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SERVICES SECTOR DEVELOPMENT:A KEY TO VIET NAM’S

SUSTAINABLE GROWTH

The authors and reviewers’ views in the interim-report and in this summary paper do not necessarily reflect theviews of the United Nations Development Programme or the Government of Viet Nam.

Foreword

This paper is a short version of a larger study entitled Options and Recommendations for aComprehensive Development Strategy for the Services Sector in Viet Nam up to 2020,1 conductedin 2004 in the framework of the project “Capacity Strengthening to Manage and Promote Trade inServices in Viet Nam in the Context of Integration” (or “Trade in Services” Project VIE/02/009), whichis currently being funded by the United Nations Development Programme (UNDP) and implementedby the Department of Trade and Services of the Ministry of Planning and Investment (MPI).

The goal of the Trade in Services project is to assist the Government of Viet Nam to further integrateinto the world economy with a focus on trade in services. The purpose of the project is to strengthenthe capacity in Viet Nam to formulate, coordinate and implement policies in support of the developmentof service sectors in the country and to manage and promote trade in services in Viet Nam in thecontext of economic integration.

The project consists of 4 outcomes: 1st Outcome: Provide technical assistance to formulate acomprehensive strategy for the development of the services sector in Viet Nam; 2nd Outcome:Improvement of information flows on trade in services; 3rd Outcome: Assessments of thecompetitiveness of services sectors and impacts of trade liberalization on the country and people;and 4th Outcome: Enhancement of human resource development in trade in services.

The project has conducted the above mentioned study according to the specific objectives andimplementation plan of its first outcome. This paper presents a summary of the interim-report ofsuch study, which provides a detailed analysis of the competitiveness of Viet Nam’s services, followedby options for addressing weaknesses and leveraging strengths and opportunities, recommendationsfor a national service sector development strategy, implications for international services tradenegotiations strategies, and suggestions for strengthening services statistics. The analyses andrecommendations contained in the study are based in part on initial studies also undertaken by theproject of the following sub-sectors: air transportation services, banking services, business and trainingservices, financial services (insurance, securities, accounting and auditing), maritime transportationservices, telecommunication services, and tourism.

The interim-report of the study, which is in actuality being used as primary analytical/technical inputby the inter-ministerial Task Force in charge of defining the main orientations for the formulation ofstrategies and planning for service sectors development in the framework of the 2006-2010 5 YearSocio-Economic Development Plan,2 was prepared by Prof. Dr. Nguyen Xuan Thang (Team Leader),Dr. Nguyen Hong Son, Dr. Doan Hong Quang, and Bui Truong Giang, MPP, from the Viet Nam’sInstitute of World Economics and Politics; and Dr. Dorothy I. Riddle, from CMC Service-GrowthConsultants Inc., Canada (International Consultant). Dr. María Cristina Hernández, Senior TechnicalAdvisor to the project, provided substantive technical inputs and served as reviewer of the interim-report, having also put together and edited the present summary paper. Mr. Ho Quang Minh and Mr.Nguyen Chi Dzung have been the National Directors of the Project. Helpful comments came from apanel of peer reviewers that included Mr. Cao Viet Sinh (Vice Minister of MPI), Mrs. Phan Chi Lan(Adviser to the Prime Minister Research Commission), Mr. Le Dang Doanh and Nguyen QuangThai (Advisers to the Minister of MPI), Mr. Dinh Van Thanh (Vice Director General of the Viet Nam

1 Sources of data provided, and references used in the present paper can be consulted in the interim-report of the above-mentionedstudy, copy of which can be requested to the project office or to the Governance Cluster of UNDP Viet Nam.

2 The inter-sectoral Task Force on services, which is headed by a Vice Minister of MPI and staffed with representatives from relatedministries and agencies, was established on 26 August 2004 by Decision of the Minister of MPI No: 995/QD-BKH, in accordancewith announcement No. 138/TB-VPCP, dated 20 July 2004. The Task Force is now working following Directive No. 49/2004/CT-TTgof December 24, 2004 on Service Development in the 2006-2010 Five Year Socio-Economic Development Plan, and with thetechnical support of the UNDP-funded Trade in Services project.

Nguyen Chi DzungDirector General, Department of Trade and Services

National Project Director, VIE/02/009 - Trade in ServicesMinistry of Planning and Investment

Institute for Trade), and Mr. Nguyen Xuan Trinh (Vice President of the Central Institute for EconomicManagement).

Thanks are also due to Mr. Murray Gibbs, former head of the UNDP Asian Trade Initiative (ATI) andof the UNCTAD Trade Negotiations and Commercial Diplomacy Branch, for his comments on thetext; to Mrs. Do Thi Nguyet Nga, Programme Officer of the Governance Cluster of UNDP Viet Nam,for her support in the publication of this paper; as well as to various consultants from the BankingInstitute, the Institute of Financial Science, the National Institute of Posts and Telematics Strategy, theTransport Development and Strategy Institute, the Institute for Tourism Development Research andthe Viet Nam Chamber of Commerce and Industry, who assisted the Project in the preparation ofinitial papers on the current situation of selected services sub-sectors.

Table of Contents

Introduction ............................................................................................................................................ 1

Chapter 1: Global issues in the development and liberalization of the service sector ........................... 3

1.1 Services are facilitators of domestic growth and social wellbeing ....................................................... 3

1.2 Services and international integration ............................................................................................. 4

1.3 Misconceptions about services and challenges for developing countries ........................................... 5

1.4 Overcoming factors hampering services sector development .............................................................. 6

1.5 Tackling policy and institutional challenges: some lessons for Viet Nam .......................................... 7

Chapter 2: Current status of services in Viet Nam .................................................................................. 9

2.1 Services sector development status ............................................................................................... 9

2.2 Legal environment status ............................................................................................................ 11

2.3 Competitiveness of Viet Nam’s services ....................................................................................... 15

2.4 Strengths and weaknesses of Viet Nam’s service industries ........................................................... 16

2.5 Opportunities and threats for Viet Nam’s service industries ............................................................ 17

Chapter 3: Recommendations on Viet Nam’s goals and strategies for services ................................... 18

3.1 Recommended overall goal for comprehensive development of the services sector ............................. 18

3.2 Proposed growth goals .............................................................................................................. 18

3.3 Recommended policy orientation ................................................................................................... 21

3.4 Proposed stages to develop the services sector ............................................................................. 24

3.5 Recommendations on strategy development ................................................................................ 25

Chapter 4: Recommendations on a roadmap for international integration ......................................... 27

4.1.Objectives to be achieved through international integration ............................................................. 27

4.2 Viet Nam’s existing commitments on international integration .......................................................... 28

4.3 Viet Nam’s rights in WTO accession ........................................................................................... 28

4.4 Viet Nam’s options in services trade liberalization .......................................................................... 28

4.5 Ongoing assessment of the impact of market liberalization ............................................................ 32

4.6 Recommendations to Viet Nam’s services trade negotiators .......................................................... 33

Chapter 5: Core Conclusions for the Design of a Comprehensive Development Strategyfor the Service Sector in Viet Nam up to 2020 ...................................................................................... 34

Annexes ............................................................................................................................................. 36

List of Tables

Table 1: Stipulated Economic Development Projections for 2010 ......................................................... 18

Table 2: Tests of the Stipulated Projections for 2010, Based on 2000 Data .......................................... 18

Table 3: Estimates for 2005, Based on 2003 Data ............................................................................ 19

Table 4: Estimates for the Agricultural Sector to 2010 ....................................................................... 19

Table 5: Estimates for the Industry Sector to 2010 .......................................................................... 19

Table 6: Calculation of Overall GDP Growth to 2010 ........................................................................ 19

Table 7: Optimal Structure of the Services Sector to Support Rapid Growth ........................................ 20

Table 8: Proposed Growth Rates for Viet Nam’s Services Sub-Sectors: 2005-2010 ............................ 20

Table 9: Proposed Economic Development Goals for Viet Nam’s National Social-Economic Strategy: 2005-2010 ................................................. 21

Table 10: Service Industries Necessary to Target to Achieve Overall Goal .......................................... 21

Table 11: Proposed Economic Development Goals for Viet Nam’s National Social-Economic Strategy: 2010-2020 ................................................................. 21

Table 12:Proposed Approach to Requests for Market Access Liberalization for Services with High Export Potential ............................................................................... 30

Table 13: Proposed Approach to Offers Regarding High Export Potential Services ................................ 31

Table 14: Proposed Approach to Offers Regarding Attracting Foreign Investment ................................ 31

Table 15: Proposed Approach to Domestic Services with High Employment Potential ........................... 32

Table 16: Proposed Approach to Domestic Services with Low Employment Potential .......................... 32

Acronyms

AFAS ASEAN Framework Agreement on Services

BCC Business cooperative contract

CEE Central European economiesCIF Cost, insurance, freightCPC Central Product Classification

DC Developing economyDME Developed market economyDWT Dead weight tons

FDI Foreign direct investmentFOB Free on board

GATS General Agreement on Trade in ServicesGDP Gross domestic product

ICT Information and communication technologyIFC International Finance CorporationIMF International Monetary FundISIC International Standard Industry ClassificationITC International Trade Centre UNCTAD/WTO

NPL Non-performing loan

RPK Revenue per passenger kilometre

SBV State Bank of Viet NamSOE State-owned enterpriseSTCW Standards of Training, Certification, and Watchkeeping

UNCTAD United Nations Conference on Trade and DevelopmentUNDP United Nations Development Programme

WB World BankWTO World Trade Organization

1SERVICES SECTOR DEVELOPMENT: A KEY TO VIET NAM’S SUSTAINABLE GROWTH

Introduction

The almost twenty-year renovation process (Doi Moi)has resulted in significant socio-economicachievements. With annual growth rates of GDP percapita averaging 5.9 per cent during the Doi Moi, VietNam has had one of the highest growth rates in theworld. The economic development of Viet Nam so farhas accompanied the open-door policy. In 2002, thetotal value of foreign trade activities surpassed that ofGDP, though it was only 63 per cent of GDP in 1990.However, much of this was low value-added activity.

The Vietnamese economy still faces quite a fewchallenges, despite its high GDP growth rate. Inparticular, the economic structure has slowly shifted,and the service sector is now relatively backward andnot competitive. The service sector now accounts forless than 40 per cent of GDP, much lower than theaverage of 50 per cent in low income countries and 71per cent in developed economies.

General assessments show that, even compared withneighbouring countries, the current competitiveness ofthe Vietnamese service sector is very poor. Meanwhile,the pressures from not only bilateral and regionalcommitments by Viet Nam but also bilateral andregional liberalization by and among other countriesare increasingly intensified, not to mention Viet Nam’snegotiation efforts for WTO accession. While theseinternational developments have a direct impact on theservice sector, they also generate indirect effects onthe whole economy through the various inter-linkagesbetween the service sector and all other economicactivities. A vivid example is that the price and qualityof such services as telecommunication and electricityplay a significant role in the competitiveness of export-oriented industries as well as in FDI inducement.

There has existed no deep understanding of, orappropriate interest in, many issues of the servicesector in Viet Nam. Although during the past few yearssome line ministries have set forth certain service sub-sector development strategies, in practice thosestrategies have failed to catch up with reality due tothe rapidly changing context. The sector-specificdevelopment strategies have failed to take into accountthe bilateral and regional integration commitments aswell as the ongoing WTO accession negotiations byViet Nam, one of the reasons being the incoherence inthe processes leading to the establishment of thosestrategies. Furthermore, there is no integrated inter-sectoral linkage among such various sub-sectorstrategies and no developmental orientation within thecontext of international economic integration.

A comprehensive development strategy for the servicesector in Viet Nam is urgently needed, covering key

service sub-sectors and their l iberalizationcommitments. Such a strategy would help policy-makers and business leaders to prepare the groundfor facing the challenges of, and effectively drawing on,the potential opportunities created by new foreigncompetition and markets, while advancing thecountries’ national socio-economic developmentobjectives and priorities.

Against this background, the present paper aims atsharing initial findings with regard to the generalsituation of the services sector in Viet Nam, as well aspreliminary options and recommendations for acomprehensive development strategy for the servicessector in the country, with the purpose of stimulatingtheir debate among Government stakeholders anddonors. Inputs gathered in the course of such debate,together with results of additional analytical researchconducted by the UNDP-funded Trade in Servicesproject during 2005, will serve as inputs towardscompleting the study referred to in the above forewordsection, which in turn shall serve to assist theGovernment in the design of a national strategy todevelop an efficient and internationally competitiveservices sector, considering Viet Nam’s integrationcommitments in services. Such national strategyshould establish clear goals for the sector up to theyear 2020 and provide new guidelines to policy makersand business managers to further develop the servicessector in accordance with both Viet Nam’s economicand human development objectives and priorities.

Content of the Paper

This paper is structured in five chapters as follows:

Chapter 1 analyses briefly the main global issues inservices development and liberalization of services;while Chapter 2 presents the current status of VietNam’s services sector in two respects: current statusof development (including an assessment of thecompetitiveness of this sector) and the legal and policyenvironment for services sector development in thecountry.

Chapter 3 proposes a preliminary framework of anoverall goal, strategic growth goals, policyrecommendations to achieve those goals, and prioritysectors to develop. It also addresses the roles ofgovernment, the private sector, and internationalorganizations. Regarding the latter, priorities forinternational funding have been suggested that couldthen be discussed with donor agencies.

Chapter 4 provides a preliminary roadmap forinternational integration, with proposals regarding

2 SERVICES SECTOR DEVELOPMENT: A KEY TO VIET NAM’S SUSTAINABLE GROWTH

requests of trading partners for enhanced marketaccess and offers that could be made withoutundermining Vietnamese services competitiveness. Italso outlines objectives to be achieved throughinternational integration and Viet Nam’s rights as adeveloping economy in WTO accession.

Finally, Chapter 5 presents some core conclusions forthe design of a comprehensive development strategyfor the services sector in Viet Nam up to 2020.

Tables A1 to A12 referred to in the text are containedin a first annex (Annex A), followed by a final table inAnnex B.


1.1. Services are facilitators of domestic growthand social wellbeing

1.1.1 Economic development is linked to rapid servicesector growth

Service industries exist in all economies because theyare the facilitators of economic activities and importantcontributors to quality of life for all citizens.Infrastructure services (utilities, construction,transportation, telecommunications, and financialservices) support all types of enterprises. Education,health, and recreational services influence the qualityof labour available to enterprises. Business andprofessional services provide specialized expertise toincrease enterprise competitiveness. The quality ofgovernment services determines the relative efficiencyof the business environment in which enterprisesoperate.

Studies over the past twenty years have documentedthe link between rapid economic growth and thedevelopment of key service industries, most notablytelecommunications and business and professionalservices. Generally speaking, as an economy develops,certain service industries or sub-sectors become morecritical and drive that development. Typically, utilitiesand construction are of initial importance in creatingan economic base.Then transportation andcommunication services provide the economicinfrastructure. Then financial and business servicesbecome more sophisticated and support ongoinggrowth and specialization. In parallel, there is usuallya shift from low skill industries and consumer services(e.g., retail services) to high skill industries supportedby intermediate services (e.g., business services). Theavailability of high quality service inputs contributesboth to increasing the value-added of industrial goodsand to generating higher skills jobs. As an economydevelops, usually the majority of intermediateproduction is comprised of services sold to other servicefirms.1

Service industries already contribute on average 68percent of the global gross domestic product (GDP),with the percentage increasing as gross national income(GNI) per capita increases. Even in the least developed

Chapter 1Global Issues in the Development and Liberalization

of the Services Sector

economies, services average over 40 percent of GDPin the majority of economies. In actuality, it is not theabsolute percentage of services in GDP in a developingor transition economy that makes the difference toeconomic development but rather the relative growthrates of the three sectors (i.e., extractive,manufacturing, services). Service industries continueto lead growth in economies at all levels ofdevelopment, driven in part by the rapid changes ininformation technology and telecommunications thatsupport service delivery. Between 1998 and 2003, globalservices production growth averaged 7.0 percentcompared with average global GDP growth of 4.7percent.

A common misconception is that having services growat a lower rate than the economy as a whole is normalfor countries at low levels of development and a lack ofcomparative advantage in services. In actuality, it isgrowth in services that most effectively fuels overalleconomic growth. For transition economies, alleconomies with double digit annual growth since 1998also have had growth rates for services that were higherthan GDP growth. Increasingly in goods productionglobally, a major portion of value-added (from 30% upto 70%) comes from services inputs. Services anchorand support the entire production process by providing“up-stream” inputs (such as research and development,feasibility studies, product design, staff training), “on-stream” inputs (such as accounting, legal services,process engineering, technical testing, computerservices, equipment repair and maintenance, finance,telecommunications), and “down-stream” inputs (suchas advertising, distribution, transportation, storage).Competitive industrial development is no longerpossible without high quality service inputs. This meansthat, as markets integrate, the quality and availabilityof service inputs becomes even more important tocompetitiveness.

1.1.2 Service enterprises create jobs

In keeping with the growth in services output, servicefirms have been the primary creators of new jobs,accounting for over 90 percent of new jobs globallysince the mid-1990s. Of particular importance todeveloping and transition economies, service firms

3 WTO’s World Trade Report 2004 underscores telecommunications, finance, business services, and transport services as thekey infrastructure services in trade and economic development. As economies initially develop, typically these infrastructureservices each develop to between 7 to 10 percent of GDP. As the economy continues growing, financial and business servicesgrow to form 15 to 30 percent of GDP.


create the kinds of jobs that are well-suited for skilleduniversity graduates (thus stemming “brain drain” fromless developed markets) as well as for a range of school-leavers who often find it hard to obtain work, includingwomen. In an increased number of these economies,the employment created in services has exceeded thatcreated in industry.

1.1.3 Services are vital to poverty alleviation andsustainable development

Quality of life services (such as education and health),supported by electricity, are critical for improving thelife of the very poor. In addition, since many serviceenterprises can be started with very little capital (incontrast to manufacturing), service industries provideopportunities for persons with minimal resources,particularly women, to become self-employed andeconomically productive. The vast majority of serviceenterprises in any economy are very small or micro-enterprises. Environmentally speaking, many servicesare “clean” industries and so assist with avoidingpollution-related illnesses and environmentaldegradation.

Another potential benefit from focusing on servicesector growth is the potential to spread economicdevelopment benefits throughout the economy.Competitive service enterprises can be developed ineven the smallest of communities, as long as there isadequate telecommunications infrastructure. Thedispersion of service enterprises (and the relatedemployment opportunities) in rural communities canhelp to stem urban migration and keep smallercommunities intact.

1.2 Services and international integration

1.2.1 Service exports are increasing as a percentageof world trade

When the General Agreement on Trade in Services(GATS) came into force in 1995, world trade in serviceswas just over US$1.2 trillion. By 2003, world trade inservices had grown to over US$1.8 trillion, or 20.0percent of world trade. The fastest growing componentof international trade continues to be “other services” –i.e., business services (accountancy, engineering,consultancy, computer services, R&D, etc.),communication services, construction services,education and health services, finance, and recreational/cultural/sporting services. Service sector developmentnow takes place in a highly globalized environment.

1.2.2 FDI in services is also increasing

The role of foreign direct investment in services isdifferent from in manufacturing, with less job creationand less value added. Cross-border mergers andacquisitions are the speediest and most practical

means of entry. In business services in particular, non-equity forms of investment are common – e.g.,franchising, management contracts, concessions,partnerships, turnkey, build-operate-transfer, and build-transfer-operate. Growth in services FDI is fuelledincreasingly by competitive pressures in the homemarket that lead TNCs to seek new markets and exploittheir competitive advantage. What attracts serviceTNCs are access to a good information andcommunications infrastructure, well-developed industryinstitutions, and skilled workers at a competitive cost.Another growth trend is “offshoring” or separating outcertain service functions to contract out abroad. Thegrowth in inward FDI in business services to developingeconomies from 7 percent of the total in 1990 to 38percent of the total in 2002 is a reflection of this“offshoring” trend.

The above mentioned trends make that servicetransnational corporations comprise 52 percent of thetop 100 corporations in the world based on grossrevenues for 2003. They outperform goods producersconsistently in revenues, profits, assets, and equityper employee. All 52 of the top services transnationalshad revenues in 2003 that were greater than the 2003GDP of Viet Nam. This means that, in the context oftheir integration to the international economy,Vietnamese service enterprises will be competing withsome very large service transnationals. Of the Top 100service transnationals, over one-half are based in theAsia Pacific, with one being a utilities company in China.Since 1996, the U.S. has almost doubled its numberof top service firms, while Japan has slipped from itsdominant position in the Asia Pacific region. In 1996,8 of the top 10 service corporations were Japanese,compared with only one in 2003. During the past sevenyears, the industry composition of the Top 100 servicecorporations has also changed. The dominance offinancial services has decreased, while computerservices (Microsoft), entertainment, health services, andretailing have moved up in prominence.

1.2.3 Liberalizing market access in services can bringnegative effects

When the GATS was initially being negotiated, therewas concern that the overall impact of liberalizingaccess to services markets would be to increase theshare of developed market economies (DMEs) inservices trade at the expense of developing countries.Unfortunately, the trends since the GATS went intoeffect in 1995 support those concerns. Data availableshow a steady increase in services as a percent oftotal exports for developed economies, especially thehigh-growth “other services,” while developing andtransition economies show a decrease. Average annualgrowth rates for services exports increased after 1999,when the GATS had been in force for several yearsalready. For developing and transition economies,double digit growth was restricted to goods trade and


related transport services. For developed economies,the growth rate for “other services” was almost doublethat of total exports during the period 1999-2003.

With regard to imports, developing and transitioneconomies in general are importing high value-added“other services,” while developed economies areimporting lower value-added goods and related transporservices. In general, import growth is the highest for“other services,” though that import growth is lower thanthe average export growth rate. These data supportthe general contention that the impact on developingand transition economies of services trade liberalization(whether desired or not) will be an increase in imports,especially via foreign direct investment.

The environment for service sector development haschanged over the past five years with the increase inbilateral and multilateral trade agreements that includeliberalizing market access in services and theacceleration in information and communicationtechnologies that make the cross-border delivery ofservices a feasible alternative. It is no longer possibleto focus simply on a domestic service sector. One mustconsider the domestic service sector in the context ofinternational integration and ensure that globalcompetitiveness benchmarks are considered. In orderfor an economy to grow and thrive, its services need tobe competitive enough that its industries are notovertaken by imports.

Economies (like Viet Nam) that are acceding to theWTO in the past few years are being pressured to makevery liberal market access commitments under theGATS. There are only a few economies that joined in2000, giving enough time to assess the impact of thatliberalization move.4

1.2.4 Continued services sector growth is expected

The World Trade Organization predicts that servicestrade will equal approximately half of world trade by2020. Already, if one adjusts the balance of paymentstatistics to reflect the under-capture of “other services”and of foreign affiliate services trade, services constituteapproximately 36 percent of world trade. As a result ofthe liberalization of market access for services,projections are that services will continue to increaseas a percentage of GDP at all levels of development.

1.3 Misconceptions about services andchallenges for developing countries

1.3.1 Services are key to agricultural and industrialdevelopment

A common misconception is that, when a developingor transition economy has scarce resources, thedevelopment priority should be industry rather thanservices. This misconception is typically based on theassumption that “services” are primarily consumer orfinal demand services and so are optional purchases.In fact, at least half of the services produced in aneconomy are “intermediate” services, or services soldto other enterprises. If one is to have competitiveagricultural or manufacturing sectors, one needs a widerange of high quality inputs – e.g., transportation,storage, telecommunications, engineering, design,market research, packaging, and so forth. Serviceinputs become particularly important if one wants toincrease the value-added in industrial production andthe competitiveness of export-oriented industries. Inaddition, service inputs such as staff training increasethe efficiency with which scarce resources are used.

One of the most difficult challenges is the employmentrestructuring required to move from an agricultural baseto a services based economy. Education and trainingin “soft” skills are essential in this process. But equallyimportant is the value and status accorded to varioustypes of jobs. In order to interest persons in (re)trainingfor service jobs, these need to be positioned asimportant to communities and the whole economy.

1.3.2 Policy makers assume little service exportactivity

A common misconception is that developing andtransition economies do not have comparativeadvantage in services and export very little in the wayof services. In fact, developing and transitioneconomies are active exporters of services Researchby the International Trade Centre UNCTAD/WTO hasfound that developing and transition economies arealready exporting on average 68 different types ofservices to an average of 33 different export markets.Approximately two-thirds of this trade is with otherdeveloping and transition economies. Another commonmisconception is that a negative balance of trade inservices is normal for developing countries. In actuality,there are developed market economies with negativebalances for trade in services and developing andtransition economies with positive trade balances. Thedirection of an economy’s services trade balance isrelated to the economy’s economic policies rather thanto level of development.5

4 Available data shows that for countries such as Albania and Jordan their services trade balances have worsened sinceaccession to the WTO.

5 If, for example, an economy has no national shipping fleet, the transportation account is likely to be in deficit. If an economy hasdeveloped a strong intermediate services sector, its other services account is likely to be in surplus. Some examples (India,Bulgaria, Latvia, Lithuania, Romania) show that developing and transition economies can have a positive balance of trade inservices, while some developed market economies (Australia, Japan) have negative balances.


1.3.3 Policy makers assume FDI is the primary benefitof liberalization

An additional misconception is that developing andtransition economies benefit from services tradeliberalization primarily through attracting increasedforeign investment and exporting labour, not throughmaking their own domestic service sector morecompetitive. It is important to remember that any foreigninvestors will be competing with existing nationalservice suppliers and potentially undermining theirability to compete in regional and global markets dueto a small domestic base. Foreign investors can bringmuch-needed capital and expertise, and liberalizing theterms for market access can make an economy moreattractive to foreign investors. However, theattractiveness of the market is also influenced by thecompetitiveness of local telecommunicationsinfrastructure and the quality of business servicesavailable. Costs of production go down if high qualityintermediate services are available locally; otherwise,the foreign investor has to invest also in their ownservices supports. So, if the terms of market accessare equal in competing economies, economies thattarget national service sector development are morelikely to benefit from foreign investment.

There are a number of potential costs to a developingor transition economy of services FDI. Given thedominant role played by large foreign servicecorporations, there is the potential for monopolisticpractices with accompanying rise in prices, control ofcultural activities to the detriment of national culture,crowding out of local suppliers, and employing localworkers only in low-paying, lower skilled jobs. There isalso the potential for negative impact on balance ofpayment due to the use of foreign suppliers (serviceimports) and profit repatriation. Perhaps moreworrisome is the potential negative impact on the poor.Unless care is taken, the gap in access to, andaffordability of, essential services can widen and, dueto foreign service suppliers servicing the more affluentportion of the population, a divergence of fundscommonly used by government to subsidize accessfor the poor. As banking is a sector that tends to bedominated by foreign banks in developing and transitioneconomies, there is also the issue of control of servicesof strategic importance.

In order to benefit from services FDI, the most importantprerequisite is a strong regulatory framework to ensurepositive multiplier effects in the domestic economy. Itis also important that developing and transition

economies take advantage of their rights under theGATS to impose performance criteria on foreigninvestors. Some examples include requirements fortransfer of technology (hard and soft); hiring, trainingand promoting local staff; the use of local suppliers;and healthy work conditions. Another option is to requireexport activity to offset any negative balance of paymentseffects. It is also important to have some mechanismto ensure that either large private companies orgovernment are supplying essential services underconditions of universal access. One option is to requirepayment into a universal services fund.

1.4 Overcoming factors hampering servicesector development

1.4.1 In-house production undermines service sectordevelopment

The process of “externalization” (i.e., purchasingbusiness support services from external providers) isanother important component in developing acompetitive economy. In small or informal enterprises,service inputs are typically self-produced.6 Becauseservices play such a key role as competitive inputs,competitive private sector enterprises are alert to thequality of services they receive. If competitive qualityservices are not readily available, self-production (in-house production) may continue even after anenterprise is large and sophisticated. Alternately,enterprises may choose to import services from foreignproviders. The developmental impact of in-houseproduction or importation is to reduce marketopportunities for domestic service providers and makeit even more difficult for good quality services to develop.A secondary impact is that there is not enough marketdemand to support specialization in services provision.

It should be noted that this developmental“externalization” process can become distorted due toin-house production by state-owned enterprises and/or government or donor programme subsidies. Ineconomies like Viet Nam, state-owned enterprises oftenproduce business support services in-house orpurchase them from other state-owned enterprises thusremoving from government the potential to stimulatethe development of business support services throughcontracting out to private enterprises. Subsidiesintroduce distortion by creating artificial competition inthe form of “free” or low-cost business support servicesprovided by development-funded projects, offered at arate that is well below the breakeven rate of privateenterprises.

6 For example, the owner or a relative does the bookkeeping, transports goods, or makes guesses about market trends. As aneconomy matures and competition increases, enterprises begin to contract out (externalize) services that are not their main line ofbusiness – e.g., they purchase accounting services, transportation services, and market research services. Where neededbusiness services are not available, SMEs must either increase overheads by hiring new staff (who are likely to be generalists,not specialists) to provide the service or do without it.


1.4.2 Low domestic demand for services increasesthe need for export markets

One of the primary challenges in stimulating the growthof competitive services is the initial lack of demand forquality services in the domestic market. If consumersare not familiar with international quality service andthe benefits to be gained from that quality, they willusually be unable to differentiate high quality from lowquality and be unwilling to pay for high quality. Withoutinternationally competitive services available as inputs,exporters in the economy will make one of threechoices: (a) self-produce the services, and therebyusing scarce resources to supply a function that is nottheir core competence; (b) purchase a lower qualityservice input locally, thereby jeopardizing thecompetitiveness of their export products; or (c) importthe service input, thereby having a negative impact onthe national balance of payments.

Given capital and skilled human resource scarcities inmany developing economies, some may questionwhether stimulating services growth is at all feasible.If one considers only the domestic economy, theprospect does look bleak. The solution lies in exportmarkets where foreigners are familiar with internationalquality benchmarks and will pay for high qualityservices. Fortunately, many services do not require highfixed asset investment in order to get started. It is quitefeasible for these service firms to start as small nicheplayers supplying services to foreign firms in their ownnational markets (exporting via Mode 2)7 and tosurrounding regional markets.

A related misconception is that, if domestic demandfor services is low, the focus on developing the servicesector will fail. It is true that it is easier to developintermediate services when there is a large domesticdemand. In the context of international integration,though, service firms have access to export markets.One of the best strategies for developing competitiveintermediate services that can be used as inputs forindustrial production is to do so through exporting thoseservices. By having to compete in regional and globalmarkets, service suppliers become familiar withinternational quality standards and the quality ofservices available in the domestic market improves.Since intermediate services form the key value addedinputs for industrial production, a low growth rate inintermediate services is likely to result in low valueadded production and a relative lack of exportcompetitiveness.

1.4.3 Inappropriate policies create distortions forservices development

Service industries develop with or without governmentpolicy support. The nature and objectives of policysupport depend on the political understanding of theimportance of services. When services are viewed as“non-productive,” disincentives such as higher taxes arelikely to develop. Government may also distortdevelopment by reserving a wide range of services togovernment monopolies or state-owned enterprises,mandating purchase from state-owned enterprises, orproviding incentives for foreign service investors thatdisadvantage indigenous service suppliers. From a tradeliberalization perspective, it is unfortunately still commonfor many developing country governments to be unawareof the competitive service enterprises already exportingand thus to assume that service sector developmentwill need to be driven by foreign investors.

1.5 Tackling policy and institutional challenges:some lessons for Viet Nam

1.5.1 Coherent domestic regulation is key tocompetitiveness

A final misconception is that “services tradeliberalization” is equivalent to deregulation of services.In reality, it is not possible to discharge government’sprimary responsibility for consumer protection unlessthere is a transparent and appropriate regulatoryframework in place. The recent WTO World TradeReport 2004 specifically explores the linkages betweenthe domestic policy environment and international trade.Indeed, in many developing and transition economiesthe issue is to strengthen the domestic regulatoryenvironment in support of competition. Regulatoryreview and reform need to address, at a minimum,competition policy, licensing of professionals, a levelplaying field for service and goods suppliers with regardto tax rates and tax incentives, and the ability to monitorand enforce regulations once they are enacted.

1.5.2 Competitiveness requires specific developmentalstrategies

As an economy like Viet Nam moves away fromprotected service industries and mandated purchasestowards an open economy, there are five factors thatneed to be considered. First, the core production andquality control functions in a services enterprises area human resource function. Staff persons are the onesthat create the service, often in interaction with theconsumer. This mean that ongoing staff training, both

7 According to WTO/GATS, trade in services occurs through four modes of supply: Mode 1 – cross-border, where the servicemoves across the border; Mode 2 – consumption abroad, where the consumer moves across the border; Mode 3 – commercialpresence, where the service supplier sets up an office abroad; and Mode 4 – presence of natural persons, where the servicesupplier moves temporarily across the border.


in technical skills and in customer relations, is criticalto competitiveness.8

Second, while quality assurance in services is criticalto their competitiveness, that quality assurance ischallenging to achieve. Most services cannot beinspected before purchase – either by the consumeror by the supervisor – as they are not produced untilafter the sales agreement has been reached. Therefore,the way that excellence is assured (e.g., in ISO9001:2000) is through control of the process ofproduction rather than through inspection of the endproduct. Successful service firms have carefuldocumentation of what staff are expected to do andwhat their latitude is for decision-making wheninteracting with a consumer. The other method of qualitycontrol is through the licensing or accreditation ofservice suppliers, especially the requirement for ongoingcontinuing professional education.

Third, because the marketing a service essentiallyinvolved selling a promise to deliver in the future,competitiveness of Vietnamese services depends in parton the profile of Viet Nam as a supplier of services.Potential consumers manage the risk of purchase froma new service supplier by asking for referrals or bygathering information on previous successes or failures.This means that different trade promotion mechanismsbecome important – e.g., government publicity aboutcreative and successful services, friendship agreementsbetween Vietnamese service industry associations andtheir sister associations abroad, partnering with well-known foreign services suppliers, etc. One of thedevelopment challenges will be to identify a lead sector– as India has done with IT services – in which to buildand promote excellence.

Fourth, Vietnamese service enterprises will maintainor increase market share only if they are able tocontinuously innovate. This is because it is usuallynot possible to protect a new service through copyrightor patent (as one can with a manufactured product);instead, one protects market share through continuingto meet and exceed consumers’ expectations.Focusing on innovation means a shift away fromstandardized services to specialty and customizedservices, which in turn require that staff have theknowledge and authority to meet consumer needs.

8 Research has shown that the most critical skills for service enterprises are the “soft” skills such as interpersonal communications,needs assessment, negotiations skills, problem solving skills, team relations skills, and the ability to design and customize services.Successful service enterprises are those that invest the equivalent of at least five percent of wages into training for staff at all levelsin the enterprise, especially those in direct contact with consumers. Success also depends on ensuring that staff are aware of, andknow how to achieve, international benchmarks for their service industry. One of the transition challenges will be how best to exposestaff to international quality service so that they are aware of any gaps between the level of service they provide and what theexpectations are in global markets.

9 Within the Russian economy, the spatial development of business services in particular, and intermediate services in general, hasbeen different from that of Western economies. Given a history of strong centralization and a socialist planned economy, businessand financial services have remained concentrated in Moscow to a much greater extent than in Western economies. Thoughtheoretically professional business services could be located anywhere throughout the country, in practice they tend to locate nearthe locus of political power. This poses challenges for distributing the benefits of service sector development throughout the country.

1.5.3 Economic planning needs to be balanced withmarket forces

A research study on the Russian economy underscorescommon themes within transition economies,particularly the legacy of central planning and subsidieswith high protection for services which has mitigatedagainst becoming competitive in the supply of services.9One of the development challenges is that opening theeconomy to private sector, especially foreign investor,participation means a reduction in the resourcesaccruing to the public sector and available for thenational budget. Care must be taken to ensure thatgovernment has adequate funds to underwrite universalaccess to basic services such as electricity, health,education, and telecommunications. The historicemphasis on large state-owned enterprises, withinternal services production, has suppressed thedevelopment particularly of competitive businessservices and service industry associations that canassist enterprises increase their competitiveness.

The challenge in a transition economy like Viet Nam isto balance central economic planning with the positivebenefits of market forces. In the context of internationalintegration, the government needs to retain enoughcontrol to make sure that social goals (such as povertyalleviation) are met while also putting in place theregulatory framework to ensure consumer protectionas the market opens.

1.5.4 The wide range of services requires coordinatedplanning

Often the structure of the domestic economy isinfluenced by the agenda of donor agencies rather thanby government’s development planning. For example,training programs may focus on the skills needed forhandicrafts or light manufacturing rather than on theskills needed for service industry workers andentrepreneurs. Export promotion initiatives may focuson goods exports, ignoring the strategies needed tosupport services export growth. In order to managethe direction and pace of service sector development,it is critical for government to have a national strategyto which donor funds can be matched. A core elementof a national strategy for services is the coordination ofinitiatives among government ministries and quasi-governmental organizations responsible for differentservices and services trade issues. Table A1 (in annex)illustrates the magnitude of the coordination problem.


Chapter 2Current Status of Services in Viet Nam

2.1 Services Sector Development Status

2.1.1 Services are growing more slowly than GDP

Since Viet Nam launched the Doi Moi programme in1986, the country has made great strides in overalleconomic growth, with an average annual GDP percapita growth rate of 5.9 percent. In addition, the open-door policy has led to a sharp increase in foreign trade;however, that trade continues to be primarily low value-added. However, per capita GDP was still the lowestin APEC in 2003 at US$480 per person. Having madebilateral and regional commitments to liberalize marketaccess for services trade, it is critical that attention begiven to ensuring that Viet Nam is able to remaincompetitive in services.

Between 1986 and 1996, the growth rate in serviceswas on average higher than that of the economy as awhole. During this time, the market mechanism wasintroduced and goods subsidies by the State wereabolished. From 1996 on, however, growth in servicesdropped below the growth rate for the economy as awhole – in contrast to global service sector growthwhich remained higher than overall GDP growth.Indeed, an analysis of Viet Nam’s GDP between 1995and 2003 shows that although Viet Nam’s service sectorhas expanded since 1996, its share of economic activityhas actually declined due to the very rapid growth ofmining and manufacturing activities. The CommunistParty Congress’ Development Plan targets for 1996-2000 of growth in services of 12-13% were not met, norwas the target met to expand the services share ofGDP to 45-46% by the year 2000 as the share droppedto 41.4 percent. The reason for not meeting set targetsmay have been the lack of a national strategy to targetkey intermediate services for growth.

A breakdown of the growth rates by sub-sector showsthat, in all cases, the growth between 2000 and 2003has been lower than in a previous period. Of importanceto overall economic development, financial services,education and training, and science and technologyservices have maintained healthy growth rates.However, business services (professional and businesssupport services) and communications – bothfoundational intermediate services – have grown onaverage at a disappointing rate.

2.1.2 Service enterprises are contributing to jobcreation

Growth in employment has been significantly slowerthan growth in GDP or new enterprise formation.

Financial services has posted the strongestemployment growth, followed by transport/storage/communications. Agriculture, forestry, and fishingcontinue to employ two-thirds of the labour force. Inorder to support a competitive service sector, there willneed to be a shift in employment out of agriculture andinto services.

The annual average for new job creation between 2000and 2002 was 61 percent higher than in the five yearsprior to 2000, with service sector jobs increasing onaverage 150 percent. The highest average annualincrease was in manufacturing jobs, which is notsurprising given that growth in manufacturing wastargeted by government. For services, the greatestincrease was in business services, followed byincreases in transportation/ communication, wholesaleand retail trade, and education and training.

Though there was a drop in 2002, GDP per workercontinued to be highest in business and real estateservices, followed by financial services and scienceand technology. While productivity in manufacturingwas higher than the average for services, it was lessthan one-quarter the productivity in business and realestate services and approximately one-third that offinancial services. Increasing the quality and availabilityof intermediate services should contribute to increasingproductivity in manufacturing. Although Viet Nam’stelecommunications and Internet industry annualgrowth rate has been extremely high, the universal levelof service remains low, with only 16.7 percent of therevenue per staff and 24.6 percent of the revenue perline compared with the regional average.

2.1.3 Services trade deficit is growing, due mainly totransport services

With regard to international trade, Viet Nam has showngrowth in services exports; however, that growth hasnot kept pace with growth in goods trade. By 2003,Viet Nam’s percent of exports from services was 13.4percent, below the global average of 20.0 percent andeven the average for developing and transitionaleconomies of 14.7 percent. Unfortunately, thedisaggregation of “other services” covers less than one-quarter of the exports, with the bulk of those servicesbeing unidentified. Imports of services have grownoverall at a significantly higher the rate than that ofservice exports, particularly the import oftelecommunication services. Unless the competi-tiveness of Viet Nam’s own services increases, theservices trade deficit produced by high import rateswill continue to grow.


Viet Nam’s deficit in service trade has steadilyincreased, due primarily to the growing deficit intransportation services. Viet Nam’s shipping fleet hasaged considerably and a growing portion of goodsexports are now being carried on foreign vessels. Therehas also been a modest deficit in financial services,but that gap has been closing. With appropriatetargeting, Viet Nam has the potential to offsettransportation imports with more rapid growth in theexport of “other services.”

One of the common misconceptions is that Viet Namis not an active service exporter. In fact, many privatesector service enterprises have had to export in orderto survive since the domestic market is still dominatedby state-owned enterprises. Of the 155 types ofservices listed by WTO, Viet Nam is already exportingat least 69 types (see Table A2). Table A3 provides aninitial listing of the top 25 export markets for Viet Nam’sservice exports.

2.1.4 Services comprise over half the enterprises andare mainly small

Over half of Viet Nam’s enterprises are already inservice industries, with the highest percentage beingin wholesale and retail commerce. The highest increasein enterprises since 2000 has been in health-relatedservices and in business services. The vast majority ofvery small and small enterprises are in serviceindustries, with wholesale and retail trade having three-quarters of the enterprises with fewer than fiveemployees. By contrast, manufacturing andconstruction enterprises dominate in size categoriesof 50 employees or more. Over 65 percent of serviceenterprises have fewer than 10 employees. Those sub-sectors showing a particular concentration of micro-and very small enterprises are wholesale and retailtrade, education and training, business services, andhotels and restaurants. Utilities, manufacturing, andmining and quarrying each have above average numberof enterprises with 200 or more employees.

There are an above average number of serviceenterprises in the low capital categories, withmanufacturing enterprises above average in the 10billion dong and over category10. Over 53 percent ofservice enterprises had less than 1 billion dong in capitalat the end of 2002. Over half of the education andtraining institutions had less than 0.5 billion dong incapital. Again manufacturing and utilities, as well asrecreational/cultural/sports enterprises were most likelyto have at least 10 billion dong in capital. Given theimportance of finance for economic growth, it is troublingthat almost two-thirds of the financial institutions onlyhad between 1.0 and 4.9 billion dong in capital.

As is common in all economies, the most capitalintensive Vietnamese enterprises are in utilities, followedby financial services. Service enterprises averageapproximately the same amount of capital asmanufacturing enterprises. Capital investments havebeen particularly notable in science and technology.While utilities and science and technology show a highvolume of investment per enterprise, they both also shownegative growth. Overall, there has been a drop ininvestment per enterprise between 2000 and 2002, withthe exception of wholesale and retail trade, construction,and a slight growth in average manufacturing investment.Utilities is the main sub-sector with substantial fixedassets, followed by financial services and mining andquarrying. Overall, fixed assets per enterprise havedecreased. On a per enterprise basis, utilities generatethe highest net turnover, followed by mining and financialservices. Though overall there has not been growth innet turnover since 2000, there has been substantial perenterprise growth in recreation/culture/sports andscience and technology.

2.1.5 Private ownership has increased, but SOEs aremajor employers

Ownership structure has been changing, driven first bygovernment’s willingness to increase foreign investmentand then by an increase in the production from privatelyowned enterprises. Over half of GDP is now producedby domestic private sector enterprises, primarilyhouseholds. Within the service sector, education andhealth enterprises are most likely to be state-owned,while business services and individual/communityservices are least likely to be state-owned. Becauseof the low participation of state-owned enterprises inbusiness services, it is probable that government wouldhave a low awareness of trade in services activities inthis cluster of services.

Regarding the number of enterprises in the economyas a whole, less than 10 percent of all enterprises werestate-owned by 2002. This surge in private ownershipmarks a significant shift since the beginning of Doi Moi.Despite the overall shift to private ownership, theownership pattern continues to vary by sub-sector.Government is most likely to have an ownership positionin hotels, and least likely to own banks outright.Foreign ownership or joint ventures involving foreigncapital are most common in insurance and banking.

The average number of employees per enterprise hasdecreased in the smaller firms, and the ownershipcategory with the largest number of enterprises(“private”) has the lowest average number of employeesthough the second highest average annual growth rate.While state-owned enterprises account for only 8.5

10 At December 31, 2002, US$1 = VND15,995.


percent of all enterprises, they are still on average thelargest employees followed by foreign-ownedenterprises. By contrast, there has been little changesince 2000 in average net turnover overall in theeconomy; however, once again the ownershipcategories with the largest number of enterprises havethe lowest average net turnover. Joint ventures postedthe largest average net turnovers, followed by state-owned enterprises. Enterprises with state capitalshowed the highest average annual growth in averagenet turnover.

While joint venture enterprises posted the highestaverage annual capital per enterprise, that amountdecreased from 2000 as did the average annual capitalin 100% foreign owned enterprises. This is a disturbingtrend in that a primary reason for opening the economyto foreign ownership is to attract foreign capital. Theonly enterprises showing an increase in average annualcapital were ones with state capital. Again, the largenumber of private enterprises showed the lowestaverage annual capital per enterprise. The same trendswere apparent with regard to average fixed assets.

2.1.6 Foreign direct investment in services remainsrelatively low

The percent of foreign direct investment in servicesremains at only half the estimate of UNCTAD (2004)that over 60 percent of all investment flows are in serviceindustries. For Viet Nam, the primary focus of foreigndirect investment has been in utilities and construction,which is quite appropriate for Viet Nam’s level ofdevelopment. Substantially more investment is neededin telecommunications, financial services, andeducation and training if rapid economic growth is tobe supported. In non-financial services, France andregional economies contribute most of the foreign directinvestment. In financial services, the prime investor isthe U.S., followed by France. Joint ventures includeAustralia and Canada, among others.

2.1.7 There are many inter-linkages among servicesectors

One of the challenges in designing a national servicesector development strategy is that services serve asinputs to all other economic activities and so there arenumerous inter-linkages. For example, the bankingsector needs an efficient IT services network thatprovides easy Internet access. Information andcommunication technology make a critical contributionto all other economic activities. Viet Nam’s current lowrankings on the Information Society Index (last out of53 ranked countries) and its ranking as 97th out of 173

economies with regard to e-government initiativessignals the need to accelerate its already rapid growthin IT development. Table A4 below illustrates the typesof inter-linkages that exist among the services coveredin this study.

Indeed, Viet Nam’s key service sectors (telecom-munications, business services, banking and financialservices, education and training, air transportation,maritime transportation, and tourism) are closelyinterlinked with each other but are in the initial state ofdevelopment. They have some competitive strengths,but these are still outweighed by weaknesses.

2.2 Legal Environment Status

2.2.1 The legal framework for services is evolvingrapidly and is still incomplete

The legal environment for the services sector hasdeveloped much later than that for the good sectors.This is largely due to the “old” perception about the roleof the services sector in the economy. In the past,services were only considered to have a supporting rolein the economy and many activities were viewed asmaking no contribution to the “material production” ofthe economy. During the reform years, the legalframework for the services sector has developed veryrapidly. Many important legal documents, especiallythose regulating the individual services industries orrelated to economic integration, were just promulgatedin the last few years or are being revised. In large part,the foundation has been built on sectoral laws orordinances. There are construction laws, accountinglaws, civil aviation laws, SBV laws, and the MaritimeCode, to name a few. There are also government decreesfor the implementation of these laws. The governmentor ministries can also issue Decisions to set out thestrategy for a given sector. Table A5 provides an overviewof some of the laws, ordinances, and decisions thatcontrol economic activity in the services sector,organized by WTO’s classification of traded services.11

The legal environment is far from sufficient for smoothfunctioning of the service sector. Many existing lawsand ordinances are incomplete, not only in terms ofcoverage but also in terms of lacking documentsrequired for implementation. Many implementingdecrees are still to be issued by the government forthe newly promulgated laws effectively come into force.There is the further issue that, due to different definitionsand classifications, the coverage of some specificissues may be fragmented and addressed in variouslegal documents.

11 Additional laws under development include the Common Investment Law, the Unified Enterprise Law, and the Omnibus Bill. Thereis a need to review all of these legal instruments to ensure that there is no overlap or contradiction and also to determine whatcoverage is missing.


2.2.2 Regulatory frameworks are still not fully andconsistently developed

Attention to service sector regulation has developedlargely in response to the requirements of internationaltreaties on services trade, such as the Viet Nam-USBilateral Trade Agreement and the ASEAN FrameworkAgreement on Services. There has not been a holisticframework for coverage of service sector regulationscovering the issues commonly addressed in moredeveloped service economies. In the context ofinternational integration, it is important to recognizethat the primary trade-distorting mechanisms forservices are typically embedded in domesticregulations (or the lack thereof). At the same time,governments retain the right to regulate in accordancewith national policy objectives, without any a priorirequirement to enact specific legislation. One of themost fundamental issues is to clarify the objectives ofdomestic regulation, which usually include thefollowing: create a transparent, efficient businessenvironment in which transaction costs are reduced;protect consumer interests by ensuring thecompetence and guaranteeing the performance ofservice suppliers; ensure universal access to basiclevels of certain services (e.g., electricity, potable water,telecommunications, education, health); collectrevenue to offset administrative functions ofgovernment; implement national policy objectives.

Licenses and certification are already required forsupplying some strategic services or businessdevelopment services. For supplying some professionalservices, such as accounting and auditing or legalservices, professional certificates are required by law.However, some of the necessary legal documents havenot yet been promulgated, creating confusion andambiguity on the conditions and criteria for the provisionof these services. Procedures for the award of licensesfor major service operators remain ill-defined and non-transparent. Regulatory objectives are not necessarilymet in the same manner across all types of services.How this is done depends in part on the consequencesof non-performance. By contrast, the incompetence ofa surgeon or an airline pilot can have fatalconsequences. Table A6 provides a summary of thetypes of regulations needed, with examples of how eachtype of regulatory role is commonly executed in othereconomies.

One of the regulatory issues is the rate of taxation forservice enterprises. There is no longer systematicdiscrimination between services and goods in Viet Nam.Except for some special cases, all enterprises in VietNam have to pay VAT and corporate income tax. FromJanuary 2004, the tax rate for corporate income tax is28 percent, applicable to all types of enterprises. TheVAT rates, however, range from 0-20 percent, with ratesvarying within this range for various service industries.The majority of firms are subject to a 10 percent VAT

(e.g., post, telecom services, legal consulting services,construction, transport services). The rate for teachingand scientific and technical services is only 5 percent.But tourism services, as well as maritime brokerageand shipping agent services, are subject to the highestrate of 20 percent. The rationale for the different ratesis unclear. Another regulatory issue is transparentspecification of incentives for which specific servicesuppliers qualify, either by virtue of service industry orby virtue of size of operation. Typical incentives includeresearch and development credits, training tax creditsor subsidies, and government loan guarantees.

2.2.3 The policy environment is complex and may becontradictory

The policy environment for services in Viet Nam hasbeen characterized by a fairly complex system of laws,ordinances, and by-law documents being issued by lineministries, agencies and provincial governments. As aresult, there is a lack of transparency, and it is notuncommon that provisions are conflicting with each other.The Vietnamese public itself has difficulty gaining accessto these documents; the task is even more difficult forforeign companies. Indeed, foreign companies are ofteninformed about changes in licensing and procurementregulations only after they have prepared documentationto conform to previous regulations. Unclear division ofresponsibilities among regulatory agencies can resultin the passage of inconsistent laws and regulations.There have been cases where provisions of newerdocuments are in contradiction with other legaldocuments that are in effect.

It is not uncommon that regulations can be stated invery general terms, leaving room for arbitraryinterpretation. Higher transaction costs associated withcumbersome procedures and non-transparentregulations may discourage the development of theservice industries that are operating under the regulationof these documents. Unpredictable changes in theregulatory framework are another issue that may havea negative impact on business development in VietNam. Frequent changes impose unnecessary risk indoing business, especially for long-term investment.Increased level of uncertainty may lead to a decreasein the scale of doing business and investment, andhence lower the demand for services.

2.2.4 Inequities still exist between SOEs and privatefirms but the role of service industry associationsis expanding

One of the salient characteristics of economic reformin Viet Nam is the increasing role played by the privatesector. The revised constitution in 1993 allowedindividuals to exercise property rights over incomeproducing assets and personal property that has madeconsiderable contribution to the proliferation of theprivate sector. The share of the state sector in GDP


has gradually decreased, especially since the newEnterprise Law came into effect in January 2000. By2003, the state sector in GDP only accounted for 38.3percent, down from 40.2 percent in 1994. Of particularnote is the services sector where the role of state-ownedenterprises (SOEs) in retail trade was cut from 30percent in 1990 by nearly half to 17.2 percent in 2002.

Yet the dominance of SOEs in strategic serviceindustries remains. The monopoly of SOEs created inthe past has been cemented by several factors. First,the SOEs have been viewed by the leadership as thebackbone of the economy and hence continue to receivefavourable treatment such as easier access to land orcapital and protection against competitors. With theemphasis placed on hi-tech industries such as ICT andbio-technology to develop a knowledge economy, alarge proportion of public investment has gone to state-selected strategic industries and geographic areas suchas the HCM software park with its high gradeinfrastructure, subsidized rent ($2/sqm), and low taxrates (0.4%).

Second, the monopoly position of SOEs in servicesectors such as telecommunications, air transport, andelectricity has been a natural consequence of unequalmarket access where private enterprises, includingforeign investors, either are not allowed access or faceenormous barriers to entry. Non-transparent and ill-defined licensing requirements, or asymmetric accessto government projects, are some prominent barriers.For example, public construction work is usuallyundertaken by local consultants and contractors,usually SOEs. Licensing procedures are often verycomplicated and there are no private domestic firmsoperating in almost every area of telecommunication.The increased competition in telecommunication sofar has been restricted to just a few SOEs.12 Starting abusiness in Viet Nam still takes longer and is morecostly compared with other East Asian countries.

The lack of a level playing field is another commonlycited reason behind the under-development of the privatesector in Viet Nam. Development of the private sectoris limited by a lack of access to credit, as well asdifficulties and high costs associated with getting useof land or office space. Operations in some servicesindustries require large fixed investment in land orbuildings. A consequence of the absence of competitionfrom private enterprise is that there has been littleincentive for the incumbent monopolistic SOEs to invest

in research and development, to improve the quality ofservices they provide, or to increase businessefficiency.With weak law enforcement, monopolies mayeasily abuse their market power to lobby for high levelsof protection and raise service prices. Consequently,the prices of some essential services (such as electricityand telecommunications) in Viet Nam have beenunusually high compared with other economies in theregion.13

Higher than average service prices, coupled with belowaverage service quality, clearly is one of the maincauses of low level of competitiveness of Viet Nam.Increased competition and quality of services will helpreduce the cost of doing business throughout theeconomy. One example of interlinkages is the multipliereffects of lowering logistics cost and improve the qualityof service of the logistics industry in Viet Nam. Doingso would eventually contribute to strengthening thecompetitiveness of Vietnamese export products, whichin turn would provide producers of exporting rawmaterials (e.g. farmers and fishermen) with better andless expensive access to overseas markets. Increasedaccess to export markets would return a higher marginto the producers and contribute poverty alleviationespecially in rural areas, which have formerly beendisadvantaged by poor logistics service.

Since 1998, a number of service industry associationshave been established in Viet Nam. This is an importanttrend because such self-governing associations canplay an important role in educating members regardinginternational competitive trends and benchmarks,developing and enforcing codes of conduct (linked tointernational standards) to ensure professionalism andquality services, providing objective verification of thecompetence of service suppliers (through licensing orcertification), ensuring continuing professionaleducation of members so that their skills are up-to-date, and educating the public about the value of agiven service.

Table A7 provides an overview of the status of self-regulation for Viet Nam’s service industry associations.Membership in the international association providesboth links to international standards of practice andcredibility for Viet Nam’s service suppliers in theinternational marketplace. Since Viet Nam’s serviceindustry associations are very young, technicalassistance from an established sister associationabroad can be helpful in ensuring that the association

12 The strategy of the telecommunication sector is to encourage private firms and enterprises from all economic sectors to investdirectly in telecommunications services by 2008. However, there is no adopted roadmap which reveals government plans forincreasing competition, private and foreign investment, other than the Viet Nam-US BTA.

13 It should be noted that competition has increased substantially in the Viet Nam telecommunications market over the last decade,considering that in 1993 the market was still a total monopoly in all market segments. However, it should be noted that some of thecurrent competition in the telecommunications sector in Viet Nam has come from other SOEs (and the armed forces) entering themarket, as they see the potential for profits and diversification, rather than from the private sector.


meets its members needs effectively. Generallyspeaking, it is difficult for consumers to assess thecompetence of a service supplier prior to the provisionof service. Codes of conduct, licensing, andrequirements for ongoing skills training in order tomaintain a license all help ensure that the publicreceiving competent and professional assistance.

2.2.5 Regulations for foreign investment continue torestrict market access

Since 1987, Viet Nam has been opening the nationaleconomy and integrating it into the regional and globalmarket. In support, the Foreign Investment Law hasbeen amended four times to better promote and ensureinvestors’ rights. Forty one (41) investment protectionagreements and thirty eight (38) double taxationavoidance agreements have been concluded withvarious countries and territories. Government nowallows foreigners to make all forms of investment inViet Nam, including in 100%-foreign-owned companies,in all sectors not prohibited by the Government. Withregard to the service sectors where there are constraints(such as telecommunications), investors are entitledto make joint investment with local partners. TheGovernment typically prohibits foreign investment onlyin sectors that are deemed harmful and threatening to(i) the national culture, (ii) the national security, (iii)public social benefits, and (iv) the environment.

However, market access in service sector remains abig issue. In telecommunication, for instance, the onlyavenue for private and foreign involvement in basictelecommunication networks (other than the BTAprovisions) has been through business cooperationcontract (BCC) schemes, in which foreign companiesfinance capital investment and share in revenues buthave no equity share and limited or no managementcontrol. In most cases, such BCC schemes suffer fromvarious drawbacks which discourage foreign (and somedomestic) investors and increase the cost of capital.Lack of ownership by the private investor and limits onmanagement control can result in increased risk forinvestors, reduction in the availability of capital, andreduction of the transfer of management expertise tothe firm. Also, since the BCCs de-link managementfrom facing investor risks, incentives for effective, profit-oriented management are reduced. In addition, thenegotiation process is time-consuming for sucharrangements and increases transaction costs.

2.2.6 Mechanisms for implementation and oversightare not clear

Weak law enforcement represents a further importantbarrier to the development of the private sector in VietNam, especially firms operating in the service sectorwhere the intangible characteristics make enforcementmuch more difficult. Weak law enforcement impliesinsecure property rights and an immediate consequence

is a higher level of risk of doing business and transactioncosts. Firms are forced to adopt a number of riskmitigation strategies to limit their exposure in case otherfirms breach contracts. They may use short-termcontracts with the promise of renewal upon successfulcompletion, or delayed payments to ensure futuredeliveries. In addition, small service firms, whichaccount for the vast majority of Viet Nam businesses,have little recourse to protect themselves from breachof contract by the other party.

In the World Bank’s Doing Business in 2005: RemovingObstacles to Growth, Viet Nam’s business environmentranks last in the World Bank list of 145 countries despiterecent rigorous reforms of its business laws. Borrowersand lenders in Hong Kong (China) and Singapore enjoyall of the ten main types of legal rights that expandaccess to credit, while those in China and Viet Namhave fewer than half as many legal rights. The reportalso finds that developing nations such as Viet Nam,through administrative procedures, make it twice ashard for entrepreneurs to start, operate, or close abusiness, and businesses and provide less than halfthe property rights protections available to businessesin more developed economies.

There also continues to be the weak regulatoryindependence from operators. Although Viet Nam hasmade impressive improvement in this area thanks toits reform in SOE management and in the preparationfor the accession to joint the WTO in the very nearfuture, the dominance of SOEs in strategic industriesimplies that the line ministries still are the owners ofSOEs and at the same time are in charge of developingsectoral policies and strategies. As a consequence,potential conflicts of interest remain. For example,although VNPT is nominally separate from MPT, in factMPT has the role of owning VNPT and promotingVietnamese telecommunications, with 94 percent ofthe market dominated by VNPT. Other countries havehelped ameliorate this issue during a transition phaseby having the ownership function vested in the Ministryof Finance, an Auditor General, or an equivalent body.

With regard to technical standards, there is a lack ofwell-defined standards for a wide range of services,along with a lack of transparency in their administration,what makes implementation difficult. It is notuncommon that consumers’ complaints have not beenaddressed adequately. A common quality problem canbe observed in construction work where the violation oflegally-stipulated quality standards has often beenunpunished.This weak implementation systemobviously can encourage the unfair competition and arace to the bottom in price and quality among serviceproviders. The resulting outcome is a low level ofcompetitiveness of Viet Nam’s service providers.

Lack of standards, together with weak law enforcement,has also been the main cause behind the alarming


decrease in the quality of education. As a result, VietNam has not been able to supply sufficient skilledworkers for the fast-growing private sector, and this willcause difficulties for Viet Nam in narrowing thedevelopment gap with its neighboring countries. As VietNam is starting late compared to other parts of theworld and coming to market during a global technologyslow down, it needs to find the will and resources tokeep improving human capital and infrastructure evenin order to maintain current levels of competitiveness.At present, Viet Nam still lacks strong industrystandard-setting institutions and does very littleinternational benchmarking.

2.2.7 Multiple ministries are responsible for services

A major challenge in most economies is the fact thatresponsibilities for service industries are spread acrossa range of ministries and governmental agencies. Inthe case of Viet Nam, every ministry plays some rolein either direct supervision of a service industry or policydevelopment that affects service industries. Unlike theother sectors, the service industries are characterizedby a much higher degree of both intra-sectoral and inter-sectoral relationship. All service industries can serveas inputs for the other services industries but also canbe important inputs of good production. As a result,the development of the services sector hinges on thecoordination among all ministries and agencies. AnnexB shows some of the linkages between serviceindustries and ministries and commissions.

One of the consequences of viewing services primarilyas support for production is that the responsibility forany specific service industry may be spread acrossseveral ministries. In Viet Nam, it is common thateach service industry will be administered mainly by aline ministry. At the same time, several other ministriesare also responsible for the formation of the strategyand operation of the enterprises. In addition, provincialpeople’s committees and departments are alsoresponsible for the activities of that service industry withinprovincial borders. The result is a complex system ofadministrative management with several horizontal andvertical linkages.

Effective functioning of such a complex administrativesystem requires several pre-conditions such astransparency, clear accountability, and a goodmonitoring and evaluation process. These pre-conditionsaim to create the “right” incentives for all stakeholderswho participate in the administration or in thedevelopment of sub-sectoral and overall service sectorstrategy. Unclear division of responsibilities amongministries and agencies may lead to the situation inwhich each agency pursuits its own interests, payinglittle attention to the development of the economy as awhole. As a consequence, ministries, agencies, andprovinces may issue conflicting or inconsistentregulations and decide to use public resources in a

wasteful manner. The outcome of the lack of coordinationis increased transaction costs and uncertainty theenterprises have to bear, and the fragmentation of theresulting strategy.

In order to develop service industries competitively,oversight for any given service industry will need to beallocated to a single ministry while ultimateresponsibility for a national service sector developmentstrategy will need to be the responsibility of a specificsenior authority rather than spread across multipleauthorities as is currently the case. The formation of acoherent national strategy for the service sector willdepend inter alias on the setting of development prioritiesas well as on the selection of interventions under tightfiscal constraints. As a consequence, the existence ofan effective coordination mechanism that can deal withpotentially conflicting interests among ministries andagencies is of crucial significance for an optimalselection of objectives and allocation of resources.

The decentralization process currently underway makesthe clear division of responsibilities even more importantto ensure coherence in national policy regarding theservices sector. The implementation of the recentlyissued Resolution 8 about accelerating decentralizationwill require significant improvement in accountability,monitoring, and evaluation so as to avoid a situationwhere individual provinces and ministries only follow theirown interests rather than implementing an integrateddevelopment strategy for the service sector as a whole.

2.3 Competitiveness of Viet Nam’s services

2.3.1 Rankings of competitiveness and regulatoryenvironment

The Global Competitiveness Report 2003-2004 hasranked Viet Nam as #60 with regard to its GrowthCompetitiveness Index (out of 102 countries) and #50with regard to its Business Competitiveness Index (outof 101 countries). This places Viet Nam as lesscompetitive overall than its main Asian competitors withthe exception of Indonesia and the Philippines. One ofthe factors in the competitiveness of service industriesis the strength of the domestic regulatory environment.Viet Nam is still behind its main competitors with regardto its regulatory and legal framework and theconsistency with which enforcement occurs.

2.3.2 Competitiveness in human resourcesdevelopment

The quality of human resources available is also criticalin determining services competitiveness as it is thestaff of a service enterprise that creates the service.Viet Nam unfortunately lags behind most of itscompetitors in the quality of education provided to thework force. Its low ranking on management training isparticularly worrisome as a lack of highly skilled


managers and supervisors can have a chilling effect onthe ability to compete in an international context. Thelow ratings on the extent to which staff receive ongoingon-the-job training and the low reliance on managerswith professional training (rather than owner-operators)also indicate the need for initiatives to strengthen skillsin the workplace if Viet Nam is to have an internationallycompetitive services sector.

2.3.3 Competitiveness in research and development

On the positive side, Viet Nam ranks above average inthe quality of its scientific research institutions andthe availability of scientists and engineers. Theseresources, coupled with the priority government hasplaced on information and communications technology,could provide a platform for excellence in outsourcedresearch and development contract work, particularlysince the workforce is used to pay being linked toproductivity.

2.4 Strengths and weaknesses of Viet Nam’sService Industries

2.4.1 The strengths

The greatest strength of Viet Nam’s services sector isgovernment’s commitment to support service sectorgrowth and international integration. Without thatsupport, it could be very difficult to addresscompetitiveness issues in services. Reform momentumis high, and a number of important legal documentshave been enacted recently (e.g., the Amended LandLaw) and others will follow shortly (e.g., CompetitionLaw, Unified Enterprise Law, Unified Investment Law).Progress is also being made in the separation ofadministrative operations and regulatory oversight,particularly in maritime transport.

Viet Nam is fortunate in having a fully digitalized tele-communications infrastructure as telecommunicationsis the key conduit for trading services. Information andcommunication technologies (ICT) have been prioritizedby government as critical infrastructure for sustainedfast growth. Tourism has also been identified as a keystrategic sector since Viet Nam is endowed withpotential tourist attractions that can be furtherdeveloped. Changes have been made so that no visais required for short-stay visitors from major touristmarkets like East Asia.

While the preponderance of state-owned enterprises(SOEs) can have a stifling effect on competition, thereis a short term benefit for Vietnamese service suppliersin that SOEs are likely to use Vietnamese servicesrather than purchase from abroad. In addition,Vietnamese service suppliers have an unparalleledknowledge of the local market and customs, as wellas links with surrounding economies. Viet Nam has ademonstrated ability for the financial services sector

to grow rapidly, which is critical in generating sufficientcapital to support private sector services growth.Finally, Viet Nam has a motivated and diligent workforce that is an asset in developing service industries,with particular strength in science and research thatcan be further developed.

2.4.2 The weaknesses

There are several paradoxes in Viet Nam’s developmentthat are contributing to weaknesses in its serviceindustries:

a) Viet Nam’s economy is growing rapidly, but value-added and quality are remaining relatively low.Services continue to be over-priced for the qualityreceived, and there is still a relatively poorunderstanding of customer needs and how toaddress them.

b) Viet Nam’s export strategy is really an importsubstitution strategy rather than an export-growthstrategy.

c) Viet Nam has committed to market orientation ininternational agreements but is still operating froma framework of planned economic growth thatmakes it difficult for competitive services to develop.

d) Viet Nam wishes to diversify the investment capitalavailable but in actuality is relying more heavily onthe State budget.

e) Viet Nam is advocating active internationalintegration but has as yet no roadmap or strategicvision for how that will occur. In services,government is potentially creating more competitionin domestic markets for Vietnamese servicesuppliers without a strategy to help them strengthentheir ability to compete.

f) Viet Nam is committed to growth with equity butthere is still significant poverty and income disparityto be addressed. Inappropriate market openingcould erode the resources available to governmentwith which to address inequities.

The most fundamental issue, though, is the lack ofcoordination among ministries and lack of integrationamong the various services master plans. At least 70percent of inputs for service firms come from otherservices, and so it is essential that there be an overallnational strategy to strengthen Viet Nam’scompetitiveness in services. Issues that need to beaddressed include an ongoing lack of capital in thefinancial system and weak human resourcedevelopment, especially at the supervisory andmanagerial levels. Since staff identify customer needs,create services, and provide quality control, their skilllevel is critical to competitiveness.


Market flexibility and awareness of service sectorissues is still developing. In the meantime, governmentis slow to react to market changes. Many SOEs providetheir own support services internally or contract withother government entities, making it difficult for privatesector services suppliers to grow and thrive. Poorcoordination between government agencies results inproblems such as the degradation of tourism sites dueto environmental pollution or a lack of propermaintenance investment.

As is the case with many developing countries, VietNam still has a weak regulatory framework, which putsits service sector at risk as market access for foreignservice suppliers is increased under internationalintegration. In many instances, there is not yetindependence between operational functions andregulatory oversight and the enforcement of existingregulations is inconsistent at best. Legal documentsare drafted with limited consultation with concernedparties, especially the enterprises, and so may notmeet the needs of the private sector. Existing lawsmay be out of date or at variance with internationalcodes and standards.

2.5 Opportunities and threats for Viet Nam’sService Industries

2.5.1 The opportunities

Viet Nam is in a position, with proper planning andcoordination, to take advantage of several key trends.The economic development and trade agreementsalready in place within ASEAN provide Vietnameseservice suppliers with a platform for developing orexpanding regional cooperation agreements (e.g., jointtourism offerings). China’s plans for the Pearl RiverDelta can result in a range of opportunities forVietnamese service providers. In the Tsunami aftermath,there are a number of opportunities for Vietnameseservice enterprises to participate in regionalreconstruction and growth.

Because Viet Nam has been attractive to foreigninvestors and foreign donor agencies, Vietnameseservice suppliers have the opportunity to export servicesto foreigners within Viet Nam, thus laying the foundationfor expanded opportunities abroad. The presence offoreign-owned businesses in Viet Nam provides anopportunity to study international best practices andfor soft technology transfer through joint ventures.

Whether independently or through joint ventures, VietNam has the opportunity to exploit several global growthopportunities. First, with an expanding “young seniors”population, there are extended opportunities to linktourism with health services for persons healthy enoughto travel and affluent enough to afford optional healthand spa services. Second, competitiveness isincreasingly dependent on knowledge-intensivestrategic input and so the demand for research anddevelopment services, which can be addressed by VietNam’s research institutes, is growing. Third, theoutsourcing of business support services is continuingits double digit growth, and Viet Nam’s informationtechnology expertise coupled with its digitaltelecommunications infrastructure can be very pricecompetitive.

The number of international agreements that includemarket access liberalization in services is growing. Thistrend at both the international, regional, and bilaterallevels will gradually erode market access barriers thatVietnamese service suppliers presently face and soprovide access to new markets. As Viet Nam movesthrough its own economic reform to accommodateinternational integration, it will also be in a position toexport that expertise to other developing economies.

2.5.2 The threats

While the opening of international markets will createmore opportunities abroad for Vietnamese servicessuppliers, it will also bring more foreign competitioninto the domestic market. If that foreign competitionincreases too rapidly, before technology absorption, itcould reduce the competitiveness of Viet Nam’s serviceindustries. In addition, imbalances can be created byforeign suppliers taking over the most lucrative portionsof the domestic markets. Government will need to bevery careful to open the services market in a mannerthat distributes the benefits. As long as Viet Nam’sresponse mechanism to external shocks is weak, itwill be vulnerable to negative shocks.

With the increasing international integration, otherdeveloping economies are also pushing to findopportunities for their service firms. As well, tradingpartners such as the U.S. are pressing for rapid marketopening that may not be in Viet Nam’s best interest.Careful coordinated planning, coupled with rapid growthof key intermediate services, will be needed to helpViet Nam’s service sector catch up and not continuallylag behind.


Chapter 3Recommendations on Viet Nam’s goals and strategies

for services

3.1 Recommended Overall Goal forComprehensive Development of theServices Sector

The following overall goal is proposed in order to ensurethe comprehensive development of Viet Nam’s servicessector:

Develop an efficient and internationally competitiveservices sector in order to:a) Provide high value-added inputs for Viet Nam’s

industrialization and modernization, especiallyexport-oriented industries.

b) Reverse the growing deficit in services trade byincreasing the export of services.

c) Provide an attractive economic environment forattracting foreign direct investment.

d) Support sustainable growth and step-by-steptransfer to a knowledge-based economy.

e) Assist in meeting national human developmentobjectives.

3.2 Proposed Growth Goals

3.2.1 Approach to calculating growth goals

Developing an econometric model for service sectordevelopment is challenging given the many inter-linkages among services. In calculating growthprojections, therefore, the Core Research Team hasrelied on a series of assumptions and estimations inorder to arrive at the proposed growth rates. Thereference point for calculations was the projections foreconomic development adopted by the Party andcontained in Viet Nam’s National Strategy, with thestipulation that GDP would double between 2000 and2010 (see Table 1).

Before beginning the estimation process, the Core Teamtested the stipulated growth rates in the Party’sprojections. The results are presented in Table 2 andshow that it is not possible to achieve a proportion ofservices in GDP as high as even 42 percent by 2010unless the services sector grows at higher than 8percent annually on average.

Table 1: Stipulated Economic Development Projections for 2010

Economic Sector Average Annual Growth By 2010:Percent of GDP Percent of Labour Force

AgricultureIndustryServices

4.0 – 4.5%10.0 – 10.5%

7.0 – 8.0%

16 – 17%40 – 41%42 – 43%

50%23 – 24%26 – 27%

Table 2: Tests of the Stipulated Projections for 2010, Based on 2000 Data

Economic Sector Actual in 2000 By 2010:Average AnnualGrowthGDP GDP% Total % Total

Calculations with Lower Stipulated Growth Rates

AgricultureIndustryServicesTotal

63,71796,913

113,036273,666

23.3%35.4%41.3%

100.0%

4.0%10.0%7.0%

94,316251,367222,359568,042

16.6%44.3%39.1%

100.0%Calculations with Higher Stipulated Growth Rates


63,71796,913

113,036273,666

23.3%35.4%41.3%

100.0%

4.5%10.5%8.0%

98,951263,030244,036606,017

16.3%43.4%40.3%

100.0%Calculations with Mixed Stipulated Growth Rates


63,71796,913

113,036273,666

23.3%35.4%41.3%

100.0%

4.0%10.0%8.0%

94,316251,367244,036589,719

16.0%42.6%41.4%

100.0%


Further, additional growth has already occurred in theVietnamese economy since 2000, with the percentageof services in GDP dropping from 41.3 percent in 2000to 40.5 percent by the end of 2003 and an estimated39.8 percent by the end of 2005. Table 3 provides theactual data, with projections to the end of 2005assuming the same growth rates as in the period 2000to 2003.

Therefore, in order to determine the growth rate neededto achieve at least 42.0 percent of GDP from servicesin 2010, the Core Team developed estimations basedon the following assumptions:

1. Since agriculture grew on average at 3.5 percentbetween 2000 and 2003, it will need to grow onaverage at 4.5 percent between 2005 and 2010 inorder for overall growth between 2000 and 2010to average 4.0 percent and the percent of GDP tobe approximately 16 percent (see Table 4).

Table 3: Estimates for 2005, Based on 2003 Data

Economic Sector Actual in 2003 Estimate of 2005:Average AnnualGrowth: 2000-03GDP GDP% Total % Total


70,574129,247136,168335,989

21.0%38.5%40.5%

100.0%

3.5%10.1%6.4%7.1%

75,676157,228154,168387,072

19.6%40.6%39.8%

100.0%

Table 4: Estimates for the Agricultural Sector to 2010

EconomicSector

Amount of GDP Percent of GDP AverageAnnualGrowth

2000(actual)

2005(estimate)

2010(estimate)

2000 2005 2010

Agriculture 63,717 75,676 94,306 23.3% 19.6% 15.8% 4.0%

2. The growth rate for the industrial sub-sectorsbetween 2003 and 2005 is unlikely to be lowerthan the average annual growth rates from 2000-2003; therefore, that growth rate can be used toestimate the proportion of industry in GDP in 2005.In order for the overall industry growth rate between2000 and 2010 to average 10.0 percent, growthbetween 2005 and 2010 would need to slowslightly in each of the sub-sectors (see Table 5).Even so, the industry sector would be 42.1 percentof GDP in 2010, which is slightly above thestipulated percent of 40-41 percent. If the industrysector were to grow at faster than 10.0 percentoverall between 2000 and 2010, the percent ofindustry in GDP by 2010 would be even higherthan 42.1 percent.

3. To ensure that the economy does not over-heat,the overall GDP growth needs to result in theeconomy increasing by no more than at ratio of2.2 every 10 years (see Table 6).

EconomicSector

Table 5: Estimates for the Industry Sector to 2010Amount of GDP Ave. Annual Growth % of GDP

2000(actual)

2005(estimate)

2010(estimate)

2000-2005 2005-2010 2000-2010 201020052000

MiningManufacturingUtilitiesConstructionIndustry Total

18,43051,492

6,33720,65496,913

21,99588,73911,21835,276

157,228

25,498146,855

18,90359,442

250,698

3.611.512.111.3

10.2%

3.010.611.011.09.8%

3.311.011.511.1

10.0%

6.718.82.37.5

35.4%

5.722.92.99.1

40.6%

4.324.73.2

10.042.1%

Table 6: Calculation of Overall GDP Growth to 2010Economic

SectorActual in 2000 By 2010: Average Annual Growth:

2000-10Ratio of

2010/2000GDP GDP% Total % Total


63,71796,913

113,036273,666

23.3%35.4%41.3%

100.0%

94,306250,698250,284595,288

15.8%42.1%42.0%

100.0%

4.0%10.0%8.3%8.1% 2.18


4. The optimal structure of the services sector tosupport rapid growth, based on internationalcomparisons, should determine the relativeproportions of sub-sectors in Viet Nam’s servicessector (see Table 7).

5. In order to influence the competitiveness of theentire economy, the focus of growth in Viet Nam’sservice sector needs to be on priority intermediateservices rather than on final demand services. Toachieve an overall services sector growth rate of8.3 percent as specified in Table 8, the servicessector will need to grow on average 10.2 percentper year between 2005 and 2010, with aboveaverage growth in transportation andcommunications, financial services, businessservices and science and technology services, andeducation and training services.

Table 7: Optimal Structure of the Services Sector to Support Rapid Growth

Service Sub-SectorServices as a Percent of GDP

42 Percent 50 Percent 65 PercentTransport, storage, communicationsFinance, insurance, real estateBusiness servicesSocial services (education, health)Hotels & restaurantsWholesale & retail tradeCommunity & personal servicesPublic administration

5%5%5%5%2%

14%1%5%

7%8%8%7%2%

13%1%4%

10%15%10%7%2%

12%5%4%

Source: Comparative analyses of over 80 economies at four levels of development by Service-Growth Consultants Inc.

Table 8: Proposed Growth Rates for Viet Nam’s Services Sub-Sectors: 2005-2010Service Sub-Sector Percent of GDP Ave. Annual Growth Rate

2000 2005 2010 2000-2005 2005-2010

Transport, storage, communicationsFinance, insuranceBusiness services; real estate*Science & technologySocial services:Education & trainingHealth & social servicesHotels & restaurantsWholesale & retail tradeCommunity & personal services:CultureParty activitiesCommunity servicesPrivate servicesPublic administrationServices total in GDP

3.92.14.50.6

3.31.43.2

16.3

0.60.12.10.22.9

41.3%

3.82.13.90.6

3.41.43.2

16.2

0.50.11.90.22.6

39.8%

4.62.54.70.8

4.11.53.4

15.8

0.50.11.70.12.2

42.0%

6.4%7.1%4.1%9.2%

7.2%7.1%6.7%7.0%

5.1%5.5%5.6%2.5%4.8%6.4%

13.5%13.5%13.5%13.5%

13.5%9.5%

10.5%8.5%

7.0%5.5%6.5%3.5%5.0%10.2%

*Note that Viet Nam classifies “real estate” with business services rather than with financial services (as is the case in the UnitedNations national accounts statistics).

3.2.2 Alternative growth goals for 2010

Based on the calculations outlined above, it will benecessary for the services sector to grow at an averageoverall rate of 10.2 percent for the years 2005-2010 ifservices are to be at least 42 percent of GDP by 2010(see Table 9 below). In order to ensure overallcompetitiveness, growth will need to be focused inintermediate services. Specifically, the following servicesub-sectors will need to grow at an average annualrate of 13.5 percent: telecommunications, finance,business services, science and technology, andeducation and training. To support tourism growth, theaverage annual growth rate for hotels and restaurantswill need to be 10.5 percent. Note that, whileGovernment has called recently for services to be 45percent of GDP by 2010, it would take an averageannual growth rate for the overall economy of 10.2


percent and of 13.0 percent each year for the servicessector in order to achieve that percent.

Specific projections are given in Table A8 in annex forpercent of GDP and Table A9 for average annual growthof economic activities, including the various service sub-sectors. Table 10 below shows the links betweentargeted service industries and the overall goalcomponents.

3.2.3 Alternate growth goals for 2010-2020

For 2003, the World Bank estimated that low incomeeconomies (such as Viet Nam) averaged services as50 percent of GDP. In order for Viet Nam’s servicesector to reach 50 percent of GDP by 2020, averageannual growth for the services sector will need to be9.5 percent from 2010 to 2020. Proposed economicdevelopment goals are given in Table 11.

Table 9: Proposed Economic Development Goals for Viet Nam’s National Social-Economic Strategy:2005-2010

Target Year

GDP growth: 2005-2010GDP growth: 2000-2010GDP 2010/2000% GDP in 2010% labour force in 2010

Whole Economy

9.0%8.1%2.18

--

Agriculture, Fishing,Forestry

4.5%4.0%

-15.8%44%

Industry

9.8%10.0%

-42.1%19%

Services

10.2%8.3%

-42.0%37%

Table 10: Service Industries Necessary to Target to Achieve Overall Goal

Overall Goal Components

High value-added inputsIncrease exports of servicesAttractive FDI environmentSupport sustainable growthAssist in meeting humandevelopment objectives

Telecom

yesyesyesyesyes

Education&Training

yesyesyesyesyes

Businessservices

YesyesYesYesyes,

includingjob creation

Finance

yesyes

-yesyes

Tourism

-yesyesyesyes,

including jobcreation

Logistics*

yes-

yes--

*Transportation, freight forwarding, customs brokerage, storage, etc.

Table 11: Proposed Economic Development Goals for Viet Nam’s National Social-Economic Strategy:2010-2020

Target Year

GDP growth: 2010-2020GDP 2020/2010% GDP in 2020% labour force in 2020

WholeEconomy

7.7%2.09

--

Agriculture,Fishing, Forestry

3.0%-

10.2%16%

Industry

7.1%-

39.9%32%

Services

9.5%-

50.0%52%

3.3 Recommended Policy Orientation

3.3.1. Recognition that services are key to increasingcompetitiveness and successful implementationof the industrialization process

In order to have an appropriate policy framework fordeveloping a competitive and effective service sectorand for successful implementation of Viet Nam’sindustrialization process in the context of internationalintegration, it is important to formally recognize thatservices are key to increase competitiveness. Thereasons why formal recognition is important are asfollows:

Firstly, this recognition will give the services sector itsappropriate status in the national development strategy,replacing misconceptions about services as non-productive or as being of less importance than goodsproduction.


Secondly, this recognition will help in setting policypriorities, clearing the way for developing the types oflaws and regulations needed to develop the servicessector, diversifying the ownership structure of serviceenterprises, and strengthening the coordinationmechanism for management of the services sector.

Thirdly, this recognition will focus policy initiatives onpriority services in order to support economic growthand improve the basic infrastructure provided bytelecommunications, education and training, businessservices, finance, and transportation.

Fourthly, this recognition will provide a framework forthe allocation of research resources in order to deepenunderstanding of the dynamics of Viet Nam’s servicessector through further comprehensive studies and pilotprojects supported by international organizations.

3.3.2 Coordinated approach to national services sectordevelopment

In order for Viet Nam to strengthen its services sectorin an efficient manner, it is vital that there becoordination at the highest level among the manygovernmental bodies responsible for services. It is alsocritical that the services sector be accorded equal statuswith industrial development in terms of resourceallocation and incentives offered.

Determining how best to achieve that coordination willdepend in part on the results of the UNDP-funded studyunder the Trade in Services Project on ministerialcoordination regarding how best to allocateresponsibilities for the service sub-sectors. Thefollowing are examples of the kinds of steps that couldbe taken:

a) Appoint a national authority (e.g., a Deputy PrimeMinister) to be responsible for all services listed inthe GATS.

b) Establish a coordinating mechanism among theline ministries responsible for the various services,which meets regularly and is chaired by theappointed national authority.

c) Appoint a “lead” line ministry or commission foreach of the service subsectors covered by the GATSwith the following administrative responsibilities:

Setting technical and service standards,& enforcing them.Licensing service suppliers in thesubsector.Conducting research on internationaltrends and benchmarks for the subsector.Liaising with service industry associations& consulting with service suppliers on thechallenges for the subsector.

Proposing policy and regulatory changesas neededProviding input on services trade negotiatingstrategies.Identifying needs for technical assistanceto the subsector.Dealing with consumer complaints.Setting growth and performance targets.

d) Separate regulatory or audit, and service provisionfunctions from the unit with lead administrativeresponsibilities so that there is no conflict of interest.

e) Receive reports from each service subsector “lead”regarding any policies, regulations, or incentivesthat need to be changed to increasecompetitiveness and ensure equity in the treatmentof goods and services production, and schedulethe timing for completion of those changes.

f) Resolve any conflicts between industrial policy withregard to industrial development and pollution andthe competitiveness of Viet Nam’s tourismattractions.

3.3.3 Strong regulatory framework

The success of market liberalization and internationalintegration in services depends on having a strongdomestic regulatory framework that meets internationalstandards, is transparent, and is consistentlyimplemented. This regulatory framework ensures thatboth domestic and foreign services suppliers meetinternational standards and protects the interests ofVietnamese consumers. At the present time, VietNam’s regulatory framework is both incomplete andinconsistently implemented.

The specific steps needed will depend on a more in-depth analysis across line ministries and othergovernment units to determine the gaps, contradictions,and implementation weaknesses for each service sub-sector. In addition, attention will need to be paid to theimpact of regulation on accessibility and affordabilityof essential services for the poor. The following areexamples of activities that could be undertaken:

a) For services where international conventions ontechnical standards exist (e.g., maritime transport,financial services), ensure that Viet Nam’s servicesmeet those international standards.

b) Ensure that there are licensing or certificationstandards in place for each of the key services,including a requirement for ongoing training in orderto maintain/renew that license or certificate.

c) Where Viet Nam has opened cross-border supplyto foreign competition, ensure that foreign service


suppliers meet Viet Nam licensing or certificationrequirements.

d) Support the development of service industryassociations which enforce codes of conduct,provide links to international associations andinformation about international standards, andfacilitate ongoing skills training for members.

e) Establish a universal services access fund tosupport government provision of services to the verypoor, through a tax on all enterprises over a certainsize.

f) Launch an initiative to register at least 25% ofservice suppliers to ISO 9001:2000, makingregistration costs tax deductible.

3.3.4 Employment creation in service industries

The majority of service sector jobs require at leastsecondary schooling. In an economy like Viet Nam,careful planning is needed to help workers transitionfrom an agriculture-based economy to a knowledge-based economy. An advantage of service industries isthe ability to create jobs throughout the country, notjust in urban areas. Rather than encourage out-migration of unemployed recent graduates, the followingtypes of initiatives could be productive:

a) Encourage unemployed recent graduates to createbusiness services enterprises.

b) Provide training in office skills and data entry/management to workers moving from rural to urbanareas.

c) Identify and develop opportunities for servicesemployment in rural areas such as agriculturalequipment repair.

d) Create rural back office (“offshoring”) operations,with appropriate training – perhaps linked to the ITpark in HCMC.

3.3.5 Increase domestic demand for services

Domestic demand for services depends on the level ofeconomic development and per capital income. In lessdeveloped economies like Viet Nam, any increase indomestic demand for services needs for come first froman increase in the demand for intermediate services,which in turn is linked to increasing Vietnamese serviceexports. Viet Nam currently faces the common dilemmaof low income countries where there is not sufficientdomestic demand to support the development of highquality specialty business services, which areprecisely the services needed by all economic sectorsin order to increase competitiveness. By supportingVietnamese business service firms in accessing export

markets successfully, those firms can develop a largeenough customer base to justify the innovation andhoning of skills needed to create and sustaincompetitively-priced, high quality specialty services.

Once high quality intermediate services are available,the next task is one of creating awareness in SOEsand the private sector regarding the benefits ofcontracting out for specialized service inputs so thatsuch purchases are viewed as an investment incompetitiveness rather than a cost. Collabourationbetween private sector organizations like theVietnamese Chamber of Commerce and Industry andthe Ministry of Trade, for example, can result insuccess stories and news articles on the benefits ofcontracting out, flyers distributed that containinformation on how to select a service supplier andhow to manage the working relationship, and seminarsthat explain when contracting out for specialty servicescan be most useful.

Government can also play a vital role in stimulatingdomestic demand for intermediate services by itselfcontracting out support services to private suppliers.At the present time, many SOEs provide their ownbusiness support services internally or contract withgovernment agencies. The use of governmentprocurement to purchase intermediate services fromVietnamese private enterprises can be a powerful forcefor stimulating domestic demand for services.

3.3.6 Increase service exports

One of the main purposes of services trade liberalizationis to increase opportunities for Vietnamese servicesuppliers to export to a wider range of foreign markets.International integration will bring with it morecompetition from foreign services suppliers in VietNam’s domestic markets. Vietnamese servicesuppliers need to be equipped with the expertise andsupport needed to compete successfully with foreignservices suppliers both in Viet Nam and abroad.Exporting services successfully requires a differentapproach from that used to export goods as, in general,what is being promoted to the foreign consumer is apromise of performance rather than a completed servicethat can be inspected before purchase. Service industryassociation have a key role to play in raising industryprofile globally, linking with sister associations abroadto facilitate partnerships, and representing the industryat regional and international conferences.

In order to successfully increase service exports, VietNam will need a national strategy for how to promotesuch exports. Fortunately, the Viet Nam TradePromotion Agency (through project vie/61/94) is alreadyin the process of developing a national exportdevelopment strategy, with technical assistance fromthe International Trade Centre UNCTAD/WTO, and isprepared to add a component on national services


export development. There is also available through theAPEC Business Advisory Council a publication,Supporting APEC SME Service Exporters: A Handbookof Best Practices, with checklists that can be helpfulto Viet Nam.

3.4 Proposed Stages to Develop the ServicesSector

3.4.1 Stage 1: Strengthen services as industrial andsocial supports (2005-2010)

In order to support overall competitiveness, attentionneeds to be focused first on ensuring that keyintermediate services are efficient and internationallycompetitive. These intermediate services includetelecommunications, education and training, finance,business and professional services, and logisticalservices. Below are initial comments on these sub-sectors, with examples of how the subsectors couldbe developed to support increased competitiveness.

Information and communication technologies (ICT):Telecommunications in particular, and ICT in general,is the primary infrastructure for the delivery of servicesin an international context. It also makes possible thedelivery of quality of life services (education, health) torural and remote communities. Viet Nam has theadvantage of already having a fully digitalized network,though upgrading to broadband technologies is stillneeded. The following are some examples of whatsteps might be taken:a) Extend the digital network via wireless and satellite

services to all rural communities, subsidizedthrough a universal access fund.

b) Expand telecommunications capacity, upgradingto broadband where possible, to raise callcompletion rate.

c) Establish and enforce service standards for thetelecommunications infrastructure to ensure promptresponse for installation and maintenance.

d) Expand repair and maintenance capacity for ICTtechnology, supported by reliable supply ofelectricity.

e) Increase the penetration ratio for use of ICT throughlaunching initiatives in e-government.

f) Close the gap between urban and rural communitiesin access to education and health services bylaunching initiatives in e-learning and e-health.

Education and training: In order to support the needsof service enterprises for appropriately skilled workers,a review is needed of the educational system to ensurethat teaching methods encourage innovation andproblem-solving rather than passive, rote learning. Inaddition, support is needed for a culture of lifelonglearning. The following are some types of activities that

could be undertaken once the outcomes of the studyof the impact on the poor are available:

a) Strengthen training provided in Business Englishin order to take advantage of trade and technologytransfer opportunities.

b) Strengthen the training of service sector managersand supervisors.

c) Launch or strengthen training in customer serviceand service excellence, including training ininterpersonal skills (e.g., problem solving,negotiations, etc) and innovation.

d) Assist service industry associations to providecontinuing education and skills training to theirmembers.

e) Negotiate mutual recognition agreements with majortrading partners for the educational credentials ofVietnamese service providers.

Business services: The expansion of business andprofessional services lies at the heart of developing aninternationally competitive services sector. Furthercompetitiveness research is needed in order to identifyhow best to form and strengthen service industryassociations, ensure knowledge of internationalbenchmarks and quality management. A pilot projectto stimulate entrepreneurship in business serviceswould be very helpful.

Financial services: Financial services in Viet Nam havealready demonstrated growth, but more growth isneeded in order to ensure the start-up and growth capitalneeded by service enterprises. As part of thecompetitiveness studies on banking and financialservices already ongoing in the framework of the Tradein Services Project, research is needed on how toensure that government retains sufficient funds to lendat minimal rates to the very poor after marketliberalization. More specific steps will depend on theoutcomes of those studies.

Tourism: Viet Nam already has a national strategy fortourism that can be linked to some of the initiativesdescribed above. Further steps, especially regardingregional cooperation, will depend on the outcomes ofthe competitiveness study on tourism.

3.4.2 Stage 2: Target lead service sectors(2010-2020)

Viet Nam has the opportunity to leverage its competitivepositioning in ICT, science and technology, and tourismto create high growth, high valued added services thatcan compete successfully in international markets.Possible candidates for targeting include the following:Back office operations (data processing, datamanagement); contracted research and development;and health tourism.


3.5 Recommendations on StrategyDevelopment

3.5.1 Prioritizing “break-through” service sectors

“Break-through” service sectors are those sectors thatcan generate significant multipliers effects throughoutthe economy and radically alternate the competitivestructure and economic options available. Governmenthas identified priority service sectors (telecom-munications, finance, air transport, maritime transport,construction, tourism) that all have growth potential andwhose competitiveness is important. Of these servicesectors, though, only telecommunications (and moregenerally information and communication technologies)is truly a “break-through” service. The changes broughtabout by the Internet and related communicationtechnologies have forever altered the way in whichbusiness is conducted as well as the economicdevelopment alternatives for rural communities.Therefore, government’s priority attention to telecom-munications as a “break-through” service sectorremains critical.

The second “break-through” service sector is trainingservices, especially the practical applications of formaleducation and continuing skills upgrading. Everysectoral study associated with this project identifiedthe skill level of human resources as a significantconstraint to growth. A significant shift in Viet Nam’scompetitiveness will only be possible if there is aplentiful supply of workers skilled in innovation, problemsolving, and customer service, supported by trainedsupervisors and managers.

The third “break-through” service sector is businessservices, which the WTO describes in its World TradeReport 2004 as “among the most dynamic [services]in the [global] economy,” pointing out that they “provideknowledge-intensive inputs to other industries, and areimportant channels for technology diffusion and asource of productivity growth in other industries”.Business services are “break-through” servicesbecause of the critical role they play in all othereconomic activities – e.g., lowering production costs,increasing product quality, lowering barriers to entryfor entrepreneurs with new ideas (by allowing them tocontract out for specialized expertise), creatingstructural flexibility by turning fixed costs (in-houseservice production) into variable costs (outsourcedservices), supporting technology diffusion, improvingsupply chain management, matching suppliers andcustomers across borders, and generating foreignexchange earnings. Examples of the business servicesthat can perform a “break-through” role are given in TableA10 in annex.

These three service sectors are the foundation andbackground for development of whole services sectoras well as other sectors in the economy, particularly

in the context of international integration and economicliberalization. The development of these sectors willhave spill-over effects and serve as catalysts forincreased competitiveness throughout the economy.

3.5.2 Implementation: The role of Government

For a national strategy for services to be successful,there are at least six roles for government to play. Thefirst and most critical is the coordination of all servicesactivities so that the policy framework is coherent, thereis cooperation among the many governmental agenciesinvolved, and initiatives strengthen rather than undermineone another. Given the variety of services involved, itis natural that different ministries specialize in particularservices (e.g., transportation, education, etc.).However, government is responsible for ensuring thatthere is a common vision and goal for how the servicessector is to develop.

A second very important role for government is consumerprotection. Most services cannot be inspected aheadof time, and consumers are often not in a position toevaluate the proficiency of a particular service provider.In addition, the consequences of poor performance –e.g., unskilled air traffic control, untrained surgeons –can be life threatening. The licensing and performancereview procedures put in place by government arecritical to ensuring that consumers receive qualityservices.

A related third role for government is ensuring universalaccess to basic health, education, and telecom-munication services. These services directly affectquality of life and the options available to citizens. Inmost instances, government needs to subsidize, orarrange for subsidization of, services to remotecommunities and to the very poor.

A fourth role for government is creating an appropriateenvironment for business so that the service enterprisesthat develop can provide efficient and effective services.A related fifth role is ensuring the competitiveness ofViet Nam’s small service suppliers. With over 65percent of service firms having less than 10 employees,support for these very small service suppliers is critical.

Finally, government has the responsibility to ensurethat international integration brings with it benefits forViet Nam in keeping with both economic and humandevelopment objectives and priorities. Unless care istaken, market liberalization in services can benefitprimarily foreign service suppliers while crowding outsmall domestic service suppliers and undermininggovernment resources for achieving social objectives.

3.5.3 Implementation: The Role of the Private Sector

Competitiveness of the services sector rests in largepart with the private sector. While some of the major


infrastructure services may continue to be provided bystate-owned enterprises for some time to come (e.g.,telecommunications, air transportation), keyprofessional and business support services areprimarily privately owned. The private sector will needto take steps to be knowledgeable about internationalstandards and benchmarks and how to exportsuccessfully. In addition, it will need to enhance skillsto identify and meet customer needs and developspecialized services.

One of the mechanisms for improving competitivenessis the development of strong service industryassociations (and even a coalition of suchassociations) that can assist members with marketintelligence, links to export markets, and continuingprofessional education. In addition, such associationscan provide government with critical input on the needsof service enterprises and barriers to competitiveness.

3.5.4 Implementation: The Role of InternationalOrganizations

There are a number of areas that have been identifiedalready in this Report where Viet Nam’s servicescapacity needs to be strengthened. It would be helpfulif, as part of a national strategy, priorities for internationalfunding were established and then negotiated with donoragencies. Table A11 provides an initial listing of studiesand pilot projects that could be funded.

3.5.5 Supervision of the National Strategy

In order for any national strategy to be successful, thereneed to be clear performance measures that can betracked and accountability implications if they are notmet. As part of developing the national strategy, suchperformance measures need to be identified along withthe most appropriate supervisory mechanism.


Chapter 4Recommendations

on a Roadmap for International Integration

4.1 Objectives to Be Achieved throughInternational Integration

As an economy liberalizes market access for trade inservices, care is needed so that the role of foreign firmsstimulates rather than depresses nationalcompetitiveness in service exports. In the case of VietNam, liberalization commitments to date have beenbased primarily on phase-in of liberalized marketaccess for foreign service suppliers. Few, if any,performance criteria for foreign service suppliers havebeen noted in Viet Nam’s conditional WTO offer though,as a developing economy, Viet Nam has the right (underGATS Article XIX:2) to attach such market accessconditions.

In addition, there appears to be little correlation betweenthe liberalization offers being made by Viet Nam andthe reality of Viet Nam’s current services exportactivities. This is not surprising as no systematic studyhas yet been undertaken of Viet Nam’s services exportcapacity. For example, Mode 1 has been listed withno market access restrictions for a wide range ofprofessional services, business support services, andresearch and development services without anyapparent analysis of the impact on Vietnamese servicesuppliers of facing cross-border foreign competition. Itwould be useful to bear in mind that (a) Viet Nam alreadyhas active service exporters (see Table A2 in annex);and (b) Viet Nam’s service providers are alreadycompeting in the region with very large servicetransnationals in a range of services.

Based on the analysis in Chapter 2 of Viet Nam’scurrent services competitiveness, the following arerecommended objectives to be achieved from theprocess of international integration. These objectivescan also form the basis for assessing the impact ofservices trade liberalization.

a) Vietnamese service exporters gain improved accessto foreign markets.Since the intention of services trade liberalizationis to promote economic growth and the expansionof service exports, it is important that internationalintegration result in an expansion of exportopportunities for Viet Nam’s service suppliers. That

means that, particularly in terms of the modes ofsupply14 most commonly used for entry of foreignmarkets (i.e., Mode 1 and Mode 4), it should beeasier for Vietnamese service suppliers to enterforeign markets.

b) Vietnamese service enterprises retain a leveldomestic playing field with foreign competitors.Sometimes special incentives are offered to foreignservice suppliers in order to attract investment. IfVietnamese service suppliers are to be competitive,it is important that they be offered similar incentivesand not be operating at a disadvantage in their homemarket.It will also be important to ensure thatdomestic service suppliers benefit as much asforeign service suppliers from the new EnterpriseLaw.

c) Vietnamese consumers are assured of qualityservices.The Vietnamese regulatory environment needs tobe such that consumer interests are consistentlyprotected, with those regulations applying to foreignand domestic service suppliers alike.

d) Viet Nam’s social objectives are met regardingpoverty alleviation.In order to meet national social objectives, it willbe important that market opening not jeopardizeuniversal access to essential services (such aselectricity, basic telecommunications, education,health), especially for the poor. In addition, marketopening should result in increased employment inservices and increased entrepreneurialopportunities in services for women.

e) Viet Nam gains capital inflows and technologytransfer from market opening.One of the reasons for liberalizing service marketsis to benefit from the resources and technology ofservices suppliers from more developed economies.Monitoring will be needed to ensure that this occurs.

f) Viet Nam’s balance of payments in servicesimproves.Viet Nam’s services trade deficit has been steadilyincreasing and, if properly managed, international

14 As mentioned before, trade in services occurs through four modes of supply: Mode 1 – cross-border, where the service movesacross the border; Mode 2 – consumption abroad, where the consumer moves across the border; Mode 3 – commercialpresence, where the service supplier sets up an office abroad; and Mode 4 – presence of natural persons, where the servicesupplier moves temporarily across the border.


integration should help to reverse that trend throughincreased service exports.

4.2 Viet Nam’s Existing Commitments onInternational Integration

Viet Nam is already a signatory to two internationaltrade agreements that cover services trade and isconducting bilateral trade discussions with Australia,Japan, and the U.K. One of the existing tradeagreements is the ASEAN Framework Agreement onServices (AFAS), which is a GATS-Plus agreementintended to substantially eliminate restrictions on tradein services within ASEAN by progressive improvementsin market access and ensuring equal nationaltreatment. Under AFAS, there are initiatives to developmutual recognition arrangements (MRAs) intended tocover accountancy, architecture, engineering,surveying, and tourism. ASEAN is in the process ofextending both its Free Trade Agreement (AFTA) ongoods trade and the AFAS to include China.

The other international trade agreement is the Viet Nam-US Bilateral Trade Agreement (BTA), which has muchmore extensive services coverage and more bindingcommitments. Viet Nam has also concluded some ofthe bilateral negotiations necessary for accession tothe WTO, based on a GATS offer15 that is even morefar-reaching than its commitments under the BTA.While usually economies are more open in bilateraland regional trade agreements than in multilateralagreements, Viet Nam has not followed this approach.In fact, should the conditional GATS schedule ofcommitments be accepted for accession purposes,Viet Nam’s commitments under the GATS will in someinstances replace under the principle of most-favoured-nation treatment (as being more liberal) existing AFASand BTA provisions (see Table A12 in annex).

4.3 Viet Nam’s Rights in WTO Accession

The GATS is based on an overall balance of rights andobligations. During the accession process, focus istypically on obligations – i.e., the offer to be made totrading partners. However, it is also important to keepin mind that there are rights that come with WTOmembership. In its preamble, the following relevantpoints are emphasized as being the purpose of theGATS:

a) “...promoting the economic growth of all tradingpartners and the development of developingcountries;”

b) “...giving due respect to national policy objectives;”

c) “Desiring to facilitate the increasing participation ofdeveloping countries in trade in services and theexpansion of their service exports including, interalia, through the strengthening of their domesticservices capacity and its efficiency andcompetitiveness;”

In the GATS, special provisions have been made fordeveloping countries, for which Viet Nam would qualify:

a) The particular need to introduce new regulations,in keeping with the provisions of Article VI.

b) The liberalization of market access in sectors andmodes of supply of export interest to Viet Nam(see Article IV:1(c)).

c) Appropriate flexibility to open fewer sectors,liberalize fewer types of transactions, and attachmarket access conditions [i.e., performancemeasures] aimed at achieving the objectives ofArticle IV (see Article XIX:2).

It is important that Viet Nam make full use of thenegotiated measures designed to assist developingeconomies in order to benefit from liberalization of tradein services. Also, as a WTO acceding country, VietNam will have the right to participate in the Doha roundof multilateral services trade negotiations and makerequests of trading partners.

4.4 Viet Nam’s Options in Services TradeLiberalization

Before opening the domestic market further to foreignservices suppliers, it is critical that a strong andcomprehensive regulatory framework be in place. Thiswould include the following:

Establishing service industry standards andprofessional credentials accreditation

Establishing standards for appropriate skills and/or qualifications required of service suppliers wherethese do not exist or are vague

Ensuring adequate enforcement capability forquality standards and professional licenses

Strengthening existing licensing and standardsagencies, where necessary

15 The following discussion is premised on the revised conditional Offer on Specific Commitments in Services that Viet Nam submittedto the WTO on 27 April 2004 and on the assumption that further revisions are possible before accession if they are shown to bein the economic and social development interests of Viet Nam. Alternately, Viet Nam has the option to achieve national policyobjectives through the introduction of new legislation and regulations as long as any differences in treatment between domesticand foreign service suppliers are not trade distorting (GATS Article VI).


In terms of services trade negotiations, the followingguidelines may be useful in ensuring maximum benefitfor Viet Nam from the international integration process:

a) Mode 1At least one component of virtually every servicecan now be delivered via the Internet. Where VietNam has scheduled “none” for market accessrestrictions, foreign service suppliers are free tosupply services electronically into Viet Nam withoutany stipulations to ensure multiplier effects withinthe economy or to protect consumer interests.

While Viet Nam may not be in a position to reversecommitments made, it is in a position to usedomestic regulation to protect consumer interests.As long as the regulations apply equally todomestic and foreign service suppliers, there is norestriction on Viet Nam’s requiring licensing or otherperformance guarantees from cross-border servicesuppliers.

b) Mode 3Viet Nam has already been successful in attractingforeign direct investment and has targetedtelecommunications, financial services, tourism,and transportation in particular for capital inflows.Higher education and technical training is anotherarea in which foreign investment might be useful.International schools from 26 universities andvocational training centres in 12 nations havealready indicated an interest.

With regard to scheduled commitments, the onlyrestraints that Viet Nam has imposed on foreignservices suppliers are related to the timing of 100percent foreign investment options. Viet Nam alsohas the right to enact performance requirementsfor foreign investors – e.g., hiring of local managers,staff training and technology transfer, workingconditions, etc.

c) Mode 4This mode involves four types of temporarymovement. Viet Nam has already scheduledcommitments with regard to two categories: intra-firm transfers, and service persons. Temporarybusiness travel is a third, and important, type oftemporary movement that involves employees of aservice enterprise entering a foreign market brieflyfor business purposes. In regard to this type oftemporary movement, the main issue is Viet Namensuring that its service exporters can travel abroadeasily without undue visa restrictions.

The fourth type of temporary movement is the out-migration of service workers for periods of up to fiveyears. While there is a detailed analysis of thistype of flow in WTO’s World Trade Report 2004,the coverage is incomplete. The assumption is that

benefits accrue primarily from the movement of low-skilled workers as the gap in wages between richand poor countries narrows and from the positivespill-overs from transfer of experience andinvestment of funds earned abroad. It is based onthis type of reasoning that Viet Nam’s PrimeMinister has allocated VND15 billion as initialcapital for the Fund in Support of Labour Exports,with VND11.5 billion to be allocated in the 2005State budget.

What is missing from the analyses of out-migrationas a form of Mode 4 trade in services is the cost tothe economy of losing skilled and semi-skilledworkers. While economists may argue that the mainbenefits to be gained are from the movement oflow-skilled workers, the reality is that the flows aremainly higher-skilled workers – e.g., computerspecialists, electronics workers, industrialengineers, architects, accountants, doctors,dentists, nurses, teachers, managers, financialservice specialists. For an economy like Viet Nam,where service sector growth depends on skilledworkers, the economic cost of out-migration maybe very high. Creating export-oriented employmentthrough outsourcing contracts in Viet Nam may bea more productive alternative.

In general, there are four types of services, eachrequiring a different approach to market accessliberalization:

a) Services with high export potential and low capitalcostsFor these services, one would want to reserve allmodes of supply in order to maximize Vietnamesecapacity development, while making requests oftrading partners for market access via Modes 1and 4 in particular.

b) Services with high export potential and high capitalcostsFor these services, one would want to attract foreigninvestment to offset capital costs but ensure thatthey enter as joint venture partners in order tostrengthen Vietnamese service capacity.

c) Services with low export potential but high jobcreation potentialFor these services, one would want to protect thejob creation potential through mechanisms suchas economic needs tests.

d) Services with low export potential and low jobcreation potentialFor these services, one could open the market toforeign service suppliers in exchange forconcessions in market access for Vietnameseservice suppliers in categories (a) and (b).


4.4.1 Suggested requests of trading partners

For those services with high export potential, it is criticalthat Viet Nam identify and negotiate the removal of thefollowing types of non-tariff barriers with relevant tradingpartners:

Requirements for citizenship or residence in orderto become licensed or provide the serviceRequirement for commercial presence (eliminatingthe possibility of Mode 1 supply)Non-recognition of professional credentialsDelays in obtaining Mode 4 visas (especially intothe U.S. market)Ownership restrictionsDiscriminatory licensing feesDiscriminatory taxation (lack of national treatment)

Table 12 below lists the priority services with high exportgrowth potential, with suggestions about the modes ofsupply in which more liberalized access should berequested. The following guidelines are offered formaking such requests in services trade negotiations,particularly of major trading partners:

a) Top priority – Mode 4Make requests to remove barriers to temporarybusiness entry. These include the need to obtain avisa before reaching the border (rather than at theborder), a requirement to be licensed in the marketin order to enter for any business purposes(including attending professional conferences,meeting with potential clients, reporting to clients),non-objective licensing requirements (e.g., must bea national), lack of mutual recognition ofprofessional credentials, and economic needstests.

b) Second priority – Mode 1Negotiate alternatives to any local presencerequirements so that small service exporters cantrade only cross-border.

c) Third priority – Mode 3Request the removal of nationality restrictions oninvestment.

d) Fourth priority – Mode 2Request the removal of any restrictions on foreignaffiliates purchasing services in Viet Nam.

Table 12: Proposed Approach to Requests for Market Access Liberalization for Services with HighExport Potential

GATS Category ServiceMode for Request

1 432

Legal servicesAccounting & auditingArchitectural servicesEngineering servicesUrban planningMedical & dental servicesNurses, midwivesVeterinary servicesComputer consultingSoftware developmentResearch & developmentAdvertisingDesign servicesMarket researchManagement consultingEquipment maintenance & repairServices incidental to agricultureServices incidental to fishingTelecommunications services[all stages]Higher education & vocational trainingInsuranceBankingAsset managementSecuritiesMaritime transportAir transportServices auxiliary to transport

Business services

Communication servicesConstruction servicesEducationFinancial services

Transport services

*******************

********

****************************

****************************


4.4.2 Suggested offers to trading partners

Services with high export potential and low capital costs.Each of the services listed in Table 13 below has ahigh potential for export growth, which could becompromised by inviting increased competition fromforeigners in the domestic market as domestic suppliersneed to be able to utilize a domestic base of activity tosubsidize the development of export markets. In eachinstance, it is recommended that Mode 1 remain“unbound” so as not to create cross-border competitorsinto the Vietnamese market. Table 13 also makessuggestions about which of these high potentialservices could also benefit from soft technology transfer

GATS Category ServiceOffer by Mode

1 432

Table 13: Proposed Approach to Offers Regarding High Export Potential Services

Business services Legal servicesAccounting & auditingArchitectural servicesEngineering servicesUrban planningMedical & dental servicesNurses, midwivesVeterinary servicesComputer consultingSoftware developmentResearch & developmentAdvertisingDesign servicesMarket researchManagement consultingTechnical testing & analysisEquipment maintenance & repairServices incidental to agricultureServices incidental to fishing

U*U*U*U*U*U*UU*U*U*U*U*UU*U*UU*U*U

NNNNNNNNNNNNNNNNNNN

JV*JV*UUUUU

JV*UU

JV*JVUUUUUUU

UUUUUUUUUUUUUUUUUUU

* Represents a change from Viet Nam’s conditional offer that could be handled alternately through regulatory requirements.N = none, or no market access restrictionsU = unbound, reserving the right to make market access restrictionsJV = joint venture required

from foreign suppliers in the form of joint ventures (Mode3). Mode 4 would remain “unbound”.

Attracting foreign direct investment for high exportpotential services. For high potential services, growthwould be accelerated through also attracting foreigndirect investment to help further develop world-classexpertise. Table 14 lists the additional services thatwould benefit from foreign capital. In each instance, itwill be important to stipulate performance requirements(as allowed under GATS Article IV and Article XIX) suchas hiring, training, technology transfer, and paymenttowards a universal services access fund.

Table 14: Proposed Approach to Offers Regarding Attracting Foreign Investment

GATS Category ServiceOffer by Mode

1 432Communication servicesConstruction servicesEducationFinancial services

Transport services

Telecommunications services[all stages]Higher education & vocational trainingInsuranceBankingAsset managementSecuritiesMaritime transportAir transportServices auxiliary to transport

UUUUUUUUUU

NNNNNNNNNN

JVJVJVJVJVJVJVJVJVJV

UUUUUUUUUU

* Represents a change from Viet Nam’s conditional offer that could be handled alternately through regulatory requirements.N = none, or no market access restrictionsU = unbound, reserving the right to make market access restrictionsJV = joint venture required, including performance requirements


Low export potential and high employment potential.Some services are best reserved for domestic servicesuppliers. This may be because they are essentialgovernment-supplied services, are critical to nationaldevelopment goals, or need further development beforeaccess is liberalized. Table 15 lists such services andindicates a suggested negotiating approach for each.Included here are a wide range of services that allow forlow capital set-up and self-employment.

Low export potential and low employment potential. Table16 lists services where liberalized market access wouldhave few, if any, negative consequences in the domesticeconomy. This may be because there is alreadysignificant domestic strength so that increased foreignpresence would only enhance the sector, or it may bebecause there is not a high potential for increasedexports in these services. These are services whereoffering better market access could be exchanged for

Table 15: Proposed Approach to Domestic Services with High Employment Potential

GATS Category

Business services

Communication services

Distribution services

Educational services

Environmental servicesRecreational, cultural, and sportingservicesTourism & travel-relatedTransport services

Other services

Service

Property managementMarketing servicesPlacement & supply of personnelInvestigation & securitySurveying & mappingBuilding-cleaning servicesPackaging servicesPrinting, publishingTranslation servicesConvention servicesPostal servicesCourier servicesCommission agents’ servicesWholesalingRetailingFranchisingPrimary education servicesSecondary education servicesCareer development servicesCurriculum development servicesEducation administration services[all]Entertainment servicesNews agency servicesTour guidesCustoms brokerageFreight forwardingUtilities provision

Proposed Approach

Don’t scheduleDon’t scheduleDon’t scheduleDon’t scheduleEconomic needs testDon’t scheduleEconomic needs testEconomic needs testDon’t scheduleDon’t scheduleDon’t scheduleDon’t scheduleEconomic needs testEconomic needs testEconomic needs testEconomic needs testDon’t scheduleDon’t scheduleDon’t scheduleDon’t scheduleDon’t scheduleDon’t scheduleDon’t scheduleDon’t scheduleEconomic needs testEconomic needs testDon’t scheduleDon’t schedule

improved market access into a trading partner’s marketfor one of the high potential service exports.

4.5 Ongoing Assessment of the Impact of MarketLiberalization

In order to ensure benefits to Viet Nam of marketliberalization, it will be important to establish a regularassessment process, like the one already started bythe Trade in Services project. In support of thatassessment process, it will be important that theGeneral Statistics Office have the resources and supportto ensure that Viet Nam’s trade in services statisticsmeasure volumes and modes of trade as per GATSdefinitions. The following are other tools that may behelpful in the assessment process of how well Viet Namis achieving the objectives outlined in Section 4.1:a) Specify precisely how each objective can be

measured.

Table 16: Proposed Approach to Domestic Services with Low Employment Potential

GATS Category ServiceMode for Offer

1 432Communication servicesRecreational, cultural,sporting services

Courier servicesRecreational servicesSporting services

***

***


b) Develop measurable requirements for softtechnology transfer and management training fromforeign direct investors.

c) Prepare a list of guidelines to preserve Vietnameseculture in negotiations.

d) Prepare guidelines for safeguarding the basic rightsto quality of life services of Vietnamese poor.

4.6 Recommendations to Viet Nam’s ServicesTrade Negotiators

Services trade negotiations will be an ongoing process.The following recommendations are offered to assist inmaking that process as productive for Viet Nam aspossible:a) Operate from an assumption of existing

Vietnamese services exporting capacity and ensurethat it is strengthened rather than underminedthrough the negotiations.

b) For high export potential services, focus on requeststo trading partners unless foreign capital is neededto strengthen domestic capacity.

c) If the potential for export growth is low, make surethat any market liberalization results in employmentcreation through the use of performance measuresor economic needs tests.

d) Keep in mind Viet Nam’s right to regulate inkeeping with its own national policy objectives andthe importance of a strong, comprehensive,effective, and transparent domestic regulatoryregime.

e) Keep in mind that there is, at present, no obligationunder the GATS to schedule subsidies orgovernment procurement restrictions as thoseareas remain open to ongoing negotiations.

f) Consult regularly with Viet Nam’s serviceexporters, especially small private sector servicesuppliers, to determine their needs and exportmarket priorities.


Chapter 5Core Conclusions for the Design

of a Comprehensive Development Strategyfor the Services Sector in Viet Nam up to 2020

From the research outcomes of the study on “Optionsand Recommendations for a ComprehensiveDevelopment Strategy for the Services Sector in VietNam up to 2020,” the following conclusions can be drawnthat can form the rationale for an overall developmentstrategy for the services sector in Viet Nam up to 2020:

1- The services sector, especially intermediateservices, is key to strengthening thecompetitiveness of the national economy, supportingthe industrialization process, fuelling the shift to aknowledge-based economy by providing high-qualityinputs for all economic activities, and addressingpoverty alleviation through service sectoremployment creation and provision of affordableessential services (i.e., electricity, telecom-munications, education, health).

2- Services trade liberalization can have a positiveimpact on the development of the services sectoras long as there is a strong regulatory frameworkin place that supports national policy objectivesand priority is given to increasing Vietnameseservices export competitiveness.

3- The services sector in Viet Nam is still under-developed with poor competitiveness and moreweaknesses than strengths. The legal frameworkfor services sector development, though rapidlyexpanding, is still inadequate, contradictory, nottransparent, and inconsistent with internationalstandards and rules. Services statisticsmethodology in Viet Nam still has discrepancieswith international classification systems andmethodologies.

4- To reach the overall targets of socio-economicdevelopment strategy stated in the PoliticalDocument of the IXth Party Congress, particularlythose for the services sector, the average annualgrowth rate of the services sector in the 2005-2010and 2010-2020 periods will need to be 10.2% and9.5% respectively, with 13.5% average annualgrowth in telecommunications, education andtraining, business services, science and technology,and financial services.

5- Ensuring that growth targets are met for the servicessector is also key to realizing Viet Nam’sMillennium Development Goals, both directly (in

terms of enhancing the availability and affordabilityof education, health, ICT services, andenvironmental services) and indirectly (by alleviatingpoverty and empowering women throughentrepreneurial and employment creationopportunities in service enterprises).

6- The development model for the services sector inViet Nam in the 2005-2010 period should be“services as supporting inputs for industrial sectordevelopment” with the six following prioritizedservices sub-sectors: (a) telecommunications; (b)education and training; (c) business services; (d)finance; (e) transportation; and (f) tourism, of whichtelecommunications, education and training andbusiness services are “break-through” sub-sectorswith “spill-over” and dynamic effects in facilitatingdevelopment in other economic sectors.

7- For Viet Nam to develop a competitive servicessector in the age of international integration, it willbe necessary to: (a) reshape political thinking andeconomic perceptions of the services sector as thekey determinant for building the competitivenessof the national economy; (b) create efficientcoordination among government bodies in chargeof services activities; (c) establish a strongregulatory and legal framework with consistentimplementation and in accordance withinternational standards; (d) build a training systemthat would develop and maintain high-qualitysupervisory and service management skills; (e)develop employment and entrepreneurialopportunities in business services; (f) increasedomestic demand for services coupled withexpanded service exports; and (g) develop a GATS-compatible services statistics system to measurethe success of service sector development.

8- Effective coordination is particularly important inorder to ensure that Viet Nam is able to meet theMillennium Development Goals, which are closelylinked to service sector development. Goal 1 oneradicating extreme poverty and Goal 3 onempowering women can both be addressed throughentrepreneurial and employment opportunities inservices. Goal 2 on primary education can beaddressed through strengthening the accessibilityand affordability of educational services. Similarly,Goals 4, 5, and 6 can be addressed through


improving the accessibility and affordability of healthcare services. Environmental sustainability (Goal7) is directly linked to environmental services, andglobal partnerships (Goal 8) need ICT services inorder to advance.

9- To ensure that the overall objectives for acompetitive service sector are met, a detailednational strategy is needed for the three “break-through” services (particularly training and businessservices).


ANNEXES

Annex ATable A1: Types of Governmental Entities That May Be Responsible for Services .................................... 38

Table A2: Types of Services Being Exported by Viet Nam by GATS Category ........................................... 39

Table A3: Viet Nam’s Services Export Markets ..................................................................................... 39

Table A4: Inter-linkages among Selected Service Sub-Sectors ............................................................... 40

Table A5: Overview of Legal Instruments Affecting Services in Viet Nam .................................................. 41

Table A6: Examples of Regulatory Objectives ....................................................................................... 44

Table A7: Status of Service Industry Associations in Viet Nam ............................................................... 45

Table A8: Detailed Projections for Percent of Viet Nam’s GDP by Economic Activity ................................ 46

Table A9: Detailed Projections for Average Annual Growth by Economic Activity ....................................... 46

Table A10: Business Services as a “Break-Through” Sector ................................................................... 46

Table A11: Projects Needing External Funding ..................................................................................... 48

Table A12: Summary of Sectors Scheduled under AFAS, BTA, and GATS .............................................. 49

Annex BMinistries Responsible for Service Industries .................................................................................................. 50


ANNEX ATable A1: Types of Governmental Entities That May Be Responsible for Services

Entities Responsible for ServicesService/Topic Government Agency Responsibilities that may have been privatized

Business services

Communication services

Construction and relatedengineering services

Distribution services

Educational services

Environmental services

Financial services

Health-related and social services

Recreational, cultural and sportingservices

Tourism and travel-relatedservices

Transport services

Other services

Cross-Sector: Modes of Supply &E-Trade

Cross-Sector: CompetitivenessIssues

Ministry of IndustryMinistry of AgricultureMinistry of FisheriesMinistry of ForestryMinistry of MiningMinistry of Justice

Ministry of CommunicationsMinistry of IndustryMinistry of Culture

Ministry of Public WorksMinistry of Industry

Ministry of IndustryCustoms Authority

Ministry of EducationMinistry of Industry

Ministry of the EnvironmentMinistry of Industry

Ministry of FinanceCentral BankInsurance RegistrarSecurities Regulator

Ministry of HealthMinistry of Social WelfareMinistry of Women & Families

Ministry of CultureMinistry of SportsParks AuthorityRecreation Centres

Ministry of TourismParks Authority

Ministry of TransportationVehicle Licensing

Utilities Regulator

Immigration AuthorityInvestment AuthorityExport Development AuthorityCompany RegistryLand Title RegistryMinistry of Trade

Ministry of Small BusinessCentral Statistical Office

Real Estate BoardProfessional Licensing RegistrarGovernment PrinterNational Research Council

Internet Service ProvidersTelecommunications RegulatorPostal ServiceNational Film BoardNational News Service

Housing AuthorityPlanning & Zoning Authority

Waste Disposal AuthorityRecycling Authority

Securities Exchange/Stock Market

Natural Disaster AgencyInfectious Disease AuthorityVocational Rehabilitation

National MuseumNational LibraryCouncil for the Arts

Port AuthorityAirport Authority

Public utilities (water, gas, electricity)


Table A2: Types of Services Being Exported by Viet Nam by GATS Category

Business Services:AccountingAdvertisingArchitectural servicesBuilding-cleaning servicesComputer consultancy servicesConsulting engineeringData processing servicesDatabase servicesEquipment maintenance & repairEquipment rental & leasingLegal servicesManagement consultingMarket researchMedical & dental servicesMidwives & nursesPackaging servicesPhotographic servicesPhysiotherapy, massage servicesPrinting/publishingPublic relationsReal estate services-rentalSecurity servicesSupply of personnelTechnical testing & analysisTranslation servicesVeterinary services

Communications Services:Courier servicesInternet servicesMotion picture projectionPostal servicesTelecommunicationsConstruction Services:General-buildingsFinishing workInstallation & assemblyDistribution Services:Commission agent servicesRetail servicesWholesale servicesEducational Services:Higher educationPrimary educationSecondary educationTechnical trainingEnvironmental Services:Sewage servicesWaste disposalFinancial Services:BankingInsurance-propertyHealth-Related Services:Ambulance servicesHospital services

Recreation/Culture/Sports:Cultural servicesEntertainment servicesRecreational servicesTourism & Travel-Related:Hotel servicesRestaurant servicesTravel agenciesTour guidesTour operatorsTransport Services:Air cargoAir traffic control servicesAir transport-passengersAircraft ground servicesCargo handlingFreight transportInland waterways-freightInland waterways-passengersLogistics servicesMaritime passenger servicesMaritime shippingMaritime towing servicesRoad transport-taxisStorage & warehousingOther Services:ElectricityWater

Source: Research by the Core Team.

Table A3: Viet Nam’s Services Export MarketsAustraliaBritish Virgin IslandsCambodiaCanadaChinaFranceGermanyHong Kong (SAR)Indonesia

ItalyJapanKorea, Republic ofLaosMalaysiaNetherlandsPhilippinesRussian Federation

SingaporeSpainSwedenSwitzerlandTaiwanThailandU.K.U.S.A.

Source: Research by the Core Team.


Education & trainingBusiness services:

- IT services and R&D- Engineering services

Financial services

TelecommunicationsEducation & training (teachers)Business services:

- IT services- Management consulting- Architecture (schools)- Engineering (schools)

Construction (schools)Financial servicesTelecommunicationsEducation & trainingBusiness services:

- IT services- Market research- Management consulting

TelecommunicationsEducation & trainingBusiness services:

- IT services- Market research- Management consulting

Financial services


- IT services- Market research- Management consulting- Architecture (airports)- Engineering (airports; aircraft)

Construction (airports)Financial services


- IT services- Market research- Management consulting- R&D (shipbuilding)- Architecture (ports)- Engineering (ports; vessels)

Construction (ports)Financial services


- Architectural services- Engineering services- IT services- Market research- Management consulting- R&DFinancial services

Environmental servicesDistribution services (supplies)Transport services (supplies)

Telecommunications

Education & Training

Financial Services

Business Services

Air Transport Services

Maritime Services

Construction Services

All services, including national security


All services


Business servicesPostal & courier servicesDistribution servicesHealth (emergency) servicesRecreational, cultural, sportsTourismNational security

Distribution servicesNational security

Educational services (schools)Health services (hospitals)TourismPort development for transport services

Inputs From Service Sector

Table A4: Inter-linkages among Selected Service Sub-SectorsInputs To


Inputs From Service Sector

Table A4: Inter-linkages among Selected Service Sub-Sectors (cont’.)Create Demand For


- IT services- Market research- Management consulting- Design & packaging- Architecture (attractions)- Engineering (attractions)

Construction (attractions)Financial servicesEnvironmental servicesAir transport

Tourism Hotels & restaurantsDistribution servicesHealth servicesRecreational, cultural, sportsTransport services

Table A5: Overview of Legal Instruments Affecting Services in Viet Nam

Coverage Legal Document Promulgated Notes

All economic activities

International Agreements

Foreign investment

Law on VATCommercial LawLabour CodeOrdinance on the Protection ofConsumers’ InterestEnterprise Law, SOEs LawOrdinance 08-2003-PL-UBTVQH11Law on StatisticsDecision 46-2003-QD-TTg

Decree 27-2003-ND-CP

Competition LawOrdinance on StandardizationOrdinance on e-commerceLaw on Promotion of DomesticInvestmentOrdinance on EconomicArbitrationLaw on Export and Import TaxesOrdinance 41-2002-PL-UBVQH10Omnibus BillOrdinance on Recognition andEnforcement of Foreign ArbitralAwards in Viet NamOfficial Letter 6842-2004-TC-CST

FDI LawDecision 146-2003-QD-TTg

Decree 105

10 May 199719972001

1 Oct 1999

1995, 199925 Feb 2003

17 June 20032 April 2003

19 March 2003

9 Nov 2004

2003

25 May 2002

21 June 2004

1987, 1996, 200017 July 2003

(being revised)

Commercial Arbitration

Abolishes the obligation forcompulsory conversion of currentincome in foreign currency by alltypes of firmsShifting from licensing towards aninvestment registration regime, forsome types of projects

(being drafted)(being drafted)(being revised & merged withLaw on FDI)

(being drafted)MFN and national treatment

(being drafted)(being revised and amended)

Fees that are priced in two tiersfor Vietnamese and foreignerswill be adjusted to become onecommon fee level

Raises the cap on total foreignshareholdings in domesticshareholding companies listed onthe Vietnamese securities marketto 30% (from 20%)Restriction on the share of foreignemployees


Table A5: Overview of Legal Instruments Affecting Services in Viet Nam (cont’.)


Business/professionalservices: Accounting

Business/professionalservices: Auditing

Business/professionalservices: Legal services

Business/professionalservices: Medical &dental servicesBusiness/professionalservices: VeterinaryservicesBusiness services: R&D

Business services: RealestateBusiness services:AdvertisingBusiness services:Consultation servicesCommunications: Postalservices

Communications:Telecommunications

Construction services

Distribution services:Commission agentsDistribution services:FranchisingEducational services

Law on Accounting


Decree 87-2003-ND-CP(replaces Decree 92/1998/ND-CP)

Law on LawyersOrdinance on Private MedicalPractice

Ordinance on Veterinary Service

Decree 06/2000/ND-CP

Law 13-2003-QH11 on Land(Amended)Ordinance on Advertising


Ordinance 43-2002-PL-UBTVQH10

Decision 217-2003-QD-TTgOrdinance 43-2002-PL-UBTVQH10

Decision 217-2003-QD-TTgLaw 16-2003 QH11

Decision 87-2004-QD-TTg


Article 9-Decree 45/1998/ND-CPDecree 63/CPLaw on EducationDecree 29/CPDecree 43/2000/ND-CP

17 June 2003

21 April 2004

22 July 2003

25 Feb 2003

2003

6 March 2000

26 Nov 2003

16 Nov 2001

5 November 2002

25 May 2002

27 October 200325 May 2002

27 October 200326 November 2003

19 May 2004

19 Mar 2003

1 July 199824 Oct 1996

199830 March 1994

Applicable to FIEs, foreigncompany branches and foreigncompany representative offices,individuals involved in accounting,as well as most Vietnameseentities.Replaces Decree 07-ND-CP of theGovernment on IndependentAuditing dated 29 January 1994.On Practice by Foreign LawyerOrganizations and ForeignLawyers in Viet Nam, expandingthe scope of operation for foreignlaw firms to meet requirements ofthe BTA.(being drafted)

Foreign cooperation andinvestment in the fields of medicalexamination & treatment,education & training, and scientificresearch

Prohibits individuals fromproviding consultancy servicesRegulates Posts &Telecommunications, reforms theexisting State monopoly in theposts and telecom sector in lightof Viet Nam’s internationalcommitments.Lowers post and telecoms feesRegulates Posts &Telecommunications, reforms theexisting State monopoly in theposts and telecom sector in lightof Viet Nam’s internationalcommitments.Lowers post and telecoms feesRights and obligations of bothdomestic and foreignorganizations and individualsinvesting in constructionRegulations on Management ofOperations of Foreign Contractorsin the Construction Sector

(no unified legal instrument onfranchising to date)MOET’s responsibilities fortraining sectors and professionsof technical/vocational secondaryschools and the issuance of


Table A5: Overview of Legal Instruments Affecting Services in Viet Nam (cont’.)


Environmental services

Financial services:Insurance

Financial services:Banking

Financial services:Securities

Health-related & socialservicesTourism & travel-relatedservices

Transport: MaritimeservicesTransport: Air servicesTransport services: Other

Other: Utilities & energyservices

Decree 18/2001/ND-CPDecree 165/2004/ND-CPDecree 06/2000/ND-CP

Decree 96/CP, Article 2

Ordinance on EnvironmentalTaxesLaw on InsuranceDecision 175-2003-QD-TTg

Law on SBVCredit Institutions LawDecree 89/1999/ND-CP

Decision 546-QD-NHNN

Circular 07-2003-TT-NHNN


Ordinance on PrivateMedical PracticeTourism Ordinance

Maritime CodeDecree 57/2001/ND-CPLaw on Civil Air TransportDecree 10/2001/ND-CP

Circular No. 1011/ 2001/CP-QHQTElectricity Law

4 May 200114 Sept 20046 March 2000

7 December 1993

9 Dec 200029 August 2003

12 December 199712 December 1997

1 Sept 1999

1 June 2002

19 May 2003

28 November 2003

25 Feb 2003

8 February 1999

19902001

1992, 19952001

2001

2004

targets, programs, contents andmethodologies for training at alllevelsNon-profit projectsInternational cooperationForeign cooperation andinvestment in the fields of medicalexamination & treatment,education & training, and scientificresearchMOLISA’s responsibility to managevocational training activities thatare closely related to employment(being drafted)

Strategy for Developing theInsurance Market in Viet Nam forthe 2003-2010

Establishing the DepositInsurance Agency of Viet Nam(DIA)Commercial banks may now settheir own interest rates on VNDloans (they have been able to dofor foreign currency loans sincemid-2001).Provisions on security for loansfrom credit institutions.On Securities and SecuritiesTrading. Now allows for foreigninvestment in securitiesinvestment funds and fundmanagement companies, subjectto capital contribution limitations.Public issues of securities arenow subject to registration with theSSC

Management of tourism, tourismresources, eligibility forestablishing tourism businesses(currently being revised)Only Vietnamese-owned ships

Shipping agents must be 100%Vietnamese-ownedAir freight agencies must be morethan 51% Vietnamese


Table A6: Examples of Regulatory ObjectivesRegulatory Role

Business license

Performance guarantee

Licensing of professionals: Initial

Licensing of other serviceproviders: InitialLicense renewalTaxation: VATTaxation: IncomeVerify ownership rights for:

Land titleBuilding titleCommercial property titleCorporate assetsIntellectual property rights

Specify collateral for equipmentloansSpecify collateral for operatinglines of credit (overdraft facilities)

Verify performance

Oversight of monopoly andexclusive service suppliers

Provide impartial review ofadministrative decisions onbusiness applications

Provide impartial review ofadministrative decisions onprofessional licensing

Provide impartial review or appealof administrative decisions onbusiness practices, taxes levied,etc.Government procurement

Services Covered

All service enterprises

Professional services

ConstructionEducational institutions, clinics, hospitals,hotels, restaurantsBanks, insurance

Accountants, architects, dentists, doctors,engineers, lawyers, midwives, nurses,physiotherapists, pilots, veterinarians

Taxi drivers, tour guides

All licensed personsAll service enterprisesAll service enterprisesAll service enterprises



Small or micro service businesses

ConstructionAccountants; financial statements of allenterprises over a stated sizeBanks, insurance, securitiesEducational institutions, clinics, hospitals,hotels, restaurants, transportationequipmentAll monopoly and exclusive servicesuppliers


All licensed professionals


All services except national security

Typical Requirements

Name search/registrationApplicationOwnership documentsProfessional licenseProfessional liability insurancePerformance bondCertificate from accreditation body

Minimum deposits; depositinsuranceEducational credentialsSupervised practiceProfessional examinationEthics & security checkExaminationSecurity checkContinuing educationSame rate for all servicesLower rate for small businessesApplicationSupporting documentation

Equipment serves as the collateral

Accounts receivable may serve asthe collateral (discounted by 10-25%)Government may serve as co-guarantorInspection of final workIndependent audit

Independent auditAnnual inspection and re-certification

Independence from operationsRegular audit again performancestandardsProvide information on the status ofapplicationRespond promptly to request forreviewProvide information on the status ofapplicationRespond promptly to request forreviewRespond promptly to request forreviewProvide appropriate remedies ifapplicable2-envelop bidding process,separating technical proposals fromfinancial proposalsCertain contracts set aside for smallbusiness bids


Table A7: Status of Service Industry Associations in Viet NamInternationalAssociationMembership

Technical Assistancefrom Sister

Association?

Code ofConduct?

OngoingSkills

Training?

Licensing orCertificationof Members?

Viet Nam AccountingAssociationViet Nam AdvertisingAssociation

Viet Nam Association ofArchitectsViet Nam BankersAssociationViet Nam Association ofSoftware BusinessesVietnamese EngineeringConsultant AssociationViet Nam FreightForwarders’ Association

Viet Nam InsuranceAssociationVietnamese LawyersAssociation

Viet Nam GeneralAssociation of Medicine &PharmacyViet Nam Real EstateAssociationViet Nam SecuritiesBusiness AssociationViet Nam TourismAssociation

IFAC, AFA

Asia-PacificAdvertisingAssociationIAA, UIA

ASEAN BankerAssoc.Asocio Witsa

FIDIC

World ShippingAssociation,InternationalFederation ofFreight Forwarders,AFFAASEAN InsuranceAssociationWorld DemocraticLawyersAssociation,Asia-Pacific LawyersAssoc., ASEANLawyers Assoc.,Mekong RiverLawyers Assoc.

MASEAN

FIABCI

n/a

ASEAN TourismAssociation

Information exchange

No

No

Information exchange

SITF

Australia (ACEA)

IFA

n/a

American Bar Assoc.,Australian LawAssoc., CanadianBar Assoc.,Japanese Fed. of BarAssoc., IndianLawyers Assoc.,Pakistan LawyersAssoc.Chinese MedicalAssociation

No

n/a

No

*

*

*

*

*

*

*

*

*

*

*

*

*

Yes

Yes

No

Yes

Yes

Yes

Yes

n/a

Yes

Yes

Yes

Yes

Yes

Certification

Certification

No

Certification

Certification

Certification

Certification

n/a

Certification

Certification

Certification

Certification

No

* There are criteria for membership, but not an enforceable professional code of conduct.


Table A8: Detailed Projections for Percent of Viet Nam’s GDP by Economic Activity

Percent of GDP in:Economic Activity

2000 2005 2010 2020

AgricultureIndustry:

Mining & quarrying Manufacturing Utilities Construction

Services: Wholesale & retail trade Hotels & restaurants Transportation/ communications Finance Business services; real estate Science & technology Public administration Education & training Health & social services Culture Party activities Community services Private services

Total GDP

23.335.46.7

18.82.37.5

41.316.33.23.92.14.50.62.93.31.40.60.12.10.2

100.0%

19.640.65.7

22.92.99.1

39.816.23.23.82.13.90.62.63.41.40.50.11.90.2

100.0%

15.842.14.3

24.73.2

10.042.015.83.44.62.54.70.82.24.11.50.50.11.70.1

100.0%

10.239.92.7

23.83.0

10.350.014.93.77.24.38.01.31.75.31.60.40.11.60.1

100.0%

Table A9: Detailed Projections for Average Annual Growth by Economic ActivityAverage Annual Growth

2000-05 2005-10 2000-10 2010-20Economic Activity

AgricultureIndustry:

Mining & quarrying Manufacturing Utilities Construction

Services: Wholesale & retail trade Hotels & restaurants Transportation/ communications Finance Business services; real estate Science & technology Public administration Education & training Health & social services Culture Party activities Community services Private services

Total GDP

3.510.23.611.512.111.36.47.06.76.47.14.19.24.87.27.15.15.55.62.5

7.2%

4.59.83.0

10.611.011.010.28.5

10.513.513.513.513.55.0

13.59.57.05.56.53.5

9.0%

4.010.03.311.011.511.18.37.78.69.9

10.38.711.34.9

10.38.36.05.56.03.0

8.1%

3.07.13.07.37.08.09.57.08.5

12.513.513.513.55.0

10.58.55.05.56.53.0

7.7%

Agriculture Accounting servicesComputer servicesConsultancy servicesEquipment maintenance and repairEquipment rental and leasingLegal servicesMarket research

Table A10: Business Services as a “Break-Through” Sector

To increase competitiveness, this activity... ...needs at least these business services:


Table A10: Business Services as a “Break-Through” Sector (cont’n.)To increase competitiveness, this activity... ...needs at least these business services:

Manufacturing

Construction

ICT/telecommunications

Finance

Transportation

Tourism

Research & developmentServices incidental to agricultureSoil testing & other laboratory servicesVeterinary services

Accounting servicesComputer servicesConsultancy servicesEquipment maintenance and repairEquipment rental and leasingLegal servicesMarket researchResearch & developmentIndustrial designIndustrial engineeringPackaging services

Accounting servicesComputer servicesConsultancy servicesEquipment maintenance and repairEquipment rental and leasingLegal servicesMarket researchResearch & development of new methods & materialsArchitectural servicesConsulting engineering servicesDesign services

Accounting servicesComputer servicesConsultancy servicesEquipment maintenance and repairEquipment rental and leasingLegal servicesMarket researchResearch & development

Accounting servicesComputer servicesConsultancy servicesEquipment maintenance and repairEquipment rental and leasingLegal servicesMarket research

Accounting servicesComputer servicesConsultancy servicesEquipment maintenance and repairEquipment rental and leasingLegal servicesMarket researchEngineering services

Accounting servicesComputer servicesConsultancy servicesEquipment maintenance and repairEquipment rental and leasingLegal servicesMarket researchAdvertisingConvention servicesMedical, dental, nursing servicesTranslation services


Table A11: Projects Needing External Funding

Topic

Extending nationwidetelecommunications network,including broadband, wireless &satellite

Expanding the availability of start-upand growth capital

Entrepreneurship in businessservices such as professionalservices, IT services, R&D andtechnical testing services, marketresearch, equipment repair andmainte-nance, services that wouldimprove value added in manufacturing(logistics, production design, packa-ging, quality assurance) and servicesthat would improve value added inagriculture (veterinary services, soilanalysis, agrology, etc.).

Improving pronunciation andcomprehension of business English

Improving the skills and quality controlof service providers

Developing skilled workers for serviceenterprises

Improving the quality of managementand supervision

Improving logistical services

Improving services export capacity

Research Needed

How to ensure that governmentretains sufficient funds to lendat minimal rates to the verypoor

Assess the current skills andoccupational interests of VietNam’s labour force, withparticular attention to thosewho are unemployed or under-employed

Analyze the reasons forweakness in management andsupervisory skills

Value chain analysis oflogistical services andopportunities for integrationand increased efficiency

Conduct a study of Viet Nam’sservices export capacity, bymode of supply and exportmarket

Pilot Project Needed

E-government, e-health, and e-learninginitiative for rural communities

Programme, with incentives tied tobecoming profitable within 2 years andcreating at least 3 new jobs, wouldprovide training and coaching support forexport-quality business services,targeting recent graduates who areunemployed and would offer ITC’s“Managing Services for GlobalCompetitiveness” curriculum plusEnglish speech training.

Mandatory professional developmentprogram for Vietnamese teachers ofEnglish, taught by native speakers ofEnglish

Assist service industry asso-ciations toprovide conti-nuing education and skillstraining to their members

Three phase pilot project:a) Encourage unemployed recent

graduates to create business servicesenterprises.

b) Provide training in office skills anddata entry/ management to workersmoving from rural to urban areas.

c) Create rural back office (“offshoring”)operations, with appropriate training –perhaps linked to the IT park in HCMC.

Assist service industry associations andtraining institutions to delivery the ITCSuccessful Services Exporting modules


Table A12: Summary of Sectors Scheduled under AFAS, BTA, and GATS

Service Sector

Business services: ProfessionalLegal servicesAccounting & auditArchitectural servicesEngineering servicesUrban planning & landscape arch.Medical & dental servicesVeterinary services

Business services: ComputerBusiness services: R&DBusiness services: Other

AdvertisingMarket researchManagement consultingServices incidental to agricultureServices incidental to miningServices incidental to manufacturingEquipment maintenance & repair

Communications: TelecommunicationsCommunications: Audio-VisualConstructionDistributionEducation:

Higher education (technical, natural science,technology)Higher educationAdult educationEnglish language training

Financial servicesHealth: Hospital servicesTourism & travel related services;

Hotels & restaurantsTravel agencies & tour operators

Recreational/cultural: EntertainmentTransport: Maritime services

PassengerFreightRental of vessels with crew

Transport: Internal waterwaysPassenger & freight

Transport: Air servicesMarketing & salesComputer reservation systemsAircraft repair & maintenanceRental of aircraftPassenger & freight

Transport: RoadPassenger & freight

Transport: Ancillary servicesStorage & warehousingFreight forwarding

AFAS

***

*

*

*

*

*

****

V-US BTA

****

*

*

***

****

*

**

**

GATS(Conditional)

*********

***********

*****

***

**

*

***

*

*

**


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Education

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Fisheries

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Natural Res.&Environment

Post & Telecom

S&T

Sport

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Transport

Bus

ines

s se

rvic

es

* * * * * * * * * * * * *

* * * * * * * * * * * * *

* *

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* * * * * * *

* * * * * * * * * * *

* * * * * * * * *

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Agriculture

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Education

Finance

Fisheries

Health

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Post & Telecom

S&T

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Transport

Com

mun

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Con

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ervi

ces

Ret

ailin

g se

rvic

esFr

anch

isin

g se

rvic

esP

rimar

y ed

ucat

ion

serv

ices

Sec

onda

ry e

duca

tion

serv

ices

Hig

her

educ

atio

n se

rvic

esA

dult

educ

atio

nVo

catio

nal t

rain

ing

Car

eer

deve

lopm

ent

serv

ices

Cur

ricul

um d

evel

opm

ent

serv

ices

Edu

catio

n ad

min

istra

tion

serv

ices

Sew

age

serv

ices

Was

te m

anag

emen

t se

rvic

esS

anita

tion

serv

ices

Env

ironm

enta

l im

pact

ass

essm

ents

Insu

ranc

eB

anki

ngS

ecur

ities

Ass

et m

anag

emen

t

* * * * * * *

* * * * * *

* * * * *

* * * * * * * * * *

* * * * * *

* * * * * *

* * * *

* *

* * * *

* * * * * * * * * * *

* * * * **

* * *

* * * * * * * * * *

* * * * * * * * * * *


ANN

EX B

(con

tinnu

ed)

Min

istri

es R

espo

nsib

le fo

r Ser

vice

Indu

strie

sM

inis

try

or C

omm

issi

on

Serv

ice

GAT

S C

ateg

ory

Agriculture

Construction


Education

Finance

Fisheries

Health

Justice


Post & Telecom

S&T

Sport

Tourism

Trade

Transport

Hea

lth-r

elat

ed &

soc

ial

serv

ices

Rec

reat

iona

l, cu

ltura

l,sp

ortin

g se

rvic

es

Tour

ism

& t

rave

l-re

late

d se

rvic

es

Tran

spor

t se

rvic

es

Oth

er

Hos

pita

l se

rvic

esA

mbu

lanc

e se

rvic

esLo

ng-te

rm c

are

serv

ices

Spa

serv

ices

Ent

erta

inm

ent

serv

ices

New

age

ncy

serv

ices

Cul

tura

l se

rvic

esR

ecre

atio

nal

serv

ices

Spor

ting

serv

ices

Hot

els

& r

esta

uran

tsTr

avel

age

ncy

serv

ices

Tour

ope

rato

rsTo

uris

t gu

ides

ser

vice

sM

ariti

me

trans

port

Air

trans

port

Roa

d tra

nspo

rtSt

orag

e &

war

ehou

sing

Cus

tom

s br

oker

age

Frei

ght

forw

ardi

ngU

tiliti

es p

rovi

sion

* * *

Pol

icy

Issu

es:

Min

istry

of P

lann

ing

& In

vest

men

t – s

ervi

ces

trade

pol

icy

Min

istry

of I

ndus

try –

indu

stria

l pol

icy;

ince

ntiv

esM

inis

try o

f Sci

ence

& T

echn

olog

y –

tech

nica

l sta

ndar

ds; i

ntel

lect

ual p

rope

rty r

ight

sM

inis

try o

f Agr

icul

ture

& R

ural

Dev

elop

men

t – e

mpl

oym

ent c

reat

ion

in r

ural

are

as; m

icro

cred

itM

inis

try o

f Lab

our

– em

ploy

men

tM

inis

try o

f Nat

ural

Res

ourc

es &

Env

ironm

ent –

land

use

* * * *

* * * * ** *

*

* * *

* * * * *

*

* * * *

* *

* * * * * * *

* * * * *

* * * * * * * * *

Services Sector Development: A key to Viet Nam's ... · Services Sector Development: A key to Viet...

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