growing economies in Asia.
The simple ceremony of admitting Vietnam took place at WTO headquarters in Geneva, Switzerland at 3 p.m., Hanoi time, or 9 a.m., Geneva time. The Vietnamese Ambassador to the WTO, Ngo Quang Xuan, members of the Vietnamese delegation, and the WTO Secretariat attended the ceremony.
Outside the WTO headquarters, a giant blue banner read: "Welcome, Bienvenue, Bienvenido, Vietnam," this was certainly a first for the WTO.
Vietnam technically became a member of the largest world trade organization on Nov. 7, 2006 when the body approved Vietnam's application. The documents were ratified afterward by the National Assembly of Vietnam. Vietnam became an official member 30 days after it formally notified the WTO institution of the vote.
As a WTO member, Vietnam will be required to cut tariffs and open quite a few sectors of its economy to foreign investors.
Right after becoming a full member of the WTO, a lot of commitments Vietnam has made for joining the WTO will become effective. According to the Ministry of Finance, 1,812 categories of taxes will be reduced by 30-40 percent on average.
The products that have high tariffs of over 30 percent and will see the tax reduction as of Jan. 11 are: textile and apparel products (63 percent), footwear (20 percent), flowers and ornamental trees (25 percent), several kinds of vegetables (40 percent), vegetable oil (20-40 percent), cosmetics of different kinds (20-40 percent), home used plastics (20 percent), confectioneries (20-30 percent), processed meat (20 percent), paper products (10-20 percent), products relating to electrical equipment (20 percent), and some other kinds of groceries (20-25 percent).
While many of the changes will take effect immediately, others will be phased in. Foreign banks, for example, won't be allowed to open their own branches until April 1.
The Ministry of Trade has completed the plan on the policies Vietnam will follow in the WTO period in order to ensure the sustainable economic growth rate in the new era.
A series of solutions have been mentioned in the development plan, including the completion of the legal framework to make it fit the new conditions. In addition, the plan has also mentioned the need to raise the national competitiveness, considering this the key task of the communist party, the state and enterprises for the new period of development.
However, becoming a WTO member doesn't simply mean opportunities for Vietnam businesses, particularly in the case of the small and medium ones. Nguyen Van Thoai, deputy manager of the Saigon Cosmetic Corp., which sells perfumes, toiletries and other products, expressed his concerns: "We estimate that after Vietnam joins the WTO, we will lose about 20 percent of our market share to foreign rivals."
According to Thoai, many foreign cosmetics firms, such as Shiseido Co., L'Oreal SA and Clarins SA, are already in operation in Vietnam. With tariffs on cosmetics being cut from 40 percent to 20 percent, more foreign firms will enter the market.
With their well known brand-names and large advertising budgets, they will make the competition even harder for Vietnamese ones.
However, that "becoming a WTO member will bring positive changes to Vietnam" is the dominant opinion in Vietnam these days.
Le Dang Doanh, an economist said: "January 11, 2007, the day Vietnam officially becomes a member of the WTO, is a historic day for the country. In joining the WTO, Vietnam is accepting increased competition, and competition will make the economy more dynamic."
According to foreign experts, Vietnam's WTO entry won't change the economic landscape overnight. Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi said: "Vietnam has been slowly bringing its trade and investment regime in line with international norms, and that's already made this place an attractive destination for some time now." However, he also warned investors of unrealistic expectations.
Thank to market reforms, foreign investors are increasing their investments in Vietnam. Foreign direct investment reached a record US$10.2 billion last year, while the economy grew at a rate of around 8 percent.