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Vietnam's Neighbors Fear Membership in WTO Will Woo Away Markets, Investment


With Vietnam being admitted into the World Trade Organization, some of its neighbors in Southeast Asia are fearful that the region's newest economic tiger will capture export markets and foreign investment that might otherwise flow their way. Vietnam's W.T.O. entry is serving as a wake-up call for its regional competitors.

Five years ago, Southeast Asian nations - many of them still recovering from the 1997 regional economic crisis - were shaken by China's entry into the W.T.O. Now, it is Vietnam's turn to cause jitters among its neighbors.

Vietnam registered 8.4 percent growth last year - second only to China among Asian countries. And like China and many of its partners in the Association of Southeast Asian Nations, Vietnam has used a combination of low cost labor, foreign direct investment and export-oriented industry to fuel that growth.

Somphob Manarangsan, a professor of economics at Bangkok's Thammasat University, says Vietnam's W.T.O. membership is going to be felt in the region.

"After entering the W.T.O., Vietnam is going to be much more competitive, have a much more competitive advantage than other ASEAN countries, particularly Thailand," he said.

Somphob says two of Thailand's main export industries will be severely affected by Vietnamese competition: electronics and food processing. And he says Indonesia will be similarly affected by Vietnamese competition in the footwear and garment industries.

Why will Vietnam enjoy such a strong competitive advantage? Somphob says it is because the Vietnamese have invested far more in education, in science and in technology than most other ASEAN countries. He foresees that, within five years, Vietnam will also become competitive in information technology and biotechnology.

Because Vietnam's minimum wage is only one third of Thailand's, Somphob says his country has to move into service-based industries where it is likely to enjoy an upper hand for a long time, such as tourism and entertainment. But he also argues that Thailand must improve its own educational system in order to compete effectively in high-value manufactured products, an area in which it could eventually face competition from Vietnam as well as China and India.

Singapore, the leading service economy in Southeast Asia, has continued to concentrate on high-value manufactured products like semiconductors. But even Singapore is taking advantage of Vietnam's hard-working, low-cost labor force. It is the newest W.T.O. member's second biggest source of foreign investment, after Taiwan.