How Vietnam could maximize the benefits and mitigate risks, which ensures that poor people are also able to access to the new opportunities in post WTO era?

Problems of poverty

Since early 1990s, Vietnam has implemented reforms in law, institution and economics in parallel with selectively liberalising international trade. This process created macro economic stability, an average growth rate per capita of 6% within the 1990-2001 period and reducing the number of poor people a half, from 58% in 1993 to 29% in 2002. Despite great achievements in poverty reduction and hunger eradication, Vietnam is still a low-income nation with GDP per capita at 550 USD (2004). A large number of Vietnamese people have lived hard and a quarter of number of children under 5 years old have to suffer malnutrition. Almost people have income just over the poor standard, which are easily reimporverished by external economic changes.

The poverty situation is particularly popular in rural areas where more than 90% poor people live and work. Agriculture is a specially sensitive sector. It uses 69% of Vietnam’s labor force and there are 45% of rural residents living under the poor standard. Average cultivate area per household is just only 0,7 ha. Factors such as crop failure, decrease in  agricultural product price due to competition from imports are potential threats to millions of  people’s incomes which are easily damaged.

Potential benefits

The main motivation of developing countries for joining WTO is the expectation on membership that could help to push exportation thanks to improving the ability of international market accession. Vietnam also expected such things; especially, boosting to export aquatic and agricultural as well as textile products. In the wake of  membership, Vietnam could also attract more foreign investment.

Vietnam hopes to take advantage of WTO’s dispute settlement system which appllies international trade rules. Vietnam could raise its voice in building these rules as a WTO member. Moreover, many domestic experts believe that becoming a WTO member and implementing accession commitments are motivation for domestic reformations.

Short term and long term challenges

Vietnam recently gained high growth rate and impressive poverty reduction level partly because it was sucessful in combining exportation with deliberate accession to importing and foreign investment liberalisations which are no need to completely comply with Washington in vogue methods.

One of the great challenges to overcome is that WTO accession could force Vietnam to open its economy more widely and quickly than expected, resulting in unexpected impacts on domestic manufacture and state policy space limit on strategic orientation of national development.

Furthermore, in spite of Vietnam’s impressive achievements in growth and poverty reduction in the past decade, social inequality between the rich and the poor has become increasingly serious. Vietnam development report in 2004 urged that development was bringing less benefits for the poor.

 Reversing this trend is one of the greatest challenges to Vietnam in the next few years. It’s important to aware that a large number of people in Vietnam have income just over the poor standard. As a result of this, many households which are not technically considered as poor are easily damaged by external changes possibly making them reimporverished.

Some certain challenges:

The competition between the farmers who take part in exporting products and the ones who produce for the domestic market will become more severe, which could lead to price decrease. This brings benefits to consumers but damages to farmers. It’s notable that the greatest part of  poor people live in rural area, producing on small scale or being employed without their own land.

The rural economy and the farmers’ means of subsistence depend on whether they could sell their products at reasonable prices or not. Some experience of other countries shows that market open did not absolutely offer the cheap prices for the urban poor people, profits appeared to fall into pocket of  big importers or processing companies. Moreover, current cheap food prices could put long term impacts on the future food independence of a nation..

Vietnamese farmers have strength in producing some exports that could be maintained and developed in the future such as rice, pepper, cashew. However, some products that are to serve domestic demands will get much difficulties because Vietnam hasn’t been able to compete in exporting them, such as sugar, maize, dairy or meat products.

In addition, many of products that Vietnam is competing on exporting markets (like rice) or increasingly importing (like maize) have been highly subsidized by the governments of rich nations or protected by tariff barriers. The US government  provides annual subsidies up to 10 billion USD for maize farm owners or 3,6 billions USD for rice farm. A cow in EU is given a subsidy of  2,62 USD per day, which is more than income of a Vietnamese poor farmer.

It is considerably challenging for Vietnam to carry out Agreement on Sanitary and Phytosanitary Measures (SPS) just after becoming a WTO member. It requires harmony in national standards in agriculture and aquiculture. This is a big challenge to small producers especially, with who lives in remote areas and also takes a long time to complete.

World Bank (WB) estimated that each agreement application costs 100 millions USD while the Government budget has limit on  sources for hunger eradication and poverty reduction.

Future orientation

The government role in supporting and regulating is very important, particularly in resource allocation, agricultural investment, rural development, continuous effort to reduce poverty and  social inequality improvement. It is necessary to strengthen control over impacts on the poor and easily damaged groups in order to have timely supporting methods that help to reduce adverse effects.

In present, manufacturing and trading effectiveness of  some kinds of agricultural products has been still low. If  there were certain investing supports, however, it could ensure attraction for farmers’ incomes even when markets become depressed and focus on national food security. In many cases, because Vietnam’s competition ability and ecological conditions in agriculture are limitative the government could support farmers to diversify products or shift to other crops.

Prior strains of plant and livestock need to be chosen on the base of market demands instead of supplying ability. It is also essential to look into specializing mechanism at some certain levels in specified areas, which bases on their agricultural ecological conditions and local demands to take advantage of  economic off scale.

Poor farmers, especially who lives in the mountainous areas having unstable ecosystem should apply crop diversification and establish mixed producing systems (crop cultivation using suitable strains, cattle breeding, fish breeding, afforestation including other forest products than wood).

Government needs to invest more in researches, especially researches into crops, such as creating highly productive plant strains that are suitable with specified agricultural ecological areas and manufacturing materials; researches into combined manufacturing  systems and livestock strains. In addition, the government should make investment to improve quality of veterinary service,breeding facility sanitation to prevent bird flu as well as quality of Insect protection measures (IPM)

Conclusion

Joining WTO, there will be losers and winners. The important thing which is also the great challenge is that how Vietnam could maximize the benefits and reduce risks to ensure  poor people to be able to access to new opportunities and get benefits from WTO joining process.