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Business

Risks & rewards

Released at: 08:11, 15/10/2014 AEC 2015

Risks & rewards

Unless competitiveness improves quickly, Vietnam's business community will be unable to fully access the opportunities the ASEAN Economic Community will present and may even suffer.

by Minh Tien

ASEAN was Vietnam’s third largest export market in 2013, following the US and the EU, with turnover of $18.47 billion. The ASEAN Economic Community (AEC), which is expected to be officially established in December 2015, will present more opportunities to Vietnam’s business community by allowing for straightforward access to a market of 600 million people with no barriers on economic space, goods and services and even employment and capital.

Such advantages are, of course, not exclusive to Vietnam. Competition will become much fiercer, as many countries in the region produce similar products. Those with inadequate preparations and low competitiveness will likely see more losses than benefits after the AEC begins. According to a survey conducted by the Vietnam National University (VNU), nearly 80 per cent of respondents were not fully aware of the opportunities or the challenges the AEC may bring and so are remarkably unprepared to respond, especially when compared to regional enterprises.

Well-prepared competitors

With substantial focus given to Vietnam’s two largest markets, the US and the EU, it is perhaps understandable that Vietnam’s business community has not given too much thought to ASEAN. This market, however, may turn out to be a potential substitute given the US and the EU are experiencing somewhat slow growth following the recession. The AEC will also allow Vietnam to enjoy preferential tariffs when exporting to China, Japan, South Korea, India, Australia and New Zealand, due to the FTA+1 between ASEAN and its partners. This favourable investment environment would not only provide the conditions for local enterprises to develop strongly but would also attract foreign direct investment (FDI) into the region. While Vietnam still appears to be rather ignorant, other members have been proactive in their preparations for the AEC.

The VNU survey showed that Vietnam is far behind Thailand and Singapore in this regard, according to Mr Nguyen Hong Son from the University of Economics and Business (UEB) under VNU. As a market of nearly 100 million people with constantly increasing incomes, Vietnam will definitely attract foreign enterprises. Foreign private enterprises also receive support from their governments as regards energy, logistics and/or finance, among others. 

Roadmaps have been designed in Indonesia for particular sectors after the AEC comes into being, said Mr Agus Tjahajana Wirakusumah, Director General of International Industrial Cooperation at the country’s Ministry of Industry, such as electronics, automobiles, cement, and textiles and footwear for the domestic market, and agriculture, fisheries, furniture and food and beverages for ASEAN markets. The need for the government and the private sector to act in concert to maximise the benefits of economic integration and pursue the ideal of inclusive growth was underscored by the Secretary of the Philippines’ Department of Trade and Industry (DTI) Gregory L. Domingo. “The government has been taking steps to strengthen local industries, improve governance by simplifying business transactions and promoting transparency in bidding for government projects,” he said, and emphasised that “it was the private sector that can take the final step to success.” Mr Sun Chanthol, Cambodia’s Minister of Commerce, meanwhile, asserted that the Cambodian Government has been supportive of its private sector by easing the investment law as well as the property law, while at the same time promoting education to secure the high-level human resources needed to attract foreign investment.

In Thailand, tens of thousands of small and medium-sized enterprises (SMEs) have received training and been closely supported by the government since 2012, to alleviate any difficulties they may face when doing businesses in neighbouring countries, as part of preparations for the AEC. Enterprises are provided with specific and detailed information on various import and export sectors and the strengths and weaknesses of partners with which Thailand does business, in the context of ASEAN gradually becoming a single market.

Berli Jucker Public Co. (BJC), a major Thai import and export firm, opened two factories in Vietnam recently, not only to serve its domestic market but also to export to regional markets. Mr Aswin Techajareonvikul, President and CEO of BJC, said that such aggressive investments into Vietnam are part of the company’s plans for AEC integration, along with promoting commerce through Thai Corp. to distribute Thai goods into Vietnam and acquiring FamilyMart to compete in the retail sector.

The leading Thai corporation in agribusiness and food, Charoen Pokphand (CP), is planning to invest heavily and raise the number of its plants to ten this year. General Director of CP Vietnam, Jittisart J. Sakulchai, revealed that the purpose of the expansion was to give the company direct access to raw mat