7 - Services Liberalization in Vietnam: The Case of FDI in Logistics Sector

Summary

Introduction

Since the Doi Moi in 1986, Vietnam has been progressively opening up its services sector. In recent years, it has made significant efforts to liberalize the sector by participating in various trade agreements, including bilateral, and multilateral agreements related to trade in service, namely GATS (General Agreement on Trade in Services), AFAS (ASEAN Framework Agreement on Services), different ASEAN+1 FTAs and recently the EU–Vietnam FTA (EVFTA) and Trans-Pacific Partnership (TPP) agreement. In line with its commitments, Vietnam has reviewed, revised and issued numerous legislative regulations and policies towards a freer flow of services. Consequently, the regulatory framework related to the services sector in Vietnam has become more transparent and open to foreign suppliers, enabling them to have better access to its domestic services market.

However, the ease of doing business in Vietnam remains at a relatively low ranking — the 90th among 189 countries (World Bank 2016), partly because the services-related policies are still relatively restrictive towards foreign direct investment (FDI). Therefore, there is a need for Vietnam to evaluate its challenges in services liberalization, especially in the aspect of commercial presence (i.e. mode 3), by examining the impediments to FDI inflows in services so as to enable Vietnam to benefit from ASEAN's initiatives to liberalize services.

This chapter analyses the development and contribution of the services sector to Vietnam's economy. It also discusses services trade liberalization under AFAS and GATS along with the domestic FDI policies in the services sector. The logistic sector was selected as a case study for a deeper analysis of Vietnam's services liberalization. Based on these economy-wide and sector-specific discussions, the chapter will identify key challenges facing Vietnam in attracting FDI into the services sector. The chapter concludes with policy recommendations for Vietnam as well as for ASEAN.