What opportunities and challenges will face Vietnam’s economy and business community when the ASEAN Economic Community (AEC) is established?

The establishment of the AEC will create major opportunities and challenges for ASEAN members, including Vietnam. In terms of opportunities, the AEC will basically be a common market and a united production area, to help improve the common advantages held by ASEAN members. Commodities, services, capital, technology and skilled labour will flow freely throughout the region minus any barriers or discriminatory treatment among members. ASEAN consumers will have a greater choice of commodities and services at lower prices and higher quality. Intra-regional trade and investment will also be rapidly developed. Enterprises will gain major benefits from expanded scales, increased productivity and lower production costs, to make products with more competitive prices. One highlight to note is that the AEC will create a chain connecting ASEAN enterprises, contributing to growth and prosperity in the region.

Mr Do Thang Hai
Deputy Minister of Industry and Trade

ASEAN is a leading trade partner of Vietnam, accounting for 15 per cent of the total in 2013. In terms of foreign direct investment (FDI), ASEAN had invested $52.3 billion in Vietnam by 2013, accounting for 22.4 per cent of the country’s total registered FDI. Member countries conducting the largest investment in Vietnam have been Singapore, Malaysia and Thailand. Through the AEC, Vietnam will have the chance to expand its markets and export items, stabilise import sources and reduce import input costs, making FDI into Vietnam more attractive and expanding its investment into other ASEAN countries. Vietnam will bolster its management systems, the restructuring of its economy, and the implementation of its socio-economic development goals.

In terms of challenges, Vietnamese products, sectors and industries will face tough competition from imported items,. Some local industries may have to narrow their production scale due to the increased competition. This is a fact of international economic integration that all member countries must accept, and enterprises must adapt. Another issue is that raw materials, machinery and equipment imported from ASEAN countries account for the majority of total import turnover. This means that, with reduced input costs (via tariff cuts), the country will benefit in the long term. Local enterprises will also benefit from pressure in innovation, changes to business and organisational structure and traditional business models, and improve their capabilities.

How has Vietnam been preparing for the AEC?

Vietnam has been an active participant in the establishment of the AEC. Along with other ASEAN countries, it has made efforts to implement commitments, programmes and initiatives towards the establishment of the AEC by 2015. In terms of trade, Vietnam reduced its import tariff rates to 0-5 per cent on 99.68 per cent of all tariff lines in the categories contained in the Agreement on a Common Effective Preferential Tariff Scheme for the ASEAN Free Trade Area (CEPT/AFTA - now the ASEAN Trade in Goods Agreement, ATIGA, which took effect on May 17, 2010). Vietnam continues to complete its commitments to remove tariffs on products in preferential industries, since 1 January, 2012, with 80 per cent of total tariff lines being cut. The country has also comprehensively cooperated with other ASEAN countries. Though development levels vary within the region, Vietnam has implemented 80 per cent of its AEC commitments compared to the average of 72 per cent. Regarding preferential measures, Vietnam is the highest among countries, with 89.2 per cent implemented compared to the average of 81.7 per cent.

2015 will be an important milestone for Vietnam in ASEAN, with commitments in trade, services and investment being implemented. In trade, Vietnam will reduce tariffs to zero per cent on more than 93 per cent of all tariff lines and cut tariffs down to 0-5 per cent on the remaining 7 per cent by 2018. Non-tariff barriers will be completely removed. The mechanism for reviewing and resolving disputes relating to non-tariff barriers will be improved. Vietnam also will integrate more deeply into ASEAN through building initiatives in trade, integrating customs, harmonising standards, and recognising the skills and standards, etc., of each other. Initiatives will be fully applied, such as the ASEAN one-door customs mechanism and trade database that ensures trade flows easily in the region, reaching the goal of united production and markets.

In services, ASEAN and Vietnam will complete a free trade scheme within the ASEAN Framework Agreement on Services (AFAS), including ten packages of commitments on major services and other packages on financial and aviation services. Through these packages, regulations on providing services will be loosened. Mutual recognition agreements in the service industry will be signed, to take advantage of movements of professional service providers in the region. Important commitments from the signing of the ASEAN Agreement on the Movement of Natural Persons (MNP), on November 20, 2012, will make movement easier among individuals. In terms of investment, Vietnam and ASEAN are implementing the framework of the ASEAN Comprehensive Investment Agreement (ACIA) by 2015.

Besides efforts to implement the framework, Vietnam has also focused on introducing the AEC to the local business community since 2009. Such activities will continue.

Do you think that awareness among Vietnamese enterprises about the AEC is low, resulting in preparations being poor?

I think that awareness among Vietnamese enterprises about the AEC and free trade agreements (FTAs) is strong as regards utilising opportunities in trade and investment in the context of integration. Through the AEC and FTAs, most exports will enjoy zero import tariffs that will contribute to an increase in export value between Vietnam, ASEAN, and other trade partners. Local enterprises have actively taken advantage of tariff preferences in FTAs, which benefit local enterprises more so than those of other regional countries. The ministry has continued to provide information about the AEC to enterprises.

What message would the ministry like to send to the business community and export and import enterprises as the AEC approaches?

There will no longer be any barriers to access in terms of commodities, services and capital in the region. ASEAN enterprises and investors will all have similar opportunities to utilise their advantages to create or develop their strengths in the global economy. Vietnamese enterprises need to actively improve their competencies as well as research the relevant commitments to optimise the opportunities offered by the AEC. In the context of global economic uncertainties, local enterprises will face new trade barriers, including technical barriers and anti-dumping, anti-subsidy and protection measures. The ministry, in cooperation with local enterprises, will hold discussions with trade partners to ensure benefits for local exporters.

What will Vietnam contribute to growth of the AEC after establishment?

The participation of Vietnam in the regional community and the cooperation by ASEAN with other partners outside of the region will contribute to increasing the attraction of the region as a destination for investment and confirm the central role of ASEAN in shaping the region.