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Vietnam Rubber Getting More Competitive
22 | 10 | 2007
Vietnam’s WTO (World Trade Organization) membership has opened doors for Vietnamese rubber producers and exporters. As soon as Vietnam officially became a member of the WTO, Vietnamese goods (including rubber) entering WTO member markets benefit from a lower import tax rate.

For example, before Vietnam was admitted into the WTO, Vietnamese exporters that sold rubber products to WTO member Chinese Taipei had to pay a tax that was higher than that exporters from WTO countries had to pay. It was the same regarding mainland China. Because Thailand, Malaysia and Indonesia were WTO members, exporters in those countries could export rubber paying a tax which was 60-65 percent less than that paid by Vietnamese exporters. Now that Vietnam is a WTO member, exporters shipping goods to fellow WTO countries benefit from the lower WTO-WTO country tax rates. This makes Vietnamese products have a more competitive price and is therefore an opportunity to increase exports.

Vietnamese rubber companies should now more easily find buyers in WTO countries for their products. China is just one of the more than 150 WTO members.

WTO membership can help Vietnam attract foreign investment, bringing in both capital and technology, as investors come to believe that there is now a more promising business future in the country. The Vietnamese rubber industry has potential and it's expected that a large number of investors will show an interest in this sector.

WTO membership is an opportunity for Vietnamese rubber producers to enter into joint venture business partnerships with foreign investors to process rubber to then export a more valuable product. This would mean a decrease in raw rubber exports but it would also mean direct competition with established processed rubber exporters in Thailand, Malaysia and Indonesia. Still, it would then be possible to sell processed Vietnamese rubber to hard-to-please markets like Japan, the US and the EU.

If sufficient foreign capital, technology and expertise were to enter Vietnam, the Vietnamese rubber industry could advance, improved varieties of rubber trees could be grown and, in the end, high quality rubber such as SVR 10 and SVR 20 could be produced in Vietnam.

Vietnam's lower tax on imported rubber will likely not affect the domestic rubber industry, as Vietnamese rubber companies export most of their products. Vietnam is now the world's fourth largest rubber exporter. Vietnamese latex rubber sold both inside and outside Vietnam is cheaper than the same type of product produced in Thailand, Malaysia and Indonesia.

WTO membership makes it easier for Vietnam to approach preferential credit and financial assistance from international organizations like the World Bank (WB) and the International Monetary Fund (IMF). The General Rubber Company (GERUCO) and many other businesses in the rubber sector still lack capital to construct or expand factories and procure advanced equipment and technology. The capital shortages are hindering them from bettering competitiveness. Hence, having access to the above organizations’ credit would help them improve technology and production.

The State does not support the rubber sector’s exports so after Vietnam becomes a member of the WTO, the country has no export supporting policies to lift. This is why rubber exports of Vietnamese companies are not affected by the country's WTO membership.

Source: VNE
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