Vietnam on the way to become a market economy

Eleven years ago, Vietnam started a long journey to World Trade Organization. United States, the main obstacle on the progress to negotiate for Vietnam to join WTO, became the last country to sign the bilateral trade agreement (BTA) with Vietnam in 2001. According to the multilateral commitments, Vietnam will be designated as a 'non-market economy' (NME) for a period of 12 years after its accession to the WTO, not later than 31/12/2018, or until it is able to meet the economic criteria for a " market economy" (ME) designation. It seems unfair that Vietnam is classed as a non-market economy after twenty years of reform.

This in effect makes it difficult for Vietnam to defend itself from anti-dumping allegations lodged by the EU and the US. But why does this happen to Vietnam even though it has tried a lot? Let see the six factors which determine Vietnam's economy a NME or ME:And hereby is the reasons for Vietnam's designation as a NME according to Ministry of Commerce of The United States. It said that Vietnam's economy is still on the way to reform and has not really met the criteria for a market economy due to the antidumping law with the following expressions:

Firstly, Vietnam's local currency or VND is not completely freely convertable in the capital market. At present, the VND is not favoured in transactions and payment, meanwhile, the dollarisation is so serious in Vietnam. i?? Secondly, wages are not determined freely in Vietnam. It is true that the government decides salary for workers in the state-owned companies, which may discourage productivity because it does not create incentives for workers to try and do works better. 

Thirdly, it is the slow privatization and equitization, or the government's dominant ownership in economy. Eventhough Vietnam has tried to equitize many state-own enterprises, especially in major fields such as banking, industry, the government still controls most of the economy with a large number of its big companies. It has failed to restructure and reform the economy to reduce the pervasiveness of state-owned enterprises and to strengthen the private sector. The private land ownership is not allowed and all stil belong to the State. 

Last but not least, there is a discrimination in domestic and foreign enterprises in Vietnam. Vietnam's laws still have some unequal regulations on foreign companies in Vietnam because it wants to protect domestic companies from foreign ones. But this situation has been improved in recent years since Vietnam fully realises the importance of foreign investments to its development. And with the Amendment of Foreign Investment Law in 1996, foreign companies find it easier to invest in Vietnam. How can Vietnam become a market economy before 2018?

For all the reasons above that prevent Vietnam from being classed as a market economy, Vietnam needs to change or improve itself to meet the criteria for a market economy. What should be done as follows: i?? First, for VND's non convertibility,by the 2010, the convertibility of the VND will be fully implemented in Vietnam, which will pave the way for heitening the international convertibility of the VND in the future. Vietnam will gradually reduce or remove the price quotations in dollars, not allow payments in dollars, and illegal foreign currency trading.

In addition, the State Bank of Vietnam will follow a flexible forex policy which allows the boosting of exports and attracts foreign investment. The forex policies will be renovated, according to which there will be more freedom in capital transactions and currency transactions. A lot of tasks have been signed, including: – liberalizing currency transactions, – removing the licensing to remit foreign currencies abroad for individuals and credit institutions, – gradually raising the allowed proportion of mobilizing capital in VND by foreign banks, – raising reserves in foreign currencies.