Preparations are crucial as the ASEAN Economic Community approaches and the work will continue after its establishment. Mr Pham Quang Vinh, Deputy Minister of Foreign Affairs.
The ASEAN Economic Community (AEC) consists of four pillars: markets and a unified production base, a competitive economic region, equitable economic development, and integration into the global economy. This will help create a large and facilitating economic space not only within ASEAN but also with other partners in the East Asia region. With our policies focused on international economic integration, the advent of the AEC will certainly involve many challenges but in the end will present Vietnam’s economy in general and its enterprises in particular with a range of important opportunities, especially in terms of new markets and investment and in improving Vietnam’s position within the region as well as in international supply and production chains.
The AEC will create a common market with a population of 600 million people and total annual GDP of approximately $2,000 billion, with trade turnover reaching $2,400 billion and intra-regional trade accounting for around 25 per cent. Tariff and non-tariff barriers are to be removed, allowing enterprises to cut import costs and hence lower their production costs and expand their export markets. The AEC will be the intersection point for various bilateral and multilateral trade agreements ASEAN is implementing or negotiating. Through the AEC, businesses can reach larger markets such as China, Japan, South Korea, New Zealand, Australia and India, through existing free trade agreements (FTAs) between ASEAN and these countries. ASEAN is also in the process of negotiating with East Asian partners to build the Regional Comprehensive Economic Partnership (RCEP), which will include nearly 50 per cent of the world’s population and 30 per cent of global GDP.
With the efforts of ASEAN in investment liberalisation within the framework of the ASEAN Comprehensive Investment Agreement (ACIA), the AEC will increase the attractiveness of the ASEAN market among investors from the region and elsewhere. This is an opportunity to attract and enhance the flow of high-quality investment, which is consistent with Vietnam’s development needs. At the same time it is also an opportunity for capable domestic enterprises to their promote investment in other ASEAN nations. With tariffs falling to almost zero per cent, goods imported from ASEAN will also enjoy tax exemptions and so create lower input costs, enabling improvements in product quality.
The AEC will also provide Vietnam with opportunities to consider its options and improve its position within regional and global supply chains. According to research, Vietnam’s export structure to ASEAN has been moving in a positive direction recently, both in quality and in value. Along with agricultural products and other raw materials, we have been exporting various value-added items from several sectors, including computers, cosmetics, processed agricultural products, and others. The AEC is an opportunity for Vietnam to reinforce this trend and continue to change its export structure towards increasing the value-added content, bringing the country to a higher position in regional and global supply chains.
The AEC also poses a raft of challenges for Vietnam. The competition from imported goods to foreign service providers and investors will be much greater for domestic enterprises. This may lead to a number of industries, if preparations are lacking, having to narrow their production scale or even withdraw from the market. Enterprises will be able to enjoy a home ground advantage but are sure to be under greater competitive pressure as regards price and quality.
Vietnamese enterprises will also have to compete more fiercely with other ASEAN enterprises in attracting foreign direct investment (FDI). Infrastructure in Vietnam, including hard infrastructure (roads, ports, energy, etc.) and soft infrastructure (the legal framework, administrative systems, etc.), remains weaker when compared to other countries in the region and this will also hinder competitiveness in attracting FDI from ASEAN or elsewhere.
Therefore, policy makers and enterprises need to seize the initiative and prepare for the opportunities and challenges that will come from the establishment of the AEC. If this can be done it will form the premise for Vietnamese enterprises to achieve success and reach further goals in the future. Looking towards the formation of the AEC in 2015, Vietnam has been carefully reviewing all aspects and is now actively preparing for its advent. According to the ASEAN Secretariat, Vietnam is among the flag bearers in following the AEC Roadmap, having achieved more than 75 per cent of the proposed target actions. But there are still a few things outstanding.
Vietnam is speeding up the implementation of public communications campaigns in order to improve awareness about the AEC among the local business community and local people. Doing so will help equip enterprises with the know-how to prepare for integration and improve their ability to respond to changes in the business environment due to the impacts of regional economic integration.
We will also continue with measures to facilitate integration in priority sectors and areas as well as the products and services that Vietnam and ASEAN are strong in (including agricultural, forestry and aquatic products, textiles, rubber, electrical and electronic products, tourism, air transport, information technology and telecommunications, etc.). On that basis, the government will support local enterprises with favourable conditions to access new markets along with promoting joint ventures and cooperation in order to enhance added-values and hence engage in the production and supply chains of partner economies. By doing so, Vietnam will be able to make use of the advantages and the scale of the single market of the AEC as well as the unified production space it may create.
Vietnam also needs to improve its business and investment environments in addition to implementing administrative reforms to enhance cooperation quality among ministries and agencies and create the most favourable conditions for enterprises. The competitiveness and production potential of enterprises must also be improved, to act as foundations for integration and the country’s attractiveness as an investment destination. In order to do this we need to strengthen workplace training and foster technology transfer.
Last but not least, the country needs to conduct economic restructuring and promote the transformation to new growth models that meet the commitments made in regional and international integration, especially in the development plans of the commercial, service, production and investment sectors.
The formation of the AEC will not stop in 2015 - it is an ongoing process. Therefore, like any other ASEAN nation, Vietnam needs to continue to implement objectives agreed to at the AEC and simultaneously build the ASEAN Community’s Post-2015 Vision for its own benefits and those of other members.
- AEC 2015
- ASEAN Community