Trade liberalization and marketization of agro-products

seriously interfered in the agricultural market in order to supply input materials for industrial production.This had a severe effect on the agricultural industry.Agriculture accounted for 30% of GDP and attracted more than 70% of the labor force, hence sustainable development of the whole economy heavily depended on the stability and development of the agricultural industry.After the Doi Moi period, prices were market driven.The higher market price of products motivated the development of production.In turn, making Vietnam one of the leading rice exporters in the world.This trend was also promoted by an open-door policy helping introduce Vietnam's products to the world market. Policies on import and exportAfter the reform, especially in 1989, the Government decided to end the monopoly of State owned enterprises in import-export activities.Local and private enterprises are now entitled to take part in import-export activities.Terms and conditions were gradually loosened; conditions on foreign trade contracts were eliminated in 1992, conditions and regulations on minimum capital in 1994, conditions on transport licenses in 1995, and import licenses in 1996.Now, only a business license is required.This loosening of restrictions encourages the import-export activities of enterprises.Generally, the tax rates on exported agricultural products are lower than those on processed industrial goods creating an incentive to export agro-products.Some tax policies have changed.The changes have been toward reducing the number of taxed items as well as tax rates.Especially after becoming a member of ASEAN and AFTA in 1995, Vietnam has gradually carried out the Common Effective Preferential Tariff Scheme (CEPT), with the import-export tax reduced to between 0 and 5% among ASEAN countries.This process started in 1996 and is expected to be completed in 2006.The tax rate on all goods and services, previously more than 20%, was reduced to 20% in 2001, and those which had a rate of less than 20% will be reduced to 0-5% by 2006.Items on the Temporary Exclusion List were gradually shifted to the Reduction List during the period of 1999 to 2003 so that the tax rates levied on such items will be reduced to 0-5% in 2006.The tax rates levied on the items on the General Exclusion List will not be reduced.The tax rates levied on items on the Sensitive List, including agro-products such as eggs, meat, poultry, rice and sugar amongst others, will be reduced to between 0 and 5% by 2010 (Table 1).Apart from import-export taxes, non-tariff barriers also considerably influence the domestic market prices.Experience from developing countries showed that they usually use non-tariff barriers to intervene strongly in export-import activities.The commonly used methods are quota, management of activities of exporting enterprises, trade licensing and price subsidies.In some cases, these methods incur an invisible tax levied on exported produce, reducing the competitiveness of the agricultural industry.Integrating into AFTA and being on the way to becoming a member of WTO (estimated in 2005), Vietnam is expected to remove all non-tariff barriers.According to AFTA agreement, the quantitative limits for items on the Immediate Reduction List will be removed with the expiration of application suspension for these items.Other non-tariff barriers including additional customs fees and technical barriers need to be eliminated gradually over a 5 year period after the expiration of application suspension for these items.In terms of import quota, the Government declares annually the list of items subject to import quotas, including such items as petroleum and chemical fertilizer, decided by the Prime Minister and other items licensed by the Ministry of Trade (in cooperation with Ministries in charge).The number of import restrictive items is changing every year.Such items as seeds, pesticides and food-stuffs being exported to Vietnam are examined and kept in quarantine to ensure standards of food hygiene and safety as well as to prevent harmful organisms entering Vietnam, following the Ordinance on Food hygiene and safety (approved by the National Assembly in July 2001).The List of Import Restrictive Items for