EC upbeat on market economy transition

A convertible currency is one sign post which flags market economy status

“Vietnam has made enormous progress in fulfilling the five criteria [of the EU in order to determine whether or not a country deserves graduation to MES,” said Fritz-Harald Wenig, director of Trade Defense Instrument Directorate at the EC’s General Trade Directorate.
Wenig and his counterpart, Neil MacDonald the head of unit, arrived in Vietnam last week to work head-to-head for the first time with officials from Vietnam’s ministries of Trade, Planning and Investment, Science and Technology, and Industry and the National Office of Intellectual Property.
The five criteria include the degree of state influence over the allocation of resources and decisions of enterprises; absence of state-induces distortions in the operation of enterprises linked to equitisation and absence of non-market trading or compensation systems; existence of an adequate system of corporate governance; respect for property laws and existence of a functioning bankruptcy regime and existence of a genuine financial sector.
Wenig, however, stressed that market economy status was not an EU seal of approval for Vietnam’s economic reform, but it was a technical label which was important in the context of anti-dumping investigations.
At the first EU-Vietnam working group on Vietnam’s graduation to market economy status, both sides discussed how the five criteria could be fulfilled in the Vietnamese economy.
Dinh My Loan, head of the Ministry of Trade’s competition department, said the working group would help speed-up EU’s consideration of Vietnam’s proof of a market economy. “The EU is a very enthusiastic and willing partner in working with Vietnam on this matter,” Loan said.
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Le Dang Doanh, senior advisor to Ministry of Planning and Investment, said the EU and the US had their own criteria for market economy consideration. “The major problem here is that Vietnam must persuade and make them understand that Vietnam has its own advantages and it is making efforts to build a real market economy,” Doanh said.
Wenig said besides making tremendous progress in fulfilling the five criteria, the EU also saw two other strong points in Vietnam’s efforts to reduce the government’s influence in company prices and costs through export incentives and progress in the equitisation process.
“We are also pleased to see Vietnam has almost passed about 30-40 decrees or decisions in order to put a legal framework in place which is clearly in line with a market economy situation,” he said. “The granting of MES is a very important issue not only for Vietnam but also for the EC. Good progress has been made in a short period of time.”
According to Vietnam’s WTO accession agreement, the country is considered as a non-market economy until 2018. However, each independent WTO member economy can remove this status under private agreements with the country.