UNDP Injects $2.55 M to Boost Viet Nam’s Trade in Services

Mar 20, 2003

Ha Noi - The UN Development Programme (UNDP) and the Ministry of Planning and Investment (MPI) launched today a new initiative to help Viet Nam manage its trade integration as the country actively seeks to enter the World Trade Organization (WTO) while working on implementing trade pacts with the ASEAN and the US.

Through the Department of Trade and Services of the MPI, this $2.55 million project aims to develop a comprehensive strategy for Viet Nam’s services sector, the largest and fastest growing component of international trade. Today, services make up almost one-quarter of the world trade in goods and about three-fifths of all investment flows. For developing countries like Viet Nam, exports of services are set to become as important as exports of goods. 

The project will also provide training for Government officials and business managers on trade policy and skills to deal with the accession issues to the WTO and its General Agreement on Trade in Services (GATS).

Viet Nam’s services sector remains underdeveloped despite the country’s progress in economic development since the launching of the doi moi or renovation process. This sector currently accounts for roughly 40 percent of the total output and employs about 24 percent of the workforce. This contrasts sharply with the services share of total output in middle-income developing countries, which averages about 55 percent of the total output, and about 70 percent in the high-income industrialized countries. According to the Government’s target, services are expected to grow by about 7 percent per year between 2001 and 2005, bringing the share of services to 42 percent of the total GDP by 2005.

Mr. Truong Van Doan, Director General of the MPI Department of Trade and Services said this three year project on trade in services was very timely and needed as Viet Nam’s economy is going global rapidly. “The benefits of services liberalization extend far beyond the services industries themselves; they are felt through their effects on all other economic activities.” said Mr. Doan.

As part of the WTO requirements, Viet Nam will have to progressively liberalize several service sectors to allow for increased market access and grant national treatment to foreign service providers. Membership, on the other hand, will allow Viet Nam to take advantage of the multilateral trading system and expand its access to markets of the over 140 WTO members.

The biggest challenge facing Viet Nam in its integration into the world economy is to ensure the country be competitive and able to reap the benefits of further integration. “The benefits are clear to those who compete from a position of strength. But globalization can have consequences for weak competitors. Liberalization is important for growth, but if it is not managed effectively, it can have negative consequences on human development and poverty reduction in Viet Nam,” said UNDP Resident Representative, Jordan Ryan.

Liberalization of services such as education, health, transport, water and sanitation will not be without problem for the poor. According to Mr. Ryan, for developing countries like Viet Nam, any external trade strategy should put people at its core. This means that it should contribute to greater job creation and environmental sustainability, ensure the fulfilment of needs for all the population in areas of food, health, education, and promote a balanced rural-urban growth.

Viet Nam has been leading the developing world in reducing poverty, effectively halving the country’s poverty rate from well over 60% in 1990 to some 32% in 2002. Further poverty reduction must therefore not be threatened by trade agreements that do not appropriately reflect the development priorities of Viet Nam. A proposed trade strategy must, therefore, first analyze the possible impact of such reforms on the most vulnerable groups of the population. Ryan noted, “The challenge ahead is for Viet Nam to make its way in the world and use trade to provide even greater opportunity for millions of its citizens rather than rewards for the few.”

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