A year in the AEC: Must take opportunities

The retail sector is under enormous competitive pressure of the AEC. Picture: Nguyễn Huế.

A big chance

According to the Ministry of Industry and Trade, ASEAN has become one of the top trading partners and an important driving force to help Vietnam maintain its economic growth for years. Statistics of the General Department of Customs show that, in the period of 2010-2015, the two-way trade turnover between Vietnam and ASEAN increased nearly 13 times (from $US 3.3 billion to $US 42.1 billion). In which, export turnover increased 18 times (from $US 1 billion to $US 18.3 billion). Now, ASEAN is the 3rd biggest export market of Vietnam (after the US and the EU). The import turnover of Vietnam from ASEAN over 10 years has increased more than 10 times (from $US 2.3 billion to $US 23.8 billion) and now, ASEAN is the 3rd biggest import market of Vietnam (behind China and South Korea).

According to Deputy Minister of Industry and Trade, Nguyen Cam Tu, with the important role of ASEAN both in trade and investment, the further integration into the AEC in the near future opens up more opportunities and challenges for Vietnam.

In opportunities, tariff barriers are removed, non-tariff barriers are reduced facilitating Vietnam’s goods, services, capital and skilled labor to flow easily to the ASEAN region. It not only opens up more opportunities to reach and expand the market with about 625 million people and annual GDP of nearly $US 3,000 billion, but Vietnam’s enterprises also can reach others markets outside ASEAN which have large economies like China, South Korea, Japan, Australia, New Zealand, India, Hong Kong (China) through the available FTA ASEAN + 1, ASEAN-Hong Kong Agreement, and the Regional Comprehensive Economic Partnership (RCEP) in the future.

Further integration in services will promote market development, improve competitiveness of enterprises providing services in the domestic sector, especially some potential services such as tourism, air transport, logistics, etc, contributing positively to the process of economic restructuring. Along with that, Vietnam will have more chances to attract foreign direct investment from ASEAN and non-ASEAN partners through improving and increasing the attractiveness of the market. At the same time, te domestic companies have ability to boost investment into ASEAN countries.

Thus, strengthening the AEC means improving Vietnam’s position in its relations with countries in ASEAN and the world, that helps to transform the economy and gradually participate in regional and global supply chains, contribute to the goal of economic restructuring and industrialization and modernization of the country. Through the AEC, Vietnam can take advantages of the opportunities to exploit projects on the development of infrastructure, serving economic development and enhancement in connection with he ASEAN members and partners.

Enterprises have little interest in the AEC.

In the view of enterprises, Director General of Vissan, Van Duc Muoi thinks that participation in AEC partly has changed the awareness of the company as the AEC purpose is to unify the market, to create a strong regional market, however, it also creates pressure of fierce competition from market liberalization and opening. In the conditions of ASEAN countries having comparative advantages are quite similar to Vietnam, if the competition is weak, Vietnam’s enterprises will face many difficulties in the domestic market and be unlikely to develop and dominate the markets of ASEAN members. Weak enterprises will be not selected to participate in highly profitable stages of supply chains, thus, they will mainly participate in the processing stage. Low-level skilled workers will hardly rise to management or expert positions with high wages, and hardly move freely and take full advantage of opportunities opened up in the regional economic integration commitments.

“However, participating in the AEC has entered the first steps, the impact is unclear. The labor movement is not strong. It is predicted after another year, the impact of the AEC for our enterprises will be clearer, labor competitiveness will be fiercer. Though the opportunities and challenges from the AEC is quite clear, with the thinking “letting the grass grow under the feet”, companies remain less interested in the integration process”, Mr. Van Duc Muoi said.

Agreeing with this opinion, Ms Nguyen Thi Tuyet Mai, Deputy Secretary General of the Vietnam Textile and Apparel Association thinks that, despite joining the AEC for nearly a year, the majority of enterprises have little interest in participating in the dynamic market of the region. The latest statistics of the Ministry of Planning and Investment shows that, 75% of enterprises are not interested in the AEC, in which, 25% do not know the AEC commitments, 65% do not see the opportunity that the AEC brings. Meanwhile, Thailand’s enterprises have been interested in Vietnam market for a year as they bought many Vietnam companies and dominated the retail market.

According to experts, though ASEAN is not as a tight market as the European Union (EU), it is extremely dynamic with a growth rate of 5% per year while the EU is still at 2% per year. According to the prediction of international experts, the AEC will catch up and surpass the EU in the next decade, thus, enterprises should take advantages of the AEC from now to dominate the export market and strengthen the domestic market because the removal of import duty of AEC is very quick and goods of the ASEAN countries will no longer over flow into Vietnam. So, in order to take advantage of opportunities and overcome challenges of the integration process, along with developing internal resources, and increasing national competitiveness, we must also build a long-term ability for enterprises and workers in the context of comprehensive economic integration.