Vietnam takes prudent step towards ASEAN Economic Community integration

With only six months left for Vietnam to be fully integrated into the ASEAN Economic Community (AEC), local enterprises are slowly getting ready for the big game ahead, which involves ample opportunities and formidable challenges as well.

Local and foreign experts have been concerned that local enterprises may face challenges when further integrating into the regional and international economy, with many trade deals with foreign partners already signed or about to be clinched, including the country’s full integration into the AEC by the end of this year.

ASEAN is a ten-member bloc which includes such Southeast Asian countries as Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar, and Vietnam.

According to the ASEAN’s website, the AEC is the goal of regional economic integration by 2015 and envisages the following key characteristics: a single market and production base, a highly competitive economic region, a region of equitable economic development, and a region fully integrated into the global economy.

The community was a framework for deeper economic integration among ASEAN member nations, and is formed as the result of integration initiatives for 12 priority fields within the bloc.

The 12 fields encompass seven commodities, including farm products, aquatic products, automobiles, electronics, wooden products, rubber, and textiles and garments, along with health care, services, tourism, aviation transport, information technology and logistics.

The ASEAN leaders adopted the ASEAN Economic Blueprint at the 13th ASEAN Summit in November 2007 in Singapore to serve as a master plan guiding the establishment of the AEC by 2015.

A member of ASEAN since 1995, Vietnam had participated in and suggested many initiatives that had contributed to the group.

The country had also strictly implemented its commitments to the AEC's formation, and was among the members that had completed the most commitments.

Challenges versus opportunities

The AEC will bring immense challenges as well as opportunities to the local economy, Minister of Industry and Trade Vu Huy Hoang said in a television program aired on Vietnam Television in February this year.

The signed free trade agreements will bring colossal benefits for exports as they offer tax incentives for Vietnam’s key commodities including textiles, footwear, agricultural and aquatic products as well as those of other processing industries, he explained.

When negotiating these agreements, Vietnam urged other countries open up their markets for its products. The Southeast Asian country also pledged to consider opening the market for some export items from these countries, Hoang elaborated.

“Vietnam is now in the second wave of investment to attract more competition. If they make good use of those opportunities, local businesses can usher in a new chapter of growth with higher incomes for the people,” a local newswire cited Kyle Kelhofer, regional director of the International Finance Corporation as saying.

Such a cohesive regional community could be a boon for migrant workers, but it could also leave them unprotected, a foreign expert wrote to a Vietnamese newswire to express his ideas.

As this new economic community emerges, there will be chance for greater mobility of workers who move across national boundaries to fill skills deficiencies, augment their incomes and gain new experiences, he elaborated.

As Vietnam’s salaries are close to the median wages for the region, economic integration could mean movements of workers both in and out of the country.

However, the AEC is not a standalone process, as it is largely complemented by the Socio-Cultural Community pillar of ASEAN integration, which cements AEC's goal of equitable economic development throughout the region, the foreign expert underlined.

“Vietnam is thus well positioned to benefit from AEC integration, and with 15 percent of the ASEAN population, the country also has a substantial contribution to make to the new regional market,” he noted.

However, risks and challenges incurred from joining the AEC are inevitable.

Thousands of imported goods enjoying tax reductions may enter the country following the launch of foreign-owned retail facilities in Vietnam.

Hoang acknowledged the wholesale and retail markets are especially worrisome for local people and businesses, adding this market is not only sensitive to Vietnam, but also to several other countries.

“This is the one step we must take while following the roadmap, as we open the market step by step and with great caution. In addition, we will have different degrees of openness for different commodities,” he said.

Minister Hoang pointed out that a number of foreign wholesalers and retailers are currently operating in Vietnam but to a very limited extent, while the volume of goods and categories of goods subject to inspection and control is huge.

“Vietnam has been open to goods from other ASEAN member countries since the 1990s, but for more than 20 years, domestically-made commodities have dominated the market,” he stressed.

“If we take prudent steps and are well prepared, Vietnam should not be afraid of the AEC,” Minister Hoang noted.

Though the AEC establishment is drawing near, local businesses, particularly small and medium-sized enterprises (SMEs), remain heedless to the integration and lack preparation for the big game ahead.

Tran Anh Vuong, vice president of the Hanoi Young Business Association, told a local newswire that local SMEs are still adjusting passively and sluggishly to changes rather than proactively joining the regional economy.

Meanwhile, the local market lacks necessary technical and non-technical measures to cushion the domestic market against imported goods upon the realization of the AEC.

Local experts thus underscored the need for Vietnam to step up communication efforts to boost local enterprises’ and youths’ awareness of the AEC, while participating in programs to enhance links within ASEAN and accelerating administrative reforms, especially in trade.

Currently the Southeast Asian country is furthering negotiations to finally conclude seven free trade agreements with other partners, including the Trans-Pacific Partnership (TPP), the Customs Union of Russia, Belarus, Kazakhstan, the FTA with the European Union, and the FTA with the other countries of ASEAN + 6./.

By VNF