- The Washington Times - Thursday, November 9, 2006

HO CHI MINH CITY, Vietnam — Banking on new business after Vietnam joins the World Trade Organization, electrical appli- ance maker REE Corp. has added an office tower to Ho Chi Minh City’s burgeoning skyline. But it also is bracing for an onslaught of competition from global giants such as Toshiba and Samsung.

For REE Corp. and for Vietnam, WTO membership will cut both ways.

“Joining the WTO will create a lot of opportunities,” said Nguyen Thi Mai Thanh, the company’s general director. “But it will also present strategic challenges.”

WTO members approved Vietnam’s entry on Tuesday, bringing to an end 10 years of negotiations with the communist country, which has begun accelerating the pace of market reforms. The entry will take effect 30 days after Vietnam’s National Assembly approves it, which it is expected to do swiftly.

Hanoi will take the spotlight next week as the host of the Asia-Pacific Economic Cooperation (APEC) summit, which will draw leaders from 21 countries and thousands of business executives from around the world.

WTO membership will give Vietnam increased access to foreign markets and the opportunity to take trade grievances to a neutral arbiter, strengthening its hand against nations that accuse Vietnam of illegally dumping goods on their markets. In return, the country will be required to drop its high tariffs on foreign imports and eliminate subsidies for state-owned companies.

Foreign companies will enjoy far greater access to Vietnam’s economy, which has averaged 7.5 percent growth in the past decade, one of fastest rates anywhere in the world.

However, American businesses may not be able to take advantage of the WTO agreement immediately because the U.S. Congress has yet to grant Vietnam “permanent normal trade relations” status.

President Bush hopes that legislation will be passed before he visits Hanoi for the APEC summit Nov. 17 to 19, but that looks unlikely.

Among other obstacles, Sen. Mel Martinez, Florida Republican, has been blocking consideration of the bill because of concerns about a pro-democracy activist from Florida who is being held in a Vietnamese jail on suspicions of plotting against the Vietnamese government.

The bill is expected to be approved eventually. But without it, U.S. companies will not be able to enjoy the benefits of the WTO agreement, unless Vietnam decides on its own to treat them the same as those from other member countries.

Since the United States and Vietnam implemented a bilateral trade agreement five years ago, trade between the former foes has grown from $1.2 billion in 2000 to $7.8 billion last year.

Many Vietnamese businesses, especially clothes makers, are excited about the new export opportunities that WTO membership will bring. Others, such as REE Corp., are eager to supply goods and services to foreign companies that come to Vietnam.

Some businesses — particularly in banking, insurance and financial services — are worried about the competition WTO membership will bring. State-owned domestic companies, still steeped in the old central-planning mentality, inevitably will be forced to change or perish.

“Foreign competition is bitter medicine for Vietnamese enterprises, but it will help them become stronger,” said Le Dang Doanh, an economist at the Ministry of Planning and Investment.

As of April 1, foreign banks will be able to operate their own, fully owned branches for the first time, said Alain Cany, head of the European Chamber of Commerce in Vietnam and director of HSBC Bank’s operations in that country.

“We are in a country of 84 million, most of them very young people who like saving and like buying,” Mr. Cany said. “They will take loans from us and use our credit cards. It’s going to be a great market.”

At the Eastern Asia Commercial Bank, one of Vietnam’s more successful banks, director Tran Phuong Binh is rapidly installing new automated teller machines and opening new branches, some in rural areas that will be difficult for foreign banks to serve.

In addition to introducing a new ATM card, Mr. Binh also is developing a “takeout” service for customers, who can call and have money delivered to their homes.

“We sometimes have to cross rivers to serve our rural customers,” Mr. Binh said. “I don’t think foreign banks will be able to serve this market.”

Foreign investment in Vietnam surged before Tuesday’s vote, rising 41 percent in the past year. Foreign firms have been encouraged by Vietnam’s market reforms. The government has approved new enterprise and investment laws that grant equal treatment to foreign and domestic firms, and it soon will approve a securities law that will increase the transparency of Vietnam’s small but booming stock market.

“Entering the WTO sends a very important signal that everything they have done so far is not just temporary,” said Cristoph Wyesner, head of the European Commission’s political, economic and trade section in Hanoi.

Vietnam’s garment exports to the U.S. have skyrocketed, and the industry is hoping to reap even greater profits after joining the WTO, which will require the United States to lift quotas on Vietnam’s garment exports.

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