Vietnam, like China, is using WTO accession as a means of ‘forcing the pace’ on transition from a socialist economy to a mixed-economy, still under the guidance of the Party (or that’s the theory). In other words, Vietnam will use an external policy transformation to leverage the domestic agenda: I can’t help admiring their ambition. Last year I worked with the Ministry of Agriculture’s policy analysts on a ‘roadmap’ for Agricultural policy after WTO accession The transformation could result in a rapid expansion of economic growth or it could be a train-wreck as the former rigid controls on land, labor and credit give way to the pressure of markets organized on market principles. The outcome depends on adjustment planning: a smoother adjustment depends on managing the introduction of competition based on transparent pricing for inputs and outputs and, crucially, on the availability of private credit to enable small entrepreneurs to make the millions of decisions that give a market liquidity, dynamism and … growth. At the same time the state distributive apparatus, notionally at the heart of socialist agriculture, has to be sharpened up to act as a safety-net for those who can’t make the transformation. The official Vietnamese news agency has begun to report more openly on the challenges: bq. The economic development scale of rural areas is still limited which prevents the application of science and technology. The processing and preservation process still lags behind production and development growth. In addition, Vietnam’s processed farm produce will face tough competition domestically when WTO and AFTA commitments on tariff cuts are implemented. Rural and agricultural infrastructure is still poor while storage and transportation charges are higher than those in regional countries. (“VOV News”:http://www.vov.org.vn/2005_06_18/english/kinhte1.htm#AgriculturalsectorfaceschallengesonthethresholdofWTOaccession) The challenges in Agriculture are stunning. Although Vietnam is the largest rice and pepper exporter in the world and the second largest exporter of coffee and cashew nuts, the real profit in these still-largely-state-run industries is questionable. There is a major problem with land ownership (titles are not easily transferable) which leads to barriers to exits and entries and puts mortgage credit beyond the reach of many farmers. Labor laws need reform to allow movement of labour between sectors (a more productive agriculture sector will have to shed labor). Wholesale markets are poorly developed … The “Roadmap”, as you can imagine, points in the desired direction but much of the territory out there is still unknown. This week, Vietnam completed it’s eighth round of negotiations on accession with the U.S. My guess is that they are working even harder than before for accession at the Hong Kong Ministerial meeting in December.
Peter Gallagher is student of piano and photography. He was formerly a senior trade official of the Australian government. For some years after leaving government, he consulted to international organizations, governments and business groups on trade and public policy.
He teaches graduate classes at the University of Adelaide on trade research methods and the role of firms in trade and growth and tweets trade (and other) stuff from @pwgallagher