A decade of WTO membership: Vietnam’s star rises

WTO Director-General Pascal Lamy (left) gave Vietnamese Minister of Trade Truong Dinh Tuyen documents on Vietnam’s admission to the WTO in Geneva, Switzerland on November 7, 2006

A new chapter for Vietnam’s economy

Before it became the 150th member of the WTO in November 2006, Vietnam was known to the world, through the media, as a small nation which had won two big wars. Its great renovation efforts and achievements in economic development, trade and investment were far less famous.

Vietnam’s WTO membership opened a new chapter for the Vietnamese economy, putting it on the global economic map. In the ensuing decade since its accession to the WTO, Vietnam’s name is no longer linked just to wars, pain and losses. It has hitched its wagon to the world’s largest trade organization and become a rising star in the global economy.

The changing face of the Southeast Asian country’s economy has cushioned it against some of the worst crises of the past decade. The financial and public debt crisis that adversely affected the global economy did not hinder the strong growth of the Vietnamese economy. Vietnam’s gross domestic product (GDP) has grown an annual average 6.29 percent in the past decade, with per capita GDP increasing from US$730 in 2006 to US$2,228 in 2015 and US$2,445 in 2016. The economy has been restructured, gradually increasing the percentage of industry and services while at the same time reducing the dominant share of agriculture.

Import, export activities have brought impressive results. The value of foreign trade reached US$327.76 billion in 2015, almost four times the 2006 figure of US$84.7 billion. Specifically, export value hit US$162.4 billion in 2015, 3.3 times higher than the US$44.89 billion of 2006. Vietnam went from being a country with a chronic trade deficit to recording a trade surplus of US$2-3 billion in 2016.

Since Vietnam joined the WTO, foreign direct investment (FDI) flows into the country have soared. In 2006, Vietnam attracted US$10 billion of FDI, more than doubling it the next year to US$21.3 billion, and reaching US$64 billion in 2008. In 2016, Vietnam attracted more than 22,000 FDI projects with total registered capital of nearly US$300 billion. Many leading groups such as Samsung, LG, Toyota, Honda, and Canon have opened manufacturing facilities in Vietnam.

Along with promoting economic growth, Vietnam has strived to eradicate hunger and reduce poverty. The lives of Vietnamese people have improved considerably. World Bank (WB) Vice President for the East Asia and Pacific Region Victoria Kwakwa, who served as WB Country Director for Vietnam for seven years, affirmed that Vietnam is a typical country in the world in eradicating hunger, reducing poverty, and promoting economic growth.

The door to the global playing field

In the opinion of economists, Vietnam’s accession to the WTO has had a positive impact on the country’s socioeconomic development and opened the door for it to join the global playing field.

So far, Vietnam has signed or finished negotiations on 12 bilateral and multilateral free trade agreements (FTAs) with major partners such as the EU and the Republic of Korea. These include new-generation FTAs with large-scope and high-level commitments such as the Trans-Pacific Partnership (TPP). Besides these, Vietnam is negotiating four other FTAs, including the Regional Comprehensive Economic Partnership, for trade activities in the entire ASEAN region.

“These FTAs have opened the space for Vietnam to develop strongly and maintain free trade with 55 partners worldwide, including G7 countries and 15 out of 20 members of the G20,” Prime Minister Nguyen Xuan Phuc affirmed.

The FTA between Vietnam and the Republic of Korea (KVFTA), though in effect just one year, has helped increase trade and investment between the two countries. The Ministry of Industry and Trade is absolutely confident of the feasibility of the US$70 billion bilateral trade target set for 2020.

The ASEAN Economic Community, one year after its establishment, has helped tighten the economic connectivity between Vietnam and other ASEAN members, especially in the field of retail sales. The Vietnamese retail market now serves not only more than 90 million consumers in Vietnam’s territory, but 600 million consumers from all ASEAN member countries.

With negotiations wrapped up in late 2015, the FTA between Vietnam and the EU (EVFTA) is expected to be signed in 2017 and take effect in 2018. This new-generation FTA with 28 EU member countries will provide Vietnam with opportunities to cooperate with leading nations such as the UK, France, Germany, the Netherlands, and Italy. It is expected to offer Vietnam a shortcut to higher productivity and quality of goods and services.

The TPP was signed in February 2016 and member countries are completing necessary internal procedures for ratification. With 12 members, including large economies such as the US, Japan, Mexico, Canada, and Australia, the TPP comprises commitments covering a wide range of fields, including trade-related and non-trade areas. Economists believe the TPP will open major opportunities for Vietnam to boost international integration, trade and investment.

Vietnam has seen big changes in its global position. Some countries which used to be Vietnam’s rivals have now become its partners. After two decades (1993-2013), the Consultative Group Meeting for Vietnam has been renamed the Vietnam Development Partner Forum. From a foreign aid recipient, Vietnam has been recognized as a middle-income developing country, and more importantly, as a development partner of large economies worldwide.