Vietnamese enterprises ahead of AEC prospects

The establishment of the ASEAN Economic Community (AEC) is expected to create a single market and a unified production base in the global value supply chain that allows the free movement of goods, services, investment, capital and skilled labour as well as to becoming a competitive and equally-developed economic community with full integration in the global economy. 

Vietnamese enterprises ahead of AEC prospects

The AEC will prioritise key factors including competition policy, consumer rights protection, intellectual property rights, infrastructure development, the tax system and e-commerce, gradual elimination of tariffs and non-tariff barriers, and approval of international optimal production and distribution standards and experience. The standardised and harmonised customs and trade procedures in the AEC will help to reduce transaction costs.

The AEC also identifies 12 priority areas that will accelerate the connection including agricultural products, automobiles, electronic products, fisheries, rubber products, textile products, wood products, air transport, ASEAN e-commerce, health care, tourism and logistics.

The AEC will support the development of small and medium-sized enterprises by taking advantage of the access to information, finances, and human resources and technology development.

In addition, the AEC will become the focus of ASEAN with an active role in joining ASEAN FTA partners and external economic partners to renew the regional structure. It will gradually develop the capital market, liberalise financial services and stabilise the financial market through the adjustment of macroeconomic policies in accordance with the levels of development of each member country.

The AEC also encourages private investment and preventing unhealthy monopoly behaviour in addition to boosting the development of transport connections, information and communications technology, energy and other cross-border connections.

AEC member countries will enjoy common advantages when the AEC takes effect including the free movement of skilled labour across borders of AEC member countries, particularly in the eight sectors with equivalent levels of workmanship - accountants, architects, dentists, doctors, nurses, engineers, and transport and tourism workers.

The economic community will also open up new opportunities for enterprises to do business with the 600-million people market with a total GDP of US$2.3 trillion, as well as other markets signing FTA with ASEAN member countries such as Australia, New Zealand, the Republic of Korea, Japan and China.

ASEAN is now the third largest exporting market of Vietnam and the second largest importing market of Vietnam with a total import-export revenue of over US$40 billion. The establishment of the AEC will help Vietnam to participate further in the global value chain.

The access to the Vietnamese market will be improved thanks to the efficient, transparent and predictable commercial environment along with the simplification of customs procedures and the elimination of trade and service barriers. The flexible and transparent regulations on certificates of origin and tariff reductions (to 0-5%) will also create advantages for Vietnamese enterprises.

Joining the AEC will help Vietnam promote domestic reforms, especially the improvement of economic institution and international trade policy, as well as forcing domestic enterprises to enhance their competitiveness. At the same time, Vietnam will have opportunities to accelerate the application of information and communications technology in the electronic administration under the e-ASEAN Framework Agreement signed in 2000.

Lowering the tariff barriers to 0-5% from 2015-2018 is a significant opportunity but also the biggest challenge for Vietnam, as Vietnam has a similar economic structure compared to other AEC member countries but has lower competitiveness in the areas of technology and product quality which will increase the competitive pressure on over 30% of Vietnamese enterprises.

Commodities from ASEAN countries will flood the Vietnamese market, offering consumers cheaper prices, but it will challenge Vietnamese enterprises with low competitiveness. Vietnam also faces much confusion in building and mastering technical barriers to protect domestic production.

Vietnamese enterprises should proactively take action and connect with others to maintain the domestic market, enhance the competitiveness and create more products exported to countries in and outside the AEC, particularly in the key industries of footwear, textiles, electronics, software, food processing and seafood.

The National Assembly, government, localities and business associations need to co-ordinate closely to create favourable conditions for enterprises, control both state and private monopolies, and impose punishments on acts hindering healthy business activities.

The national policy changes must be explicit, predictable and consistent, conforming with principles of a market economy and integration commitments. Vietnam also needs to improve the quality and consistency of legal documents in addition to improving the quality of economic forecasts and taking the initiative in drawing precautionary plans to prevent economic fluctuations.

It is also crucial to focus on training and use of talents and high qualified human resources to improve the capacity and efficiency of the civil authority and corporate governance activities, as well as to promote the strength of the nation, localities and business community towards improved competitiveness and sustainable development.